"You missed my point," he pointed out.
"Did I ?"
"Now, let's consider the problem again," my friend explained, "When the insurance scheme gets going for a while and many of the trustees are elderly, the claim rate would be very high. You agreed on this point. Didn't you ?"
"Yes ...?" I though we discussed that last time.
"Then, how could the business run? In other words, where comes the money to pay for the claim each year?" my friend was slightly excited.''
"You mean ...?"
"I mean, in a stable state, the yearly pay-off would be covered by the insurance premium collected that year." L went on, "When reputation builds up, more people would agree to join the scheme, and the business could prosper."
"Stop there. The story sounds familiar. Where did I hear of it?" I thought I was seeing light.
"Have you heard of the Ponzi scheme?" my friend suddenly put up a wicked smile.
"Yes ... no. What's it?" I vaguely remember the term but could not recollect what's that all about.
"That's the old term. After the financial tsunami, people called it the Madoff investment."
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