Member-only story
Is Medium a Ponzi Scheme?
An analysis of the money-making side of Medium
When I first joined Medium, I read a few articles about making money on this platform. The algorithm quickly learned that preference and soon my feed was flooded with the How I made $X in Y days type of article.
The comments in those articles typically include at least one comparing Medium to a Ponzi scheme. The comparison stuck in my head, and I wanted to analyze it in more depth.
A Ponzi scheme is a very specific type of financial crime. It is named after Charles Ponzi, who, in the 1920s, talked thousands of people into investing their money in his artifice. The “investment opportunity” Ponzi was selling didn’t exist. Instead, he used the money of late investors to pay “rents” to early ones.
Medium is not an investment platform, and its users don’t expect dividends. At face value, there is no way this platform could be a Ponzi scheme. However, those commenters probably used the term to refer to the broader category of pyramid schemes.
In a pyramid scheme, an organization pitches an investment opportunity to potential salespeople who, in turn, would use the same pitch to recruit more of them.
The catch is that the revenue doesn’t come from selling a product or investing in anything lucrative…
