Pyramid Scheme?

Question

What's the Pyramid Scheme and anyone have any examples of it?

Answer 1

is like a Ponzi scheme, it is a fraudulent investment operation that involves paying abnormally high returns ("profits") to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business. It is named after Charles Ponzi.

Pyramid schemes now come in so many forms that they may be difficult to recognize immediately. However, they all share one overriding characteristic. They promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public. Some schemes may purport to sell a product, but they often simply use the product to hide their pyramid structure. There are two tell-tale signs that a product is simply being used to disguise a pyramid scheme: inventory loading and a lack of retail sales. Inventory loading occurs when a company's incentive program forces recruits to buy more products than they could ever sell, often at inflated prices. If this occurs throughout the company's distribution system, the people at the top of the pyramid reap substantial profits, even though little or no product moves to market. The people at the bottom make excessive payments for inventory that simply accumulates in their basements. A lack of retail sales is also a red flag that a pyramid exists. Many pyramid schemes will claim that their product is selling like hot cakes. However, on closer examination, the sales occur only between people inside the pyramid structure or to new recruits joining the structure, not to consumers out in the general public.

A Ponzi scheme is closely related to a pyramid because it revolves around continuous recruiting, but in a Ponzi scheme the promoter generally has no product to sell and pays no commission to investors who recruit new "members." Instead, the promoter collects payments from a stream of people, promising them all the same high rate of return on a short-term investment. In the typical Ponzi scheme, there is no real investment opportunity, and the promoter just uses the money from new recruits to pay obligations owed to longer-standing members of the program. In English, there is an expression that nicely summarizes this scheme: It's called "stealing from Peter to pay Paul." In fact some law enforcement officers call Ponzi schemes "Peter-Paul" scams. Many of you may be familiar with Ponzi schemes reported in the international financial news. For example, the MMM fund in Russia, which issued investors shares of stock and suddenly collapsed in 1994, was characterized as a Ponzi scheme.

Answer 2

You pay let's say €100 to enter and you represent the top of a pyramid. You then persuade 2 more people to enter, they each persuade 2 more and they each persuade 2 more, with everyone paying €100. You get the money from the 8 people at the bottom of the pyramid, so you get €800. Each of these people is also the top of their own pyramid, so supposedly they will all get €800 in the end as well. They're illegal in many countries, so don't try to enter one.
If my explanation's a bit unclear, see http://en.wikipedia.org/wiki/Pyramid_scheme

Answer 3

no capitalism isn't a pyramid scheme that is a financial philosophy a pyramid scheme is a fraudulent plan to maintain getting extra and extra human beings to take a position to coach a pretend earnings to purely the unique few. capitalism is a genuine working form that succeeds while utilized wisely. the only similarity between capitalism and a pyramid is that the backside is extra beneficial than the best with a view to create a truley sturdy shape.

Answer 4

What murnip said. Examples are Herbalife and Amway ("multi-level marketing" where you have to get 5 people or so under you to find 5 people each to go under them, they also have to find 5 people each and so on and so on).