Ever been contacted by a high school or college classmate you never really talked to, and now she wants you guys to meet at a coffee shop somewhere in Ortigas? You ask her what’s up, but she just tells you it’s business-related and promises to tell you more in person. If she senses your doubt, she’ll compliment you or talk about your “friendship” just to make you show up.
Let’s say you do show up at the said coffee shop to meet her. She’s wearing designer items from head to toe and she looks pretty much well off. Eventually (after asking how you are like you guys are long lost friends) she tells you about this “business” that you might be interested in or that suits you because you’ve always done terrific work, etc. and you’ll earn big time for sure like she does, as proven by her posh look. As if she really cares about you.
You ask her what you should do. If she says anything about selling a product and recruiting other people (anything about recruitment at all), back off. She’s scamming you through a pyramid scheme. (Can you believe the nerve?)
A pyramid scam is an illegal practice of tricking people into paying or investing money with a promise of high returns, usually without any product being sold.
How it works: The first recruiter (the one at the top of the pyramid) will tell someone (like you) to hire, for instance, 10 people and sell a product or make an investment, and will promise you around a million pesos in a month. He’ll tell you that it’s more important to recruit people than actually sell the product, since you’ll earn more that way. Let’s say you agree to this idea. The recruiter will make you invest or pay for the “starter kit” (the product you’ll be selling).
After you pay, you start calling people to ask them if they’re interested in selling or buying the product. When you do this, you’ll hear a bunch of nos and something along the lines of “Oh, I can’t buy it ’cos I’m selling it, too!” You’ll find that there’s no one left to recruit, and the odds of getting your money back are very, very small (smaller than placing the right bet on the Russian roulette).
With pyramid scams, it’s mathematically impossible for everyone to make money. If each recruit on one pyramid level got 10 people, somewhere at the bottom level, the total number of people to be recruited will go to a billion, and then 10 billion on the next one—and the planet doesn’t have that many people yet.
Pyramid scams work because there are people who lose: those people at the lower levels of the pyramid. According to the organization Pyramid Scheme Alert, 88 percent of the members will be on the bottom and will lose their money. And what makes all this illegal is that people lose their money just so that people at the top can benefit, when it’s only supposed to be through market forces, like price hikes.
To be sure you won’t join a pyramiding company here’s an eight-point test, a series of questions that should help you know if you’re being invited into the system:
1. Is there a product?
2. Are commissions paid on sale of products and not on registration or entry fees?
3. Is the intent to sell a product not a position?
4. Is there no direct correlation between the number of recruits and compensation?
5. If recruitment were to be stopped today, would the participants still make money?
6. Is there a reasonable product return policy?
7. Do products have fair market value?
8. Is there a compelling reason to buy?
If the answer is no to even one of those questions, you’re most likely being talked into the pyramid scam. And you know what to do with that: say no.
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