Ever had someone try to sell you Amway, or worse, try to recruit you to sell Amway?  Today we discuss pyramid schemes and how to protect yourself from them.

Robert Fitzpatrick joins us to discuss money making schemes.  They pre-date the internet but have exploded in number since the advent of the net.  Find out how to spot and avoid them.

There are two main types of these schemes.  One that is presented as a money making opportunity, as a career.  These are multi-level marketing schemes.  The other type is sold as a social opportunity and commonly known as a gifting circle.

The three biggest MLM schemes are Amway, Herbal Life and Nu Skin.  Someone recruits you to sell products and get a portion of your sales and you recruit others and get a portion of their sales and the “endless chain” grows.  In a regular sales job there is none of this cultish recruiting.  It’s cut and dry.  You sell product X for $X and make a portion of that price.  In these MLM schemes, you are told the amount you can make is nearly limitless because you get a portion of the money those you recruited make and a portion of the money those they recruited make into infinity.

Well, hell.  Making money into infinity sounds great.  What’s the problem?  Well, if you follow the model of you get five people, they get five and so on, you’ll reach a number that is bigger than the world’s population thirteen levels in.  So that’s a problem.  There is a limited number of people available but these scams don’t tell you that.

Ask yourself if you could make a living just selling the product, not recruiting.  Have you ever seen anyone selling Herbal Life?  The money comes from enrolling people who then buy the products, they have to buy the products.  The bottom group will always lose out and represent the biggest portion of the entire group.

Still not dissuaded?  Herbal Life is currently being investigated by the FTC, FBI, and SEC, all the acronyms!  Companies like this have not been taken down for so long because they have a lot of lawyers, lobbyists, and PR people working for them.  Many people who have been taken in by the scam are too ashamed to report it and so these companies have been unchecked for a long time.

A gifting circle works much the same way.  It’s often disguised as a women’s networking group.  It costs $5000 to join and that money goes to the top recruiter.  There aren’t even any products in these stupid things.  You just laid down five grand to sit and the mean girls table, good job dummy.

These things have broken up families and ruined marriages.  The person buying in has so much on the line that when someone close to them calls them out, they double down, making the problem worse and sometimes destroying the relationship with the person who pointed out this was a scam.  People have lost their homes because of their complete lack of incredulity.

Come on guys.  If you are smart enough not to send your bank details to a Nigerian prince, you’re smart enough to avoid this stuff too.

Show Notes

Pyramid Scheme Alert:  Robert’s site to protect consumers from money schemes.

Betterment:  Make money the legitimate way.

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