Setting the Scene:
I had finished work, ate some dinner, and was looking for a place to chill out on my laptop. With limited options, I found a local Tim Horton’s Coffee & Bakery shop and decided to hang out there.
When I entered, the first thing I noticed was the place was packed! “Perhaps this was the happening place to be on a Wednesday night” I thought. So I ordered my coffee, took a seat, and got on my computer.
The majority of the people that were there looked slightly less than well-off. But among them were a few very well (and overly dressed) young women.
Preying Upon the Ignorant:
I got on my phone to have my regular evening call with my wife when suddenly I observed “The Presenter” arriving. He was a young African American male in his 20’s that was also well dressed. He went around the store giving a “Whud up?” and handshake to everyone in attendance (all of which seemed to have been waiting for him to arrive). Everyone seemed glad to see him and he was warmly welcomed. Had I found myself in the middle of some type of cult meeting?
Luckily, since I was on my phone, the group seemed to ignore me (although a few people did motion for me to join them). I smiled and declined. But from afar, I observed.
“The Presenter” whipped out his laptop, thanked everyone for coming, invited them to come close together, and then began his PowerPoint presentation. As the words starting rolling off his tongue about the benefits of “joining his club”, I had finally figured out what was going on:
• This was going to be a sales pitch for some form of a pyramid scheme.
What is a Pyramid Scheme?
For anyone who doesn’t know, a pyramid scheme is a shady business practice where people get rich by recruiting others to sell some crappy product or service. To continue the scheme, the current recruits are given the burden of finding new recruits, and thus with each cycle the pyramid grows. Those who initiate the scheme (at the top of pyramid) usually make all the money while each new set of recruits (those at the bottom of the pyramid) makes less and less.
The problem is that the cycle of recruiting more and more people to grow the pyramid eventually runs out, and usually leaves the suckers at the bottom of the pyramid with lost money. Pyramid schemes are illegal, but they can still lurk in various forms.
My Observations:
How did I know this was a pyramid scheme? By many observations:
• The presentation was about joining a “vacation club”. It started off with lots of fantastic images of tropical beaches and people enjoying vacation.
• To join this club, you had to “get your family and friends” to sign up to use their service.
• A bulk of this presentation centered on “how easy it was to make money from doing this”. The Presenter talked about how he went from working for minimum wage to earning “thousands of dollars” each week. His female peers (the other well dressed individuals) also spoke up about how they went from being poor, single-mothers to independent, strong women! Each one of them also bragged about how they “don’t actually have to go to work since they do this”.
• The presentation concluded with images of rich people like Mark Zuckerberg. “Don’t you want to be rich like this guy?” the Presenter asked.
• Not one mention of actual financial advice like saving your money, budgeting, starting a 401k, etc.
If that didn’t convince you, there was more. After the presentation concluded, the “new recruits” stayed behind for a training session with one of the females. Here were offered the following top-notch advice:
• How to get people to come to these meetings.
• How to get kids out of the meeting so the parents can pay attention and be engaged.
• How to start conversations with random strangers and then invite them to join the group. (Is this why they kept motioning for me to join them?)
• How to boldly introduce yourself and tell your rags-to-riches story.
• How many people you need to recruit to have one of these “special” presentations.
• How to use your female persuasion to get the men interested.
• Again, not one mention of actual financial advice.
It’s Just Not That Easy:
I suppose that it should come as no surprise that people are still desperate enough to buy into this type of get-rich-quick nonsense. After-all, isn’t our society obsessed with finding the quickest, least-effort solution? TV commercials are full of products that promise you to lose weight without exercise or get rock-hard abs.
Unfortunately though, like exercise, it’s impossible to cut corners and short-cut your way to actual results.
People need to understand:
• If it was really “that easy” to make money, then why wouldn’t we all be doing what this person is offering and getting rich?
Whenever someone offers you an idea or inclusion in something that sounds too good to be true, it probably is!
Unless you’ve going to be a true entrepreneur or have a real product or service to sell, then you’re going to have to get rich the old fashioned way: Going to work, saving your money, and investing little by little for the future. Don’t worry … a helpful site like Wealth Pursuits has dozens of examples showing different ways you can do this!
Remember, beware of anyone who tries to sell you on anything that defies your common sense.
Dear Readers – Have you ever been a witness or invited to participate in a pyramid scheme? Has anyone ever promised you riches for taking part in something that sounded too good to be true? How did you know that it was going to be a scam?
Related Posts:
1) Why Is It So Hard To Buy Something?
2) What is Happening to the Middle Class?
3) Gambling at the Casino – Still Not Really Investing
Photo Credit: “Stacked” by DieselDemon on Flickr
I’ve been pitched pyramid schemes several times. These folks like to lurk around the business and finance sections of bookstores.
If I have trouble figuring out how money is made from the product you’re selling, then I’m immediately skeptical. There are some people who make money from “network marketing” businesses, but they’re great salespeople. Great at getting more suckers to sign up. I’m convinced they’d be just as successful if they used their abilities to sell a legitimate product.
That’s it right there! These people seemed to be great and friendly, but all they were looking for were SUCKERS! They probably would do good to just sell something legit!
I generally avoid that sort of thing – people pitching it and people in them. I have heard of them and have had a friend that got sucked into one without really knowing what it was, though.
That’s the problem – they’re so ambiguous! At first they sound legit and the people are so optimistic that it becomes deceiving! Nice work steering clear of them!
I’ve sat through a few of these presentations, and the one thing I’ve noticed is how the emphasis is normally on recruiting other people. Your money isn’t made selling an actual product or service which people could find valuable. That’s how you know to stay away.
It’s interesting that they tried to recruit you! You’re right – if it was so “easy”, why isn’t everyone doing it? And why do they need to recruit others if they’re doing so well already?
That’s the Achilles heel. If you have to recruit anyone, it’s a scam.
I left out that we had a VERY short conversation in the parking lot. They tried one last time to get me interested, but I blasted them with questions to which they did not have answers. They don’t like being asked questions. 🙂
I agree. I have a friend who is also a business affiliate and does Amway, which in regards to I myself will never do and I know he will never recruit anyone to do so underneath or alongside him. I actually sat through their presentations and while I do give them some props for their efforts, in the end it’s still a pyramid scheme to me. Their products however do seem quite nice a I’ve purchased a few things from their ‘health and wellness’ category.
Now Herbalife, TruNutrition, etc.. all those, they all for some reason rubbed me the wrong way (even more so).
I guess there is a sucker born every minute.
I’ve been to several pyramid meetings that were both real and scams. To me they all still have the same common thread. Even though some are legitimate, they play up the “get rich quick” factor way too easily. Not everyone can do it, and it takes a special kind of sales person to get people to buy stuff using that method. I almost signed up once, but decided it wasn’t for me after I kept asking questions, and they couldn’t answer them.
Great observation! Anyone who keeps repeating “It’s so easy” or “You’ll make money in no time” is using some fundamental psychological trickery (aka Brainwashing)
They sure don’t like it when you start getting wise and asking quesitons, do they? 🙂
In high school I got sucked into a job interview with one of those pyramid schemes. I got out of there as fast as I could!
Welcome to the site TAS! That’s funny! I answered a newspaper ad that was also a pyramid scheme. It was so ridiculous! They couldn’t tell me who they were, what I’d be doing, or what the interview was for, but they kept re-assuring me that it was “a great opportunity for me”. How would they know it was a great opportunity for me? I’m just a guy answering a newspaper ad!! Scam!
My senior year in college a guy at the gas station started talking to me and said he had a job opportunity. So I met him another day to discuss, and he made his pitch. It was along the same lines, with some kind of club/group. A few minutes into the pitch I just told him that this was awaste of both his time and mine and got out of there.
Smart move! It’s tough, but sometimes you’ve got to just tell it to people like it is!
When I was a kid, i think 12 or something like that, i came to my dad and asked money for such a thing. He tried first to explain me it’s a scam. I didn’t want to listen, of course. He did the smartest thing he could do – he gave me that money. I learned my lesson back then and since then if i smell even slight hint on such scheme, i walk away. It cost me fraction to learn the lesson when i was yong and saved me fortune when i grew up. It’s a good value for money or tuition, eh?
Probably one of the best investments your Dad ever made! Sometimes these types of lessons have to get taught in the classroom of life in order to stick!
I’ve been asked to join these at least a dozen times. I went to a seminar in college and a few years ago one of my old co-workers/business owners asked me to join one. He’s actually doing quite well but it’s DEFINITELY not easy and it takes A TON of time to build up.
It’s impossible to sign up 3 people that will sign up 3 more motivated people, that will each sign up 3 more motivated people. People are never that motivated once they realize how hard it is! lol
And thus the pyramid falls apart! It’s interesting that you know someone who has ACTUALLY made this work. I wouldn’t imagine that it’s any cakewalk to pull off a true income from even a legitimate form of these types of ventures.
Wow that’s crazy that you witnessed that! I’ve never witnessed it, and I still can’t believe people fall for it.
There are just some things you take for granted. People still think the email from Nigeria is real. People still think the pop-up with the “Free iPad” is real. And apparently there’s a small community of people in OH that really believe they’re going to “get rich quick” off this vacation club. I’m so disappointed in Tim Horton’s ….
There are soooo many! About a year ago someone tried to trick me into one. They knew I kept a finance blog and was interested in investing, so they wanted me to come to some “seminar” about “wealth building”. It seemed legit… until the guy told me he paid something like $400 for a “kit” so he could sell other people things, and if I joined him then we would be a “team” and try to find more people to work below us.
It was really whacked.
Welcome to the site Bridget! That’s crazy! $400 for a kit? It was probably no more informational than anything you could read for free on a PF blog or book from the library! And the cult-like talk adds an extra level of creepiness to it … Good job dodging that bullet!
That had to be pretty awkward to be sitting in that coffee shop sipping on your beverage, and all of a sudden a pyramid meeting unfolds before your very eyes. I don’t blame you one bit for declining the invitation to attend.
In the past, I’ve attended many of these meetings and found that they preached the same old theme. Recruit your friends, family, and coworkers and become rich like the late Steve Jobs. After awhile, this becomes so old. I just don’t waste my time anymore.
It was VERY awkward! But I don’t fold very easily.
Funny isn’t it? They showed a picture of Mark Zuckerberg as an example of someone they could aspire to be. Yet they offered no legitamite or original ideas. Bernie Madoff would have made a better image to show 🙂
I have never witnessed a pyramid scheme. I would stay far away if I did. I’m not much of a sales person so I think someone would have a terrible time trying to pitch this kind of idea to me.
It was probably interesting for you to watch though. lol
Katie, sorry to under-represent Ohio. 🙂 Yes, my first reaction was to get the hell out of there. But my naturally curiosity and the prospect of having a great Monday blog post kept me planted. I was really interested to know WHAT they were all there for!
Trust no one. This reminds me of the company that sells washing detergent at three times the price you can pay at Wal-Mart. I never like to be part of these insane ideas to make easy money. But your experience proves that our world is full of those who want to get fantasized about these get rich quick schemes.Sad!!
It really doesn’t take a whole lot of common sense to see right through these tricks, does it?
It is shocking that people still buy into pyramid schemes and scams. It’s crazy! When will people learn that there is no easy way to get rich, because if there was, we’d all probably be doing it! The only way to make money is by hard, honest work. Also, is there seriously a Tim Hortons in the U.S.? I thought they were just a Canadian thing?
No way! There’s a million Tim’s here in MI! I love the little Iced Cappuccinos!
I always feel bad for people who fall for these. Some are just ignorant but others are greedy. Hopefully this post saved a few people for falling for one in the future.
Thanks Lance. I’d like to think so! 🙂
I think there is tons of money to be made doing this sort of thing. Just realize that the lower the barriers of entry, the more competition there is and the harder you’re going to have to work to make money. Plus, with low barriers come lots of questionable products. If anyone can sell this way, everyone will.
I’m with Carrie: people play up the get rich quick part. I think if you find a good product and are prepared to work your ass of, you might make a few bucks.
That said, if I’m personally going to work hard, it won’t be on convincing my friends to come to a meeting. Those people won’t be my friends for very long.
LOL – I about fell over reading the first part! Thanks AJ!
multi level market vs pyramid scheme
MLM are legitimate businesses, their sales distribution network is through their sales reps (multi level marketing). Not all MLM are schemes. Amway or whatever it is call and Avon are two examples.
Pyramid schemes are pure fraud aka Bernie Madoff where money is brought in from new investors to pay the original investors.
I don’t recommend MLM as you wind up burning a lot of friendships. But there are people who do it and make millions. So to the right person, it’s a great business opportunity.
I work with investors in my projects and have to always build the trust and inherent fear. Its simple, if your gut tells you not to do something. Trust your gut.
Invest Like 1 Percent
However you define it – I do not recommend them as an investment or the get rich quick schemes people make them out to be.