Pyramid Schemes and MLM
Pyramid schemes are illegal businesses that con people out of money by giving them hope of financial success. The organizers of pyramid schemes will usually try to present their business as a legitimate multi-level marketing (MLM) business. However, despite some similarities between pyramid schemes and MLM, there are important disimilarities.
In a pyramid method, a member must pay a fee for joining the program. Then, that member must bring in more members, who will also have to pay a fee. Pyramid schemes received their name because the venture develops as a pyramid structure, with the earliest member on top, the people recruited by the original member on the second level, those people’s recruits on the third level, and so on. Participants receive money from the fees of the people on the levels beneath them.
The setback with pyramid schemes is that eventually, they will run out of potential prospects. When this happens, the most recent members will not be able to make back the money that they invested in fees. For every successful member, there has to be a number of unsuccessful members who lose their money. Therefore, pyramid schemes are considered not legal.
Despite the fact that pyramid schemes are fraud and destined to fail, people continue to participate in them for two reasons. First of all, the promised riches are really tempting, and people know that such riches are possible, even if they are unlikely. In this logic, getting involved with a pyramid scheme is a lot comparable to gambling, another popular past time. Secondly, the organizers of pyramid schemes try to disguise their dealings as a legal MLM business.
Network marketing businesses take on the same pyramid structure as pyramid schemes. However, Network marketing businesses actually sell a product. This is a very crucial difference. Because MLM members are selling a product, they have a source of continuous profits and a way to maintain the business. As a result, MLM businesses are not destined for failure. Additionally, MLM members need to invest a lot of time recruiting and training new sellers; success is not instantaneous and does take hard work, just as success in any honest business enterprise does.
Those who are considering joining a MLM business should research it thoroughly to ensure it is legitimate. You should also be wary of organizations that promise instant wealth with little effort; if it sounds too good to be true, it probably is.