Pyramid scheme

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Joe Carrithers

September 16, 00

English 10HCheap Custom Essays on pyramid scheme

Too Good to Be True

The Truth behind Pyramid Schemes

"Psst....want to make a lot of money real fast? You can earn up to $5,000 a week - with comparatively little work! Are you interested? Alright, alright, just come to this meeting. And look nice, too. This is for real! Does this sound familiar to you? Instinctively, you should know better than to listen or act upon ads with promise of quick attainable wealth and financial freedom. But as many as 80,000 people across the United States are frequently coerced into a pyramid scheme with the illusion that he/she can accomplish his/her goal of attainable wealth; without realizing that pyramid schemes offer a little more than the complicity in the scheme itself .

By definition a pyramid scheme is a fraudulent system of making money based on recruiting an ever-increasing number of investors. (http//www.ftc.gov/). The initial promoters recruit these investors, who in turn recruit more investors, and so on. The scheme is called a pyramid because at each level, the number of investors increases. The small group of initial promoters at the top requires a large base of later investors to support the scheme by providing profits to the earlier investors. Let's take a recently new organization called by.net who

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claimed to be an innovative internet access provider. It hopes that one day of taking over rival internet access provider such as AOL Time Warner.

The company prides itself on its low prices and the numerous services it offers. Among these services is a virtual shopping mall with many big-brand affiliations and "cross-platform instant messaging solution," (http//www.by.net/aross/present/flipchart1.asp) which allows users to chat with other users across many chat-platforms. Finally, by offers numerous awards for using their service and finding customers. But this doesn't end here; by offers a special alternative program in which the customers can become a "representative" of by who are allowed to advertise their product. You make money by selling their product and recruiting other "representatives." The requirement to become a "representative" is to simply paid $40.00 to sign up and $70.00 registration fee to be allowed to promote its products (http//by.cjb.net/). The company justifies these fee by explaining that the fees covers various business expenses and it also covers hosting fees of a website which the company provide for you.

The practice of recruiting such representatives, herein referred to as distributors and profiting from their registration fees is known as pyramiding, or multilevel marketing (MLM) [In accordance with FTC regulations and laws passed in a majority of the 50 US states]. Although pyramiding in itself is not expressly illegal, "a great majority of organizations practicing MLM turn out to be illegal pyramid schemes" (Rushkoff 1). Therefore, just by definition, one must be cautious of bys business method. But without doing further research, it is impossible to comment on the legitimacy of by. The harm cause by a pyramid scheme may be summed up as follows since most of the promised rewards are tied to recruitment, a situation is created in which the monetary benefits set forth by the company cannot come true for

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the vast majority of the participants. "The resulting losses are not accidental; they are determined by the structure of a compensation plan that ties most of the promised reward to a participant's ability to recruit others into the program. By the very nature of the recruitment pattern, earnings representations attached to a pyramid scheme must turn out to be false". (http//www.labbb.org/scripts/cgiip.exe/WService=wsbroker1/C%A/Inetpub/wwwroot/SouthlandReport/default.htm?hCompID=11868&hAKAID=1&hAddrID=1).

Retailing is important in a pyramid scheme (keeping in mind that a pyramid scheme is always incognito to the public eye), multi-level marketing sales is the most common disguise of pyramid schemes. If the MLM Company is growing primarily by getting more distributors to purchase goods and these distributors are not reselling to consumers (people not enrolled as other distributors) then the company is disguised as a distribution company. In fact, "as the products or benefits being offered become less and less tangible" (Rushkoff 0) no distribution and no true selling are occurring, just recruiting. This means that the main way to make money in that company is to enroll many others, and the main way for those others to make money will be to enroll still more. Mathematically, this cannot continue, so the plan cannot deliver its promises. It is a scam. The trick is on the distributors who are required to buy products and they must trick others into also buying goods (and trying to sell them to still more distributors.) If commissions, bonuses or overrides are being paid, but little retailing is occurring, then the commissions are really recruitment fees. "Multilevel marketing schemes sell nothing more than membership and a get-rich scenario" (Rushkoff 0).

Some might argued that by is not a pyramid scheme, but rather a job opportunity given to a person who is willing to cooperate with the company's rules in working at his or her own

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pace to make a sustainable income. At the by website the company states that by is not a salaried position but an entrepreneurial enterprise, the company do not guarantees of income.

"No one makes money in by.net exclusively by recruitment. To be certified, one must have obtained two non-rep ISP customers. by .net is a customer acquisition company that teaches others how to acquire customers for their own internet ecommerce businesses. Representatives can make an income without an organization, using customers alone. A representative engaging exclusively in recruitment only practices is subject to immediate termination."(http//www.by.net/aross/present/flipchart.asp).

The use of pyramid occurs in every aspects of our society government, business, jobs, and even sports team or competitions epitomized a pyramid. So every pyramid case is not necessary affected adversely, but rather have positive outcomes. For example, if our country does not operate in a pyramid-like function then it would be corrupt because you need to have an operation in which you have a leader (the president) controlling a small group (congress) to make justifiable laws to maintain his/her people. Likewise in any sporting game you have to have a coach and his assistants to guide and lead the team, otherwise the team is disorderly conducted or you would not have a team at all.

Lastly, whether you are coerced into a pyramid scheme, win or loose, it is ultimately depended upon one's choice to decide his/her faith of financial freedom. Financial freedom does not guarantee happiness in life, but freedom of choice is. Beneficial or detrimental, the ultimate question that remains is an ethical one. Are you willing to partcipate in a proven scam? Are you willing to bring friends, family and acquaintances into a hostile situation? And are you willing to risk losing both business and friendship for a quick monetary fix? So the choice is yours, choose it wisely.

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