Scam Tactics: Why do HYIPs compound DAILY?

Why do HYIPs compound daily?

The answer is "habit loop"... The HYIPs are there to feed you false information to get you to form a habit... "trust us"

Habit loop has three steps

• Cue -- the trigger to start the routine
• Routine -- the behavior
• Reward -- the reward for performing the routine

A cue triggers the habit, much like the bell causes Pavlov's test dogs to start salivating. 

The actual routine is the behavior triggered by the cue. A physical routine is sometimes called "muscle memory", but a routine can also be emotional or just mental, or combinations. 

The reward is the endorphin rush you get when you've completed the routine, can be physical rewards (like chocolate) as well. A reward can be a simple "whew, glad I survived that" to a little smile when you realized you parallel parked perfectly or anywhere in between.  

The way the brain works is as soon as it spots a cue, the brain automatically executes the routine, without further processing. Think of it as "macros" that is run automatically. The brain doesn't need to calculate every move as long as it saw the cue. And the reward for finishing the routine is what cements the routine into place, and turn it into a habit. 

So what does all this have to do with HYIP, i.e. micro-ponzis? 

The HYIP operators are out there to make it your habit. You are prompted and was rewarded for doing so. And to accelerate your habit formation, the ponzis compound daily. Once it became a part of your habit, it makes you resistant to any suggestion that you're involved in a fraud. 

Genuine investments send you statements yearly, quarterly, or annually. Annual percentage yield is calculated from the nominal yield. The more frequent the compounding, the higher annual percentage yield even if nominal yield stays the same. 

So why do HYIPs want to compound daily? They *want* you to check it daily, to see it "growing". And because you see it growing, you don't want to pull it out. 

• Cue (reminder to check)
• habit (checked it, it's growing!)
• reward (ah, this is a good investment!)

ZeekRewards, a Ponzi scheme that ran from 2011 to 2012, took it a step further by incorporating contra-freeloading into the cue phase, by adding yet another habit loop. 

Contra-freeloading was a term coined by zoologists when they realized animals in zoos were often bored to death as they lack all the cues of living in the wild, so the animals did not want to eat even when the food is readily available. So zoologists came up with mini puzzles like a container that had to be "tricked" open to get to the food inside. This process was termed contra-freeloading, as opposed to freeloading, i.e. get rewarded for doing nothing. 

ZeekRewards introduced contra-freeloading into their habit loop by telling the members that they had to post a link somewhere in the Internet, then record that posting with ZeekRewards in order to "qualify" for their daily rewards. In reality, the data entered was never checked, and it could have been done in a few minutes. For this, the members are rewarded up to 1.5% DAILY compounding of their "VIP points", which they get by spending $$$$, and they are encouraged to keep the money in the system (repurchase) so the money can compound even faster. 

So the loop became

• Cue (must post ad)
• Habit (post ad, check compounding)
• Reward (I compounded!!!) 

It's estimated that the ZeekRewards scam, by the time it was shut down in 2012, had hit 850-900 million dollars (initial estimate of 600 million turned out to be too conservative) involving almost 1 million victims around the world. 

To break this habit loop, it's important to realize ONE fact:

Until you have the money in your wallet (or bank account, or your personal eWallet), it is NOT your money. Whatever they claim you've "compounded", it's NOT YOURS YET (until it is). It's very easy to fake compounding. Madoff's firm did it for a decade, generating fake statements on trades that supposedly created such 'steady returns'. Until it's in your hand, it's just a number on a screen. Your bank account is guaranteed by the Federal government. Your account elsewhere is not.

Beware of "bad" habit loops that scammers want you to form.