Friday, April 13, 2012

Scams - My first encounter with a pyramid scheme

When I was 15 or 16 years old I had my first taste of buying into a pyramid (Ponzi) scheme.  These schemes seem to always rear their ugly head when times are tough.  The new term for many pyramid schemes are Multi-Level Marketing (MLM).  Now, don't get me wrong.  Some of these businesses are legitimate.  I certainty will not name any names, but they can be very disappointing to many people for several reasons.


First of all, usually the products aren't very good.  This isn't always the case, but the company's I've joined the products were below average at best.  Product was fine, but the product that I purchased and was suppose to sell or get other people to join under me was prepaid phone cards.  This was back in the 90s where calling cards were just starting out.  It seemed like a great idea at the time, until I found out how much they cost per minute.  $0.50 per minute was the cards.  We can now buy calling cards that can call South Korea on a cell phone for $0.06 per minute.  I think the standard at the time was like $0.25 per minute.  It doesn't take a genius to realize how difficult it will be to sell someone a phone card for $10 that gives you only 20 minutes of talk time, when you can go to a super center and get one for $10 and get 40 minutes.  The worst part about the whole thing was I dragged my older sister into the scam.  I paid like $99 and she paid $249.


So, how can you tell if the MLM is a pyramid scheme or not.  Pretty simple...they focus on how you can make money.  If the training is primarily focused on getting other people to join under you...welcome to a pyramid scheme. 


The thing about these scams is the people at the top are the ones who get wealthy.  In other words...those who get in early make the money.  My advise is to smile, and say I wish you the best of luck.  The last thing you want to do is rope in your friends or family.  Your reputation is very important, and you don't want to ruin it on some lousy no good company.  Besides there are plenty of businesses you can start with little to zero capital.


I must say if you have enough willpower to say no, it is a good experience to learn more about how these companies work.  Fully understanding that no matter what they say, your answer is...I need to think about it.  Or, I need to talk to my partner before making any major financial decisions.  If you do decide to do this...or go to some quick talking seminar that gives you a free lunch and free book if you sit through 8 hours of sales pitch post a comment on how you felt.  It is amazing how powerful the presentation really is.  How much did each product cost?  $3000!  I went to one seminar and the person was selling a overpriced luggage bag with paperwork on how to create your own LLC, Trust, etc.  I was shocked at how many people bought this stuff.  You can go to pretty much any attorney in your area and start one for less than $1,500.  All I can say was...wow...that was one expensive piece of luggage.


This leads me to another book that I recommend reading.








Influence: The Psychology of Persuasion is a great book on psychology.  The book is highly rated on Amazon, and I give it two thumbs up.

Lastly...some people are not wired to be sales people.  I briefly touched on the subject of personality tests in one of my past articles.  Understanding your personality can help determine many things...from possible career paths, strengths, and weaknesses among other things.


If you ever run into a get rich quick scheme...just remember...the founders of the scheme are the only ones who gets rich.  Why, because they are on the top of the food chain.  Plus they know that most people who buy into a get rich quick scheme is someone who cannot sell.  Therefore why waste any time training or helping that individual out.  They move on to the next victim.

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