DANGERS OF PYRAMID SCHEMES

WHAT IS A PYRAMID SCHEME?

A pyramid scheme, which is a business structure revolving around the investment of recruitments who further recruit more participants, whose commissions are often partially credited to the earlier recruiters depending on the number of recruitments they bring in.

Back when I was in college, I joined a pyramid scheme. There are variants of pyramid schemes, but the typical outcome of this design is that those at the bottom levels generally do not find profit. And that is where I was, at the bottom.

Pyramid Schemes are illegal in many places and so they would never admit to you that they are a pyramid scheme. They switch around a few business mechanisms to get around the semantics of what defines a pyramid scheme. But they are still a pyramid scheme.

If I remember right, it was a friend who one day invited me to join him for a job listing. I don’t remember how he found out about it, but despite not having much luck in the part-time job industry at that time, I wasn’t really too interested. I did not understand what the job listing was for, but he mentioned that it did not require prior experience or education, and here I was thinking, well, I have an education, maybe they will see that as an advantage and hire me. Gosh, so stupid of me!!

Keep in mind I was naïve to this sort of thing at that time and did not really understand the concept of a pyramid scheme yet. I did not get to read this kind of article to warn all of you about it.

So we drive to this sketchy neighbourhood I am not familiar with and arrive at this unwelcoming building and after knocking on what could have been both a front and back door, we were greeted by two people who I assumed to be the employers, later I realized that recruiters were the more appropriate title.

They quickly introduced themselves and we were then led into the room with four or five other people. The room had a panel arrangement with a projector set for a PowerPoint presentation at the front. At the side were a snacks table and you bet I partook in that free stuff!

They started the presentation soon enough and begun talking about their product which was this premium organic instant coffee, and we were going to be responsible for selling it, which I thought should have been a relatively simple task. Many people open up their mornings with coffee to be able to survive a workday. Or even start their evenings if they want to prepare themselves for the night of deadline rush. It is a kind of product people would want at any time of the day.

The presentation was short and simple. They first talked of the benefits of being in this business, suggesting the ability to earn a full-time income for a part-time job, and how they reward exotic cars to recruits who work hard and reach a certain quarter of their own recruitments. I do not know what it is about these pyramid schemes, but for some reason, they offer nice cars, that realistically you will not be able to earn. They also mention a lot of company vacations that you would be able to indulge in, all for selling some coffee, and it depends on how hard you are willing to work. And that is how they get you, they lure you with an opportunity that sounds like anyone could be competent, shower you with a potential for extravagant rewards, and challenge your pride of whether you have what it takes to make it big. Well, there is some truth in that, but it is a real tough responsibility for you their recruitments. They have nothing to lose; if you make it big, then hey, I guess they were right. But if you fail miserably, they leave you with a verdict that you only have yourself to blame because you did not work hard enough.

Being a college student contemplating about my carrier choice, I was the right target for them. I was looking for ways out of my program, looking for other options and they caught me slipping.

They continued with some crap about health benefits and how superior it is to other products as if it was meant to give you eternal youth or something.

Don’t get me wrong, they, of course, let us try some samples of the coffee and I am not going to lie, I loved it. But you know? Maybe drinking a product from strangers should have called for more caution because they could have been a cult or something and I could have drunk the ashes of their leader and he could have reincarnated in me.

In the middle of the presentation, they even had to defend themselves and said: “this is not a pyramid scheme.” I mean, for them to have to include that in the presentation should mean people have accused them of being a pyramid scheme before. Gosh, so stupid, that was a red flag I missed.

HOW PYRAMID SCHEMES WORK

Okay, so here is how pyramid schemes work.

First, you have to buy inventory from the recruiter. They usually give a few choices of package. It may be Bronze, Silver and Gold. Each with varying amounts of the product and its different types. They may even give you membership cards at a price.

The Bronze is for recruits who are unsure. Low commitment means low risk, but at least the schemers milk even the slightest amount from you. The Silver gives you a little more, and Gold gives you the most and decreased price per unit.

You’re then tasked to sell the products, and you can also get your own recruitments that could help your sale. Now here is the thing, they will not exactly tell you how much to sell it for, you’ll have to decide that for yourself. Sell for less and it will be easier for you to sell out, but for little profit. Selling high is a little risky, but you earn more.

Alright, so when I got home, I calculated and came up with a price I could manage. I first started off by selling to my few family and friends, and then slowly approached people from my college since most stayed up late studying. I could save them a trip to the coffee store.

This went on for a while, and eventually, after a few earnings, I went to rent a small unit downtown and opened up my own coffee shop. I did well and even got to recruit a little bundle of people who first started off as my customers. Within a few months, I was finally rewarded with an exotic BMW that they promised us in the presentation. And with that car, I took a ride to a nearby park where a beautiful girl approached me and complimented me on how big my wallet was and so I dated her, and now we live happily ever after on our private island. Kikiki, just kidding! I did not sell jack shit.

My mother and two of my friends bought a pack, then I realized I had zero marketing skills because I was awkward at approaching people and I was stuck with an actual pyramid of boxes of coffee that I couldn’t sell and the only consolation I had was that I liked drinking it and now the only people who benefited from it were my recruiters.

Oh my God, so that is how the pyramid scheme works!

The presentation by the schemers really knew how to boost our ego and hype our potential to make it big. They did not care if we sold our coffee or not because we were not really buying inventory from them. We were just buying. We were the customers made to look like investors, and the people we invested in had nothing to lose. And you can only imagine how many layers of recruitments that goes before them, with the scenario repeating itself over and over.

And with today’s pandemic making people lose jobs and businesses going down, and people are looking for ways to make ends meet and other opportunities, it is times like these that people become vulnerable to fall into these schemes.

Meanwhile, you may not be approached by one selling coffee, but it may be any different product. Hopefully, you can sense the red flag and make better decisions unlike me.

Pyramid schemes still exist because they are heavily advertised that anyone can find personal success in them, which is false.