EXCERPT: 'Viral Loop'

By inviting customers to his home, the Stanley salesman avoided all of this. Instead of trudging to individual households, a time-consuming propo-sition since he couldn't be assured the person answering the door would be welcoming, potential customers came to him with purses open. This intent to buy opened up a whole new value proposition. With home parties, "the buying spirit is contagious," Brownie Wise wrote in a training manual. "It is a proven fact that you will sell more to a group of 15 women as a group than you will sell to them individually." Soon the Stanley salesman from Maine was reporting impressive sales figures, and it didn't take long for word to spread within the company. Other Stanley sellers across the country approached local groups to inquire about demonstrating their products. After they hit up most of the organizations, they turned to their wives to organize parties, with the hostesses receiving either a cash commission or a gift. This selling strategy helped push Stanley Home Products sales from $3 million in 1940 to $50 million ten years later.

Meanwhile, as Tupperware sat idly on store shelves from coast to coast, Brownie Wise in 1949 ordered $152,149.13 of Tupperware, which in to-day's dollars would be $1.4 million.

[ PONZI SCHEMERS ]

WearEver, Stanley, and Tupperware weren't the first to tap viral expansion loops, but they may have been the earliest to promote legitimate businesses. Get-rich-quick pyramid schemes based on the "rob Peter to pay Paul" prin-ciple had long relied on word-of-mouth virality to expand the pool of money at breakneck speed. Organizers attracted large numbers of participants with the promise of sky-high returns on their investment—sometimes offering to double a person's money in as little as ten days. In the nineteenth century schemers bilked investors who thought they were financing silver-fox fur farms, an experimental engine that used water for fuel, technology that could extract gold from the sea, and bonds covering exotic products in even more exotic locales. Their fast-talking operators, relying on the same "splash, cash, and dash" formula, paid off as promised to the first people to contribute. These lucky early investors inevitably told their friends and family, who also invested. They too were bought off, and suddenly thousands of people were throwing money at the operators until the whole pyramid came crashing down when the operators couldn't continue to pay back investors. By then they were usually gone but not forgotten.

The biggest viral schemer of all was Charles Ponzi, an Italian immigrant who registered a business in Boston called the Security Exchange Company in December 1919. He claimed to have figured out a system to reap 400 per-cent profits by engaging in arbitrage with international postage relay cou-pons. These functioned like promissory notes that could be used by a reci-pient in one country to pay postage to another, since stamps could not be used to mail letters across borders. Because the same coupon could be pur-chased in Italy for a fraction of what it cost in the United States, Ponzi sur-mised he could pocket the difference. He printed certificates promising in-vestors 50 percent interest on their money in three months, which he later shortened to forty-five days. But he never bought more than a handful of coupons.

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