A Pyramid scheme

What is a Pyramid scheme

Pyramid Schemes (also known as a ponzi scheme) usually come in many disguises, but all have the same sense about them, they are too good to actually be true.

The Scheme is usually thought up by a single person who is at the top of the Pyramid. The term Pyramid is used because off the structure within which the scheme works, few people (top of the scheme) receive early compensation and often. Those sitting a top the pyramid see fast returns on their money, they then assist in promoting the amazing money system to new recruits, who in turn introduce more ‘investors’ (usually family and friends) which assist in keep the scheme going.

The point of the Pyramid is to have a big base below you. To get paid you would typically need to introduce 10 sub ‘investors’, who in turn would need to introduce their own sub distributors, which then form part of your third level of ‘investors’.

What’s the problem with that

The problem with a pyramid scheme is that you eventually run out of ‘investors’. No product or service is being sold meaning that the only way to continue to make money is by introducing new members who need to continue to contribute.

However, when they realise they are running out of recruits they often stop their own contributions which leads to the collapse

How bad can a scheme get

Most people lose their a little bit of monthly income, these are usually small fry schemes that did not require a large sum to gain entry.

However, there are hundreds of cases where people have lost their entire life savings on the idea of doubling or trippling their money in a very short time.

The biggest Scheme ever

Over $50 Billion dollars was lost, and at the center was Bernard (Bernie) Madoff 

The biggest Ponzi/ Pyramid scheme ever uncovered was run by one of the worlds (at the time) foremost financial investors and the former non-executive chairman of the NASDAQ stock market . The guise of joining an investment with someone most people would consider a financial genius and at the same time seeing unbeliable financial returns, was too good to miss. Most people were afriad of being left behind.

In 2008 when the world entered the recession, the pyramid collapsed!

Why is a Pyramid Scheme also Known as a Ponzi scheme

Named after Charles Ponzi after his Pyramid scheme which lured investors with promises of huge financial returns collapsed in the 1920’s. Originally Ponzi had started with a legitimate business, however it turned eventually and new investments were used to pay early and original investors as well as Ponzi himself.

Why Multi Level Marketing is not a Pyramid scheme

Multi Level Marketing or MLM is extremely different. MLM involves working within an entity to distribute products or services that generate a profit.

Your income or dividends earned are NOT based on continuous introduction of new members.

Within a MLM business you may benefit from a down line contribution, but your business success is not tied to this structure. Network marketing has been described as one of the best businesses to enter with little to no experience and was even mentioned in Robert Kiyosakis book the cashflow quadrant. See what is network marketing here.

What Network Marketing/ MLM programs can you join in South Africa

IFA

A division of clientele life offer you the opportunity to start your very own small business from scratch in South Africa. IFA and Clienetel life have been around for decades and offer members the opportunity to sell financial services while benefitting from the Multi Level Marketing system.

The products are beneficial and affordable which makes it a fantastic opportunity for South Africans to start with a very small business investment. Over time with a small amount of effort your businesses grows month on month and after a bit of effort over time you will have developed a monthly residual income.

Find out more about IFA here

Amway

American Way, known as AMWAY was founded in 1959 and uses Multi Level Marketing to sell products such as home care, beauty products and health supplements.

Amway does not allow retailing of its products but a direct selling approach.