The Greater Fool Theory or Greater Fool Game looks at stock bubbles, Ponzi scheme and MLM from another perspective. Essentially you try to get into the game as early as possible and sell your stuff to the next person or the Greater Fool. Now the next person is the Greater Fool because by buying what you have proposed to sell, he probably doesn't gain anything (or every little). Try visualizing magnetic beds or slimming pills or purple crystals that claim to do wonders but the effects are impossible to quantify.
So the only way he can get out of this trap is to find a Greater Fool (than himself) and sell it to him. As long as you are not the Greatest Fool, you will win the game. In MLM and Ponzi scheme, the Greatest Fools are people at the lowest level of the pyramid. The reason why MLM and other Ponzi Scheme and stock bubbles can carry on for some time is because the Greatest Fool or Fools have not joined yet. So those in the game can continue to have fun.
A true value investor however, does not like to participate in the Greater Fool Game. He believes in buying things below their intrinsic value and in the Greater Fool Theory, intrinsic value of any product or stock is way, way, way below its market value. (i.e. you are buying something worth $1 with $100.)
There is no right or wrong about making money. Depending on your investment philosophy, you can engage in Greater Fool Games all your life and make truckloads of monies. And throw a few shillings to the down-and-out value investor staying true to his philosophy. (FYI: Warren Buffett lost 50% of his wealth during the IT bubble by staying true to his invesment philosophy.)
Just make sure that you are not the Greatest Fool.
See also Definition: Value investing
and Ponzi Scheme