The 1936 Square Deal Automobile Club. Pyramid scheme. Pittsburgh, 1936.
The operation of the club and twenty rules are presented on the front and back of a one page document in the archive. The page here contains: (i) an analysis of the operation of the club by D. VanArsdale, (ii) a complete transcription of a newspaper clipping regarding charges against officers of the club, and (iii) these links to images of its front and back.

The operation of "The 1936 Square Deal Automobile Club."   D. VanArsdale

The document's "membership form" has the following names. Addresses are omitted here (see front image).
1. William Ewing
2. Buelah Loadman
3. Pat Kane
4. Lillin Kirsch
5. C. E. Steinke
6. Louise Silk
7. Alma Reeder
8. Geraldine Silk (new member)

We explain the action of the pyramid, using some of the above names for specificity.

1. The new member, Geraldine Silk, pays the person recruiting her, Alma Reeder (#7 on the list) 50 cents. Alma then places Geraldine's name and address in the 8th slot, making a carbon copy of this completed "membership form."  Geraldine is given the original to keep and the Club gets the carbon copy.

2. The Club delivers the carbon copy to the first name on the list, William Ewing.  The Club also prepares two copies of the list with the names moved up one slot: William's name is dropped, replaced by Buelah. Alma becomes #6 and Geraldine's name and address now appear in slot #7. Slot #8 is blank. Geraldine is given these two copies and endeavors to recruit two new members. She also receives from the club a "Club Stamp of Approval," which authorizes her to receive dues for the Club.  The instructions advise recruits to be sure a seller has this copyrighted stamp of approval. .

3.  Suppose Geraldine sells her two letters for 50 cents each, following the above procedure.  And suppose her name then works up a continuing list, and finally appears in the number one slot when, say, Jane Doe purchases a letter sometime later. Geraldine will receive a carbon copy of Jane Doe's membership form from the club, as in step 2. Geraldine is then required to take $5 to William Ewing, the man who appeared in slot #1 when she joined. William may be expecting her, since he has the carbon copy of Geraldine's own membership form, sent to him by the Club when she joined.

4. If Jane Doe and her successors are successful, eventually Jane's name may reach the top of a list, at which time she must give $5 to Geraldine. Geraldine could, under ideal circumstances, receive 2^8 = 256 such payments. This would be 256x5 = $1,280, enough to buy a new car in 1936.

(i). The Club gets 10% of all dues paid - from the 50 cent sales of the list and also from the $5 dues paid by participants when they first reach the top of a list. For this it provides: (1) record keeping, (2) delivery of the carbon copies of the completed membership forms (3) the Club Stamp of Approval, and (4) the two progressed lists. Also it may "eventually provide club rooms and entertainment for the pleasure of members."

(ii). The pyramid scheme is unusual in not requiring the principal payment until oneself has reached the top of a list. When the pyramid crashes, this may result in a large number of later participants losing only 50 cents. However many middle level participants would get caught between having paid the $5 yet not receiving any dues themselves.

(iii) Though underplayed, the awareness of saturation is present. The complete name of the club is: "The 1936 Square Deal Automobile Club."  The benefits of membership (for paying 50 cents dues) in Rule 18 (see back page jpeg) are restricted to "the year 1936."  And "a member's name is not permitted to appear more than once on an application in the eighth position, as no member in any club pays dues more than once annually, . . ." Thus we see the club operations were restricted to the year 1936, with the possibility of other clubs in subsequent years. And though not explicitly stated, the headings on the form (no space for city) and use of a local messenger service, imply the Club's activities were restricted to the Pittsburgh area. While looking at the 20 rules on the back page, check out Rule 7!  Well, it could be argued that those excluded were done a favor. 

[Unidentified newspaper clipping - full text:]

Delay Hearing on Auto Chain Letter Plan
$2,500 Bonds Set for Riggs, Radio Man, And Associates.

  Officers of the Square Deal Automobile Club, sponsor of Pittsburgh's newest craze, the auto-chain letter, today were granted a postponement of their hearing on charges of operating a lottery and violating the Fictitious Names Act.

  Alderman A. M. Maloney postponed the hearing to Tuesday, September 8, after the officers attorney, A. M. Oliver said: "We are not ready to go into a hearing."
   Assistant Chief County Detective James A. McGinley agreed to the continuance.

  Oliver said he would furnish $2,500 bonds each sometimes today for Glenn Riggs, KDKA announcer, the club's president; R. Woolslayer, secretary; C. S. Kenny, treasurer, and D. E. Laird, a director, who, detectives say, is taking full responsibility for the club's operations.

Comment - D. VanArsdale
Note that the Officers of the club were charged with violating the "Fictitious Names Act." Use of fictitious names is a temptation to anyone starting a money chain letter or pyramid scheme. The list of 8 participants (front page) reveals that there are only 5 distinct addresses, and two of those are very close together.

Provided by George A. Trach, Rillton, PA to D. VanArsdale.


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