Is your Current Job a Pyramid Scheme?

 Charles Ponzi 1920

The owner of Pop Media Consulting I have been in marketing about a decade. So when I came into Multi-Level-Marketing or Network Marketing I had the same reservations and questions like most people.

What’s the difference between multi-level marketing (MLM) and the infamous Pyramid Scheme?

Well interestingly, a type of Pyramid Scheme started in 1920 by Italian American Charles Ponzi. Ponzi had created a business no different from any other business, where he sold investors a promising endeavour. In this case the business sells empty shares taking advantage of the lack of investor knowledge or claiming the investment strategy must be kept disclosed to ensure a competitive edge. The deal would be a vague verbal explanation like a ‘Hedge Fund’ or ‘Offshore Investment’ where there is no tangible product or service.

These investors were not paid in the traditional sense from profit, but paid from new investors. The perpetuation of high returns required an ever-increasing flow of money from new investors to maintain the business, this couldn’t be sustained long term and the business slowed and collapsed giving the illusion of insolvency.

Today this is known as the highly illegal Ponzi Scheme.

Now, let us take a look at two types of Pyramid Schemes which are closely related to the Ponzi Scheme.

Naked Pyramid

Participants only make money by recruiting more members and there is no product. For example:

•      You recruit 10 people to invest in “low risk or no-fail investment”
•      Those 10 pay $100 to the recruiter
•   The recruiter tells them to go out and recruit 10 more to do the same

Ok this sounds simple, but we run into a pretty big problem. Those 10 recruits each find 10, then 100 new recruits will have to find 10 each to make their $900. Meaning they have to come up with 1,000 people willing to invest in the business. Then, that 1,000 needs to find 10,000 to make a profit. This forms the ‘Pyramid’. There will not be enough recruits at the bottom of the pyramid to support the level above leaving everyone at the bottom losing their investment.

Product based Pyramid

Same concept but has a legitimate direct sales opportunity. For example:

•  Distributor recruits 10 salespeople who pay $500 each for a product starter kit to on sell
•  Distributor receives 10 % for each kit sold
•  Distributor also receives 10% from every kit sold by their recruits
• Recruits encouraged to recruit more over selling products

Everyone at the top of the down line receive commissions for these new recruits
Problem, the products themselves don’t sell very well, or have barely any profit margins. Forcing the distributors to find more recruits. Market becomes quickly saturated with an unnecessary product and no one left to recruit. It collapses.

What makes MLM different?

Well to be honest, looking at ‘product based pyramid scheme’ there seems to be comparisons.

Don’t let that fool you.

At some point I think everyone has been pitched a MLM opportunity. While the pitch differs from each organisation, it’s pretty much a chance to abandon your everyday job, be your own boss and make lots of money while making new friends along the way.

Well that all sounds peachy but with the programs legitimacy so hotly debated, I’m here to plough through and expose some truths with what I believe is an industry primed for explosive growth and will be one of the most significant solutions to our current job dissatisfaction.

A growing reality is the increasing number of people disenchanted with their current careers. I was one of these people. We are exhausted from the so called ‘stable’ corporate grind, day in day out and don’t feel the connection between job and the people it impacts outside the office. Our focus is the desire to be part of something bigger and better, to have a positive effect on others. Aspects of life that can be fulfilled with specific types of products and service available through MLM.

“Don’t tell me stability is stable because it’s not.” – Seth Godin

MLM can lessen the hurdles people face coming into entrepreneurship, with providing training, support, and ample encouragement along the way.

This is not a ringing testimonial for the entire industry. Like any investment of time, money and energy, people need to be aware of what they are getting into and do their research. Remember, your product is going to be key and if you treat it like a hobby it won’t pay you like a business.

You should be asking these questions:

• Does the product meet a need?
• Does the product fix a problem?
• Is it on trend?
• Is it priced to sell?
• Is it priced to profit?
• Do you even like the product?

MLM program will feature a low upfront investment where a distributor will purchase the product. The distributor sells it directly to the public, friends and family through presentations or direct selling. People are more inclined to buy a product from recommendations showing proof the product works rather than a traditional advertisement. The program asks participants to encourage their existing distributors to recruit new distributors by paying the existing members a percentage of their recruits' sales. It also makes sense that If you are passionate about a product and it’s something you use every day to become a ‘member’, giving you access to major discounts. MLM programs aren’t just a financial escape but a business model that helps uncover human spirit.

Example compensation plan here.

Daria M. Brezinski Ph.D, a practicing psychologist and former marketing director for a multi-level marketing magazine, explains.  “Many people don’t realize that multi-level marketing companies are successful because they help people satisfy a number of important human needs, including feeling significant, having connections, learning something new, and making a difference.  I have heard people in network marketing say again and again, ‘I’m doing this because I’m meeting amazing people … making so many connections … and I feel so good about myself.”

What people are finding is that even though not everyone has landed on easy street, that when human needs are being met, the members and consultants don’t focus solely on the financial aspects.

As seen here through Network Marketer Karen Pogue’s passionate story. Karen’s has been in involved the MLM company Nucerity since 2011.

“First and foremost are the Founders. Without their foundation, we wouldn’t be where we are today. The ethical, brilliant businessmen that they are is what defines this company. They respect each other and us. Their leadership and core values reflect throughout NuCerity. Also, we have something that no one has in the world. Skincerity is a breathable barrier, a category creating technology that is ours to tell the world about.”

More success stories here.

MLM is not just meeting the needs on an ethical level but at the highest financial level. MLM is now being recommended by the top business leaders all around the world.

These include Donald Trump, Richard Branson, Robert Kiyosaki, Darren Hardy, Jim Rohn and Stephen Covey. In the book “why We Want You To Be Rich by Donald Trump and Robert Kiyosaki, the authors have an entire section dedicated to network marketing.

Donald Trump explains, “It requires an entrepreneurial spirit and that means focus and perseverance. I don’t recommend network marketing to people who are not highly self-motivated.”

He continues “Another important aspect of network marketing is that it’s inherently social so if you’re not a social or outgoing person I’d think twice about going into it. Sociability is a requirement. My advice about network marketing is to do your research and put everything you’ve got into your product. Genuine enthusiasm is hard to beat and the odds will be with you.”

Donald Trump famously stated “If I lost everything and had to start over, I would associate to a multi-level marketing company and start working.”

Regardless of age, gender, education, background, experience, nationality, past or present, you can change your future through choosing the right product. Becoming a Multi-Level Marker you can build your business as slowly or quickly as you choose, where you personally select those with whom you work, and build a limitless future where you control your own life.

The contrast between the Pyramid Scheme and MLM is vastly different when you break down the defining features. It’s clear to me that MLM has much more to offer than just commission and recruitment and is a far cry from the illegal Pyramid or Ponzi Scheme.

In fact, I believe the concept of starting a business for perpetual income will become one of the most significant trends impacting us through the 21^st century. But it has to start with redefining entrepreneurship. That means helping people find ways to turn a passion or personal desire into extra money in their bank, replacing a work identity, staying relevant and connected. Something MLM companies are poised to capitalise on.