Pyramid Schemes and the American Dream

Pyramid schemes are a growing problem in the United States but why do people fall for them? What is so alluring about these so-called business opportunities? I would argue that the idea’s presented in most pyramid schemes that attract so many people are the opportunities to ‘be your own boss’ and to work on your own time at your leisure. Many of these schemes present the idea that the amount of money you make is in your own control based on how much work you want to do. First let us discuss, what is a pyramid scheme?

A pyramid scheme is typically presented as a reputable company (I had one approach me under the umbrella of CITI, a multi-faceted and well known bank). The company makes itself look and sound like a successful, multi-level marketing program (U.S. Securities and Exchange Commission). The typical pyramid scheme will require money up-front from the participant, or employee. The employee is then promised good money in return for signing other people up for the scheme (U.S. Securities and Exchange Commission). According the U.S. Securities and Exchange Commission, pyramid schemes typically have no actual product and use the money from new recruits to pay the older recruits.

The world we live in today is busy and full of adults who have very little time and very little resources. Many of whom have more debt than their current income will allow. With this in mind, it is easy to see why so many people are duped into a pyramid scheme. A pyramid scheme promises high pay outs in a quick turn-around time. You want extra money, and fast right? A pyramid scheme offers a business model that might allow you to quit your current job and make even more money, while working for yourself. You would love to be your own boss right? How about all of the extra time you will have to spend with your kids? All of these promises are very alluring versus the lifestyle the typical American lives today. Does it sound too good to be true? As a general rule of thumb, it probably is.

Pyramid schemes are often violating federal laws however it is difficult to challenge these companies once you have joined. According to the 5th circuit court, “You’d have to be either dumb or venal to volunteer for the bottom rows of a pyramid scheme” (Frankel 2016). The federal government offers the following signs that the company you are looking into might be a pyramid scheme: no genuine product or service, promises of high returns in a short time, easy money, no demonstrated revenue from retail sales, buy-in required, complex commission structure, emphasis on recruiting (U.S. Securities and Exchange Commission 2013).

This brings us to the real issue plaguing many American’s today, time and money. The American dream of the olden days has been forgotten. Hard work is a thing of the past. People want the most profit out of the smallest amount of work. Why is this? An applied psychologist might be able to theorize that the economy shift has created this new mindset. The rise in monthly household expenses with little rise in income has made it difficult for families to live with only one working parent and thus time with family has fallen by the wayside. I believe a serious change must be made in the American economy in order to get back the American dream that this county was built upon.

 

Frankel, Alison (2016). En Banc 5th Circuit asks: Why do people buy into pyramid schemes? Reuters Online. Accessed 5 October 2016. http://blogs.reuters.com/alison-frankel/2016/10/04/en-banc-5th-circuit-asks-why-do-people-buy-into-pyramid-schemes/

U.S. Securities and Exchange Commission (2013). Accessed 5 October 2016. https://www.sec.gov/answers/pyramid.htm

1 comment

  1. Jennifer Lee Segilia

    Thank you for the information. I often find myself thinking about getting involved in one of these schemes just to make fast cash. I am a single mom and would like to just have one month where I do not live paycheck to paycheck and these schemes are extremely tempting to someone like me. I often wonder too about the pay day cash loans. I have looked into them as well and find it appalling to see the rate of interest and wonder how many people out there are desperate enough to pay that ridiculous interest rate.

Leave a Reply


Skip to toolbar