The More Things Change

Reading excellent accounts of two of our more notorious scandals du jour – Madoff and Stanford – called to mind Yellow Kid Weil and his “Get Rich Quick Bank.”

Yellow Kid Weil was a con man, famous for saying he promised something for nothing and delivered nothing for something. As detailed in his fascinating book Con Man: The Autobiography, around 1900 Weil and a partner took out a series of ads in newspapers across the country that simply said: “A Little Story of a Big Success – How $100 Makes $1,000.”

To the many that responded, Weil sent a brochure explaining that because he and his partner owned many race horses, they had an insider’s betting edge:

The brochure further explained how we, as the owners of the most consistent winners, were in better position than anybody else to know just when these horses would win and what the odds would be. We proposed that the investor send us a hundred dollars to open an account. We would place bets for him on sure winners, using all or any part of his money.…

In those days $100 was a lot of money and we hardly expected to find so many who had that much with which to speculate. But soon our mail was overwhelming. Remittances for $100 poured in. We had to take more space and enlarge our quarters.

Dangling the promise of inside tips to take betting money was a standard con at the time, one that Weil himself seems to have done quite a bit. This con was different. What set it apart from the rest was what he did with all the money that rolled in:

Here is the way we worked. We would put Mr. Smith (who had an account of $100 with us) down on a ten dollar bet on a horse that had won. As soon as we knew the horse had won, we mailed the report to Mr. Smith….

We kept Mr. Smith’s account for a month. At the end of the month, we sent him a remittance for $125, with this explanation:

“We are returning your original investment plus the earnings. We regret that the volume of our business makes it impossible to handle such small accounts.”

We did the same thing to every account. Our letters only whetted the investor’s appetite. If he had more money, he immediately wrote in to ask how much he would have to invest to have us handle his account. We replied that we could handle nothing under $500. The response to this was so great that we soon raised the minimum to $1,000. We had a few inquiries about taking larger investments — $5,000 or more.…

Actually what we were doing was paying dividends on old accounts from the monies we received from new accounts — borrowing from Peter to pay Paul.

Weil claims this con netted an annual income of $480,000 before its inevitable crash.

Years ago when I first read Yellow Kid my two recurring thoughts were (1) he’s exaggerating (he is a con man, after all), and (2) if he isn’t exaggerating, people in the old days were much more naive than people today.

Reading Yellow Kid now, I have to admit my initial assessments were most likely unfair to Yellow Kid and to people in the old days.