The human condition is a strange but puzzling state. Even though we have been gifted with reason we are strangely easy to manipulate. We only see what we want to see. This flaw in our composition has made it easy for people with bad intentions to exploit our weaknesses. People are lazy and want to get rich quickly. They so want to believe that there is a shortcut to financial success. Enter pyramid schemes. Even though these are illegal in most countries they can be hard to detect. These scams come in all shapes and forms – gifting clubs, financial investment groups and some even disguised as legitimate Multi-Level Marketing (MLM) businesses.
The lines between a legitimate MLM business and a pyramid scheme get blurred easily. MLMs reward members for legitimate sales, whereas pyramid schemes pay out on members based on the recruitment.
Firstly – you have to buy your way in with a starter pack. Then, you have to recruit more people to join the scheme and earn commissions on new arrivals.
Ponzi schemes are slightly different from pyramid schemes in that the founders use the joining fee of new members to pay existing members. New recruits are duped into thinking that the payouts come from legitimate business profits. Since this is not sustainable, the scheme collapses when new members stop joining the scheme.
How do these businesses thrive?
Like any good parasite, it needs a capable host. Not the strongest, nor the fittest but whatever is willing and able. Pyramid schemes lure new members with the promise of opportunity and empowerment. Members are often unemployed with extra time on their hands and looking to make a quick buck. These perceived opportunities are almost impossible for them to ignore.
Parasitic organisms need a network to spread from host to host. These companies spread through existing structures in communities and spread in groups such as churches, immigrant communities and other tightly knit communities of similarly-minded people.
How does the virus perpetuate itself? It needs the duped and vulnerable, still newly converted to report a positive experience. There is nothing like a new, fired-up convert to spread the gospel of the pyramid scheme
The others in their network follow their example. Once the virus is replicated in others, success has been achieved. Eventually, they do not make a profit and fail but are bullied into silence by shame and the sense that they were just not good enough. It’s easier to blame themselves rather than the scheme.
How to spot a pyramid scheme
It’s always handy to be alert and aware of these handy pointers to steer well clear of being the next to be hoodwinked.
Firstly, pyramid schemes use time-sensitive actions. Slogans like “Act now or miss this opportunity” are commonplace. They want you to buy in while you are still on a high and not when logic sets in.
Next, the promises of grandeur and life-changing income. If it’s too good to be true, it probably is.
Legitimate MLM companies do not require members to pay for the opportunity to become a distributor or to sell a product or service. If you need to buy your way in, you are probably better off at the roulette table.
If, after all of this you still happen to find yourself in the boardroom of a hotel listening to a presentation, then there is still hope. Please kick yourself and the person who invited you for wasting your time and theirs. I hope you do not part with your hard-earned cash and waste their time instead of your money.