My friend Ponzi

Find out, how pyramid schemes and finical frauds look like.

Sarah:  I have to tell you about this great lady I talked with. Her name was Lilly and she is part of this new interesting thing called Multi-level marketing. So she is distributing quality cosmetics and she is earning a thousands of dollars from that. It is so easy that she is telling everyone about it. But the coolest thing of all is that when you find new members to join the company you are earning money every time they sell.

To tell you the truth at the beginning I was a little bit skeptical but did my own investigation and the founder of the company Mr. Ponzi has a very good reputation. So what do you guys, think?

Ann:  Yes I have heard of this Multi-level marketing. It looks interesting but what do you think about the cosmetics they sell.

Sarah:  It is an unknown brand with perfect quality. They are distributed from person to person and that allows them to save millions of dollars from advertising.

Thomas: Sorry Sarah but it looks like you are been brainwashed. Here is a definition

Multi-level marketing (MLM)- is a marketing strategy in which the sales force is compensated not only for sales they personally generate but also for the sales of the other salespeople that they recruit. This recruited sales force is referred to as the participants’ downline, and can provide multiple levels of compensation.

All MLM’s are pyramid schemes which look like this:

Although MLM’s may be legal they have hidden risks embedded:

  • Pyramid schemes inevitably collapse if you do not recruit new distributors.
  • The prices of the products must be high because many people on the pyramid have to take their share. That is why MLM’s are targeting markets with high margins like chemicals and healthy food.
  • Only a few people on the top of the pyramid make any profits.

Sarah: Hmmmmmmmmmmmm.

The only domain where “creative” sounds like a really bad word is accounting.

Just do not play onerous games.

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