Pyramid scam or scheme. same thing....Last night i was invited to what i thought was a business seminar?

Question

about 10 minutes into the seminar is when i figured out it was a pyramid scheme. in his speech he tried to contradict it being pyramid scheme by comparing it to other successful businesses that follow a pyramid type pattern,...ie.....Home Depot has one ceo, the ceo has a couple managers under him, which has maybe 10 regional managers under them, which has maybe 30 district managers under them which has 200 general managers etc. etc. well you get the idea, Well my question is why is it that pyramid schemes consistantly fail while true businesses don't, or is it just luck of the draw?

Answer 1

Pyramid schemes require that new members be constantly enlisted, as the chain becomes broken when some do not perform or drop out.

If they worked and each member enlisted two more, and those two enlisted four, those four enlisted eight, etc.,
withiin 30 days the membership would exceed the population of the entire US.
Double a penny each day for 30 days. That's the premise of pyramid schemes.

In business, the employees work every day and usually perform for many years. If they "stop working", they do not receive a portion of the remaining employees earnings.

The only fallacy in some cases is retirement benefits that have not been paid into and invested. Unions have gained so many benefits that are not fully paid , that the corporations are/have been in financial trouble.

Consider SSI. You are paying the benefits for present retirees. The money that retirees paid into it has been squandered by our brilliant politicians, who have the power to increase payments when needed.
Your SS benifits will be paid by your children/grandchildren.

These guys are pros at demonstrating the comparison to legitimate business.

Ordinarily the first few who orginize these schemes are the winners. They never last as long as legitimate business.

Answer 2

The term pyramid scheme is misused often. A pyramid scheme doesn't exchange goods or services, only money---like a chain letter or gifting program. Most people automatically assume multi leveled programs are all pyramid schemes, which some are and some aren't. The reason that most "multi level marketing" ventures fail is because probably 85-95 of the people are waiting for someone else to make the business successful and then get a "free lunch". So what happens is that 5% of the people make it work and nobody else is able to duplicate the results because of laziness, poor system design or poor training. A typical brick and morter business is usually taken more serious by its owner and its customers. Perhaps, the physical location and set hours give more legitimacy and structure and therefore more condusive for profit. Don't get me wrong. There are legitimate MLM programs out there where intelligent, determined people are very successful, however, franchises like McDonald's are proven money makers even if they are ran by the most incompentant of employees. Why? People are hesitant to buy from companies that might be a fly-by-night operation or potentially bankrupt in 2 monthes. It boils down to image, name recognition, location, customer satisfaction, legitamacy and other things that are relative to the perceiver.

Answer 3

Because a legitimate business makes money buying, selling or trading merchandise or a commodity, e.g stocks, or providing a service. Pyramid schemes depend on the gullibility of people and do none of the above they just recirculate money and or products.

As the name says there are very few people at the top and a zillion at the bottom. E.g. you get a list with five names and addresses you mail each $5 then you delete the name at the bottom and put yours at the top then you mail the list to five other people.

The first few people that start the scheme can make a killing but as geometric progression increases (2,4,8,16,32,64, etc) the ones at the bottom get left behind bent over their desks whimpering with their pants around their ankles.

Answer 4

It's a pyramid scheme if the only way you make money is by bringing in more people under you to pay a membership fee or something. Does the company have any real products to sell? If not, then it is a pyamid and it's illegal - run away. In a pyramid, the only guys that make money are the ones that get in really early before the pyramid collapses. They fail because they have no products to sell. They can only survive as long as more suckers are convinced to join and pay their fees, once they reach a level where the last ones in can't find anyone else to join, the pyramid collapses - the founder(s) take theri money and run

Answer 5

There are two kinds of pyramids. The actual pryamid scam and multi level marketing. A legitimate multi-level marketing company emphasizes reliable products or services. A pyramid scheme uses products or services to disguise its quest for collecting money from the investors on the bottom levels to pay other investors further up the pyramid.

In a typical pyramid scheme, new investors must pay a fee for the right to sell the products or services as well as for the right to recruit others into the pyramid for rewards unrelated to product sales or services. Very often the products or services the victim must buy are unsalable, and the pyramid's promoters refuse to repurchase them. On the other hand, legitimate multi-level marketing companies will buy back unsold merchandise, although often at a discount from the original price.

Success in multi-level marketing is based on two factors: product and service quality, and the hard work involved in being able to sell the products or services. Recruitment of new investors is secondary.

Answer 6

A pyramid scheme is really more like the work from home selling something kinda thing. One person sells you the idea for $10 then your supposed to sell that to 10 other people for the same amount but you give 10% of your profit to the person who sold it to you. The people that you sell to are supposed to do the same, then eventually people stop buying and the profit stops coming in. Thats why pyramid schemes fail.

Answer 7

Not all Pyramid business fail all the time, some success's some don't. But in order to success in these type of business you have to know a lot people..family.co-workers..friends etc. You have to be very strong self motivate, outgoing and friendly.

Answer 8

Home Depot and other business aren't pyramids because they don't each need a lower level underthem. That last new hire who is stocking shelves doesn't have to find two friends or send $6 to anyone to earn a living. The Execs don't have to find people to pay them to keep a job.
When you have a company that basicly does nothing except get people under them to get people under them it will fail because you run out of people willing to do that.
Take a soap company that pays sales people for finding more sales people. They each invite friends for dinner or something and try to talk them into selling soap but really they wnat them to find more people to talk into finding more people to be under them they really don't make money selling soap. You don't hear talk about how wonderful the soap is, no advertising of the soap, nobody you know uses the soap, it really isn't about the soap.
Home Depot really is about hardware.

Answer 9

I had a similar experience. I went for a job interview as a salesman. got the job and left my previous job. I wasn't told what I would be selling till I turned up for training. it turned out to be very expensive hoovers and it worked out that i went out and did a demo and if they bought one I got a cut of the profits. But the person who trained me also got a cut and the person above him got a cut and so on. I quickly realised that it was a bit of a scam as there were many if's and but's. also constant contradictions. If it sounds too good to be true then it most likely is and I would steer well clear.

Answer 10

A pyramd scam isnt a business, it doesnt carry out any business, you just give some money to the people above you. A real business sells a service or a product (or should do, some real businesses do seem a little scamish to me).