“Hi, Gurleen! If I was to share an opportunity with you, would you be open to learning? And possibly make more money on top of what you currently do?”
said a stranger. Well, not exactly a stranger but a guy whom I personally didn’t know and we supposedly attended the same college.
The conversation started off in a rather benign way –
He then briefly mentioned his venture – it was some sort of a web business that helps international brands expand their portfolio in the Indian market –
At this point, I was rather curious and wanted to know more about their business and possible opportunities for collaboration. We decided to discuss further on a ZOOM call.
THE FIRST ZOOM CALL
I excitedly got onto the call and was joined by the guy who approached me, along with his brother (who was also his business partner based out of Toronto, Canada). I waited for them to brief me about the role, their business idea, the opportunity, and how I could contribute.
The “Canada brother” kept talking (and believe you me, I have never met anyone who was that talkative) and every time I’d ask about ‘my role’, he’d evade the topic by saying that he couldn’t disclose the idea right away. He repeatedly mentioned how important it was for him to build a professional relationship on the foundation of ‘trust’.
And I thought to myself-
“ok fair enough, maybe his idea is actually highly confidential and he’d perhaps reveal it by the end of the call”.
For the next 40 minutes or so, I was given the impression that his “idea/approach” was so disruptive, that it could change how marketing was being done in India. He then went on vaguely about what an amazing company it was, the great mentoring opportunities they had, and how fantastic its products were, without ever mentioning the actual products that were to be marketed in India. Then he gradually introduced the idea of “Network Marketing“.
Until then, I had no idea what network marketing was all about. He suggested that I read this very popular book called “The Business of the 21st-century” by Robert Kiyosaki before we got into another ZOOM call in a couple of days. Throughout the call, he kept sharing “Gyaan” that everyone should find ways of generating passive income, and the people who worked 9-5 jobs and didn’t side hustle were mediocre people who will never strike it rich or live to their highest potential. He also mentioned that my husband should be aware of what I’m getting into and that he should also join us during the next ZOOM call.
Towards the end of the call, I was quite impressed by their steady approach, and hurriedly went to inform my husband about this possible future collaboration. He being his skeptical-self shrugged it off as a “time-waster” and laughed at the notion of him joining the next ZOOM call.
THE SECOND ZOOM CALL
This time, I was the one who was “given” the opportunity to talk. He asked about my key takeaways from the book and we got chatting, in fact, it was a good discussion. Towards the end, I waited for him to share his “disruptive” business idea. But alas! instead, he shared a story about a couple who had very humble beginnings in Bangalore (India), and who now owned a mansion and had crazy wealth in California. He went on about how this “mentor” changed his life too. In between his various stories, he kept asking me hypothetical questions like, “What would you ask this uber-rich man if you happen to meet him?”.
I replied –
“I am going to ask if he’s still happy.”
The guy perhaps wasn’t expecting a response like this, so he answered his own question. He said his first question to the wealthy guy was inquiring “how he had become so successful?”. For the next 30-40 minutes, we were just discussing hypothetical scenarios and I was getting really impatient. I again asked him what his business idea was and how I could contribute. To which he said the next meeting is going to be life-changing and I’d get to meet this uber-rich guy, the “mentor” he was talking about. At this point, I just felt like saying –
“shut the f***k up and stop wasting my time!”….
To be honest, it’s true what they say about “sunk cost fallacy“. So instead of really saying the above, I said yes to meeting this “mentor” :/
Fast forward to…
THE THIRD ZOOM CALL, ACTUALLY A WEBINAR
This time, the younger brother (who had initially reached out to me) sent the ZOOM link on WhatsApp, saying this meeting is going to change my life and that I am going to love it!
I had absolutely zero hopes but I was too curious to not attend the session. On joining the ZOOM call, I saw 200 odd folks, mostly Indians, looking for jobs. They seemed to be from very humble backgrounds, and some even looked desperate for jobs or side income.
Then, the facilitator (the so-called “mentor”) began his session. He asked people who were new to the group to raise their hands. A couple of them raised their hands, but I didn’t and therefore got this message instead :/
The new folks were randomly asked about their desires, how much extra money would they want to make, and if given a chance, how rich would they like to be. After people answered, they slyly said that network marketing (with very little financial investment) was the answer to their dreams. They’d have to work hard selling products and recruit people under them, who’d further sell their products.
Then they introduced brands like NaturaCare, Amway, Herbalife, and others. The attendees were told that it’d be their job to directly sell products from these brands and recruit friends and family, who’d further sell the products to their network of friends and family, while also recruiting them to do the same.
Then came the most bizarre part – they showed a list of people who have struck it rich by doing this exact business. Some of them who were also part of the session said things like:
“the key that ignited my passion was accepting success and welcoming it into my life”
and that power of attraction is the highest power there could be.
There were also photographs of wealthy Indian and Paki couples (mostly husband-wife duos) showing off their mansions, their white Mercedes Benzs, and enjoying luxurious vacations. These power-dressed couples who were flaunting their pearl necklaces and expensive-looking watches stated they were from Dubai/UK/US/Canada etc. and recollected their success stories claiming that they (just like the attendees) started from nothing.
By that point, the gullible folks in the audience were *star-struck* by these “desi-moguls” and you could see the $$$ signs glowing in their eyes. They listened closely to every word uttered by these people and were pumped up by their fake lavishness. Little did they know that it was a non-nefarious way of introducing a “Pyramid Scheme” as a network marketing business <facepalm>.
Anyhow, we were now nearing the end of the session, when it was announced that the Q&A round would be canceled for lack of time. Everyone was instructed to reach out to their respective recruiters (who had invited them to the session) for the next steps.
SO WHAT EXACTLY IS PYRAMID SCHEME/MLM?
An oft-used recruiting tactic for multi-level marketing (MLM) companies, MLM participants use these public, unsolicited pitches to recruit new salespeople under the guise of “mentorship” or a “business opportunity.” MLM companies — notorious for predatory recruiting, high-pressure sales tactics, and near-guaranteed capital destruction — are enterprises where members’ earnings are based on a binary, or pyramidal, commission system. Members are paid for products they sell, new people they recruit, and people in their “downline” who do the same.
Here is how they mostly work: You sign up and pay the buy-in fee to receive your startup kit, and then you start clogging everyone’s social media feeds about your new venture and beg your friends and family to join you on your “journey to financial success”. You host a bunch of fake parties or worse, you meet up one-on-one to catch up and the whole thing turns out to be nothing more than a demo and sales pitch where you guilt your friends into buying stuff they don’t want or need. After you subject them to that, you then try to recruit them to join your team of consultants, or whatever term your particular MLM uses.
As with all MLMs, the real money to be made isn’t in selling their products but in recruiting more people to join your team (basically, doing the work for you).
So the real winners are the person who started the business and the very first people she recruited. This top of the pyramid is also where all of the success stories tend to come from.
Among the most vulnerable to these pyramid schemes are people in smaller towns and rural areas.
Market saturation prevents growth in a small town because once everyone you know starts selling it, no one can make any money and you’ve essentially created your own competition.
TYPES OF PYRAMID SCHEMES
Different forms of pyramid schemes exist which can be broadly classified as follows:
Multi-Level Marketing Pyramid Scheme Multi-level marketing (MLM) is a legal business practice, but unlike traditional pyramid schemes, this model involves the sale of actual goods or services. But participants are not mandated to close any sales, in order to generate income by recruiting members below them.
Some MLMs are nearly indistinguishable from pyramid schemes because they involve the sale of printed materials that have no real value, such as educational courses. These MLM schemes thrive by forcing recruits to buy such no-value products at high costs, and by making them sell these same products to next generational members.
Chain Emails persuade naive recipients to donate chunks of money to everyone listed within the email. After making the donations, the donor is invited to delete the first name on the list and replace it with his own, before forwarding the chain along to his own group of contacts, with hopes that one or more of them will send cash his way. In theory, recipients keep collecting donations until their name is deleted from the list.
Ponzi schemes are investment cons which work on the premise of “Robbing Peter to pay Paul.” They may not necessarily adopt a pyramid scheme’s hierarchical structure, but they do promise high returns to existing investors by taking investment money from new blood. Often lured by the prospect of too-good-to-be-true returns, most Ponzi participants end up losing everything. Investment advisor Bernard Madoff, arguably the most notorious Ponzi scheme artist, was sentenced to 150 years in prison for operating a multibillion-dollar illegal operation.
A FEW SCAMS FROM THE PAST
Here are some of the scams that have taken place in India in the recent past. You can learn more about them by clicking on the headlines below-
HOW THE PYRAMID TUMBLES
Pyramid schemes are viable as long as the lowest levels remain wider than the upper ones. But once the lowest levels shrink, the entire structure collapses. By nature of exponential math, it’s just plain impossible for pyramids to sustain forever, and somewhere in the chain, people will invariably lose their money. Interestingly, even high-level early adopters may lose money near the end, due to conditions that delay their payments from underlings, which often require waiting periods.
THE BOTTOM LINE
Pyramid schemes are illegal in many countries. The model of profiting by using the network effect often traps individuals into recruiting their acquaintances, which can feel slimy for everyone involved and can ultimately strain relationships. Investors should exercise caution with such schemes or simply avoid them altogether.
HOW TO AVOID SOCIAL MEDIA SCAMS
Social media is a great place to connect with friends and family, but it is also a place where scammers and con artists lurk. Always stay informed and exercise caution.
- Stay alert to pyramid schemes. Pyramid schemes promise quick profits for recruiting others. Scammers prey on the desire to make a lot of money with very little effort.
- Be skeptical: Before you accept any offer on social media, do your research. Just because something appears to be fun and was shared by a friend, doesn’t mean there isn’t an inherent risk. Many of these offers include extravagant promises that aren’t kept.
- Monitor Friend Requests. Don’t accept friend requests from people you don’t know. Also, be wary of a second friend request from someone you are already connected with; the second profile may be an imposter trying to access your data and your friends’ list.
- Ask questions and research the offer before joining any business venture. What appears to be a legitimate investment could still be a pyramid scheme. Check business ratings and reviews on credible sources on the internet before agreeing to work with or invest in any company or individual.
BUT WHAT HAPPENED WITH ME?
Well, after the ZOOM webinar I was quite certain of it being a “Pyramid Scheme” and I was not going to be duped into investing any time or money on it. When the guy finally contacted me again to schedule another round of discussion, I politely refused.
THE RISE OF THE SCEPTIC ME
And guess what, this week I got another message on LinkedIn from a guy who wanted to partner with me on a business idea. Learning from the above experience, I clearly asked him to provide me with more details about the role and expectations, before jumping into any ZOOM calls. Its been a week and I haven’t heard from him since.
Hope reading about my experiences make you smarter than I initially was 😀