Pyramid schemes

          A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products. As recruiting multiplies, recruiting becomes quickly impossible, and most members are unable to profit; as such, pyramid schemes are unsustainable and often illegal.

Pyramid schemes have existed for at least a century in different guises. Some multi-level marketing plans have been classified as pyramid schemes.In a pyramid scheme, an organization compels individuals who wish to join to make a payment. In exchange, the organization promises its new members a share of the money taken from every additional member that they recruit. The directors of the organization (those at the top of the pyramid) also receive a share of these payments. For the directors, the scheme is potentially lucrative—whether or not they do any work, the organization's membership has a strong incentive to continue recruiting and funneling money to the top of the pyramid.

         Such organizations seldom involve sales of products or services with value. Without creating any goods or services, the only revenue streams for the scheme are recruiting more members or soliciting more money from current members. The behavior of pyramid schemes follows the mathematics concerning exponential growth quite closely. Each level of the pyramid is much larger than the one before it. For a pyramid scheme to make money for everyone who enrolls in it, it would have to expand indefinitely. This is not possible because the population of Earth is finite. When the scheme inevitably runs out of new recruits, lacking other sources of revenue, it collapses. Since the biggest terms in a geometric sequence are at the end, most people will be in the lower levels of the pyramid; accordingly, the bottom layer of the pyramid contains the most people. The people working for pyramid schemes try to promote the actual company instead of the product they are selling. Eventually all the lower levels make no money, only the people at the top.

          People in the upper layers of the pyramid typically profit, while those in the lower layers typically lose money. Since most of the members in the scheme are at the bottom, most participants will not make any money. In particular, when the scheme collapses, most members will be in the bottom layers and thus will not have any opportunity to profit from the scheme; still, they will have already paid to join. Therefore, a pyramid scheme is characterized by a few people (including the creators of the scheme) making large amounts of money, while subsequent members lose money. For this reason, they are considered scams.

          pyramid schemes depend on recruiting people to become distributors of a product or service. Like MLM, the pyramid scheme offers the opportunity to make money by signing up more recruits and by accomplishing certain levels of achievement.The big difference between multilevel marketing and pyramid schemes is that MLM is legal in Canada (and most of the US) and pyramid schemes aren't. Participating in a pyramid scheme is an offense under the Criminal Code of Canada, punishable by up to five years imprisonment.But it can be very difficult for the person looking for a business opportunity to tell the difference between a legitimate MLM opportunity and a pyramid scheme at a glance. How do you tell whether it's a legitimate business opportunity or a scam? How do I know the difference between network marketing and pyramid schemes :
          The goal of network marketing is to sell the product directly to the consumer without the need for advertising or social media like "TV , radio , Journalism ,and internet"

Easier and cost less and save the price of mediaBut in pyramid schemes The first and last goal is to collect money in all possible waysHiding behind the name of network marketing and They deceive all conscriptsBy the way, If the company loses, everyone loses except those who are at the top of the pyramid           Are you required to "invest" a large amount of money up front to become a distributor? This investment request may be disguised as an inventory charge. Legitimate MLM businesses do not require large start up costs.If you do have to pay for inventory, will the company buy back unsold inventory? Legitimate MLM companies will offer and stick to inventory buy-backs for at least 80% of what you paid.

           Is there any mention of or attention paid to a market for the product or service? Multilevel marketing depends on establishing a market for the company's products. If the company doesn't seem to have any interest in consumer demand for its products, don't sign up.Is there more emphasis on recruitment than on selling the product or service? Remember, the difference between multilevel marketing and a pyramid scheme is in the focus. The pyramid scheme focuses on fast profits from signing people up and getting their money. If recruitment seems to be the focus of the plan, run.

These next two questions will help you determine what the focus of the company is: Is the plan designed so that you make more money by recruiting new members rather than through sales that you make yourself? This is the signature of a pyramid scheme operation.Are you offered commissions for recruiting new members? Another pyramid scheme trademark. It's the number of people who are willing to sign up that matters in a pyramid scheme, not the products or services being offered.

As always, when you're investigating a potential business opportunity, you'll want to gather all the information you can about the MLM company's products and operations.Get (and read) written copies of the company's sales literature, business  plan and/or Marketing planTalk to other people who have experience with the multilevel marketing company and the products to determine whether the products are actually being sold and if they are of high quality.
Check with the Better Business Bureau  to see if there have been any complaints about the company.And listen carefully when you're at that MLM recruitment meeting. Inflated claims for the amazing amounts of money you're going to make should set your alarm bells ringing.

         In fact, pyramid schemes don't work unless somebody loses. Those at the bottom of the pyramid are essentially defrauded by those on top. It's a mathematical fact that no matter how many people join a pyramid scheme, 88 percent of the members will be on the bottom level and will lose their money .Pyramid schemes are illegal because people don't lose their money due to normal market forces, but because the system requires them to lose so that a few at the top will win.         Studies show that in a naked pyramid scheme, 90.4 percent of people lose their money, while in product-based pyramid schemes, that number jumps to a shocking 99.88 percent         So are you know the difference between product-based pyramid schemes and legitimate multi-level marketing (MLM) companies?