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Don't trust "get rich quick" schemes

by Tegan Mazur-Copy Desk Chief
Tue, Sep 5th 2017 05:00 pm
Photo taken from Wikimedia Commons
Photo taken from Wikimedia Commons

Everybody wants more money for less work. The idea of a "get rich quick scheme" is hardly new. They've been around for ages because many people are tempted to buy in when they are told that they have the opportunity to make a lot of money with minimal effort and the right attitude.

The truth is, of course, that most of the time even hard work over the course of a lifetime is not a guarantee that you will end up rich, or even get by. Pyramid schemes are one of the more famous (or rather infamous) types of "get rich quick" operations. According to a Federal Trade Commission (FTC) article entitled, "The telltale signs of a pyramid scheme," by Aditi Jhaveri, the things to look out for are actually quite simple. 

One of the first things to consider is what employees' compensation is based off of. If compensation is based off of how many other people an indivdual recruits to sell, rather than how much product they sell, chances are that it is a pyramid scheme. 

According to the article, two other key aspects of a pyramid scheme to look out for are: a requirement to buy large portions of inventory from the company and having to buy products that aren't wanted or needed, simply to remain in the good graces of the company.

Companies may also try to get people to feel comfortable working for them by including something familiar in the scheme. For example, they might mention a celebrity or a well-known figure who is attached to the company in some way, or they might be selling a product that people are already familiar with. This may make it seem more legitimate or inviting, but like all scams, it's just another rug that will be pulled out from underneath everyone eventually.

It is also important to remember that there are things similar to a pyramid scheme which are actually legitimate businesses. 

Multi-level marketing plans are one such example. According to the FTC article "Multi-level Marketing," many types of these businesses can actually be legitimate. The big distinguishing factor is, again, income. Legitimate businesses like these determine employees' income by sales rather than recruitment.

According to the Forbes article, "Mary Kay Preys on Women" by Helaine Olen, pyramid schemes often prey most effectively on those in tight financial spots. The model for Mary Kay lines up very neatly with the model for a pyramid scheme, requiring the purchase of large amounts of make-up product, and offering rewards for recruiting others to sell the make-up. 

The article also mentions that this scheme in particular, as well as those like it, are often most effective on those in financial distress. It's important to remember that when in a financial bind, it's best to be cautious of money-making schemes.

According to the FTC article, "It's no longer business as usual at Herbalife: An inside look at the $200 million FTC settlement" by Lesley Fair, Herbalife operated in much the same way. It promised an excellent product to sell quickly and easily to make big bucks, but delivered the same old scam. 

Herbalife was actually prosecuted and required to pay back $200 million to employees due to "misleading money-making claims." It's important to remember that scams are not just a possibility far off in the distance to watch out for, they're something coercing a lot of people into wasting their time and money.

When looking for a job out in the world or to pay for college, air on the side of caution if a job requires a lot of time, and especially if it requires a lot of money. If it looks like a pyramid scheme, talks like a pyramid scheme and walks like a pyramid scheme, it just might be a ... well, it's probably a pyramid scheme.