A short description of what a Pyramid Scheme is.

1. A pyramid scheme is a fraudulent, unsustainable investing plan that has cost many people worldwide
their money. This involves a promise to participants of some form of payment or services for enrolling
other people into the scheme, rather than offering them any form of real investment or sale of products
or services. This scheme has been in existence for at least a century.
Pyramid schemes come in many different shapes and sizes that many are not familiar with and many of
the would-be investors do not understand the level of risk involved. Many countries of the world have
banned the various forms of pyramid schemes because of its fraudulent nature.
The Pyramid scheme is structured just like a pyramid and starts with one person. The initial recruiter,
who is the top guy at the apex of the pyramid. This person recruits a second person who invests like
$100 and this sum is paid to the initial recruiter. In order for this person to make his/her money back,
the new recruit must bring in more people under him/her with each of them investing $100 each. If this
recruit is able to get 10 more people to invest, he would make $900 with just a $100 investment.
The 10 new people also become recruiters who in turn are required to bring in additional 10 people.
This will be a total of 100 more people and each of these ones will also be obligated to pay $100 to the
person who recruited him or her. Recruiters always get a cut of all the money received save the initial
$100 paid to the person who recruited them. The process continues until such a time when there are no
more recruits.
See the diagram below:
PYRAMID SCHEME STRUCTURE
The truth about the pyramid scheme is that there is no end benefit since the money simply travels only
up the chain. The top guy and a very few people at the top levels of the pyramid only make the most
profits from the scheme. Those who were not able to recruit any followers end up losing their money.
The pyramid schemes have somehow become associated with network marketing or the multi-level
marketing (MLM) business. This is because when some schemes intend to sell a product, they often use
the same product to cover and hide their pyramid structure. They often have been called pyramid
selling and the reason why there is a contention about network marketing or multi-level marketing to be
no more than legalized pyramid schemes.
There are marketing and investment frauds in which a person is offered a franchise or distributorship to
market a particular product or service. The game here is, the real profit is only earned by the sale of
new distributorships and not by the sale of the product. In other words, the emphasis on selling
distributorships of the product rather than the product itself will eventually lead to a situation where the
continued supply of investors is completely exhausted, collapsing the pyramid.
The pyramid scheme on the other hand, does not involve the sale or distributorship of any product or
service but cash oriented.
It is always easy to see how a pyramid scheme can work, regardless of the form it takes but getting into
it involves deception of some kind since every participant is not able to receive the profits promised in
return.

2. When starting any home based business it is important that you can distinguish between a pyramid
scheme and someone just calling it a scheme.
My recommendation is finding a company that pays a high commission and also has a unique product.
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