Pyramid scam works by convincing you to join their “business” and promising you that you can make a lot of money from commissions. These commissions will come from recruiting members who will pay membership fee and/or selling their overpriced product or service. Sometimes these scams don’t even have any product or service to sell and makes money just from their membership fee. People you recruit are called your downline and the system is designed so that money from them will flow up to you and the people above you.
When you go to a presentation organized by the leaders of these scams they will have members speak and provide testimonials on how much they are making. These are few members who joined at early stage of the scam and are either aware that they are scamming people or brainwashed to believe that they are not doing anything wrong. What they don’t show you is that for each of those member who made money there are hundreds who did not.
These scammers even dare to compare a legitimate corporate organizational hierarchy because it’s structure is shaped like a pyramid and those that are on the top makes a lot of money. That’s another trick to entice you to join their scam. If a legitimate company wants to hire you, you don’t need to pay a membership fee when you decide to join and you also don’t need to recruit other people in order to make money unless you are in HR.
Mathematically, the probability of a member making money from a pyramid scam is very low. For example, if a you need to recruit ten members and if those ten need to recruit ten each before you make money then you need 110 people (10 for your recruits + 10×10 for the next level) under you. This means that for every 111 people (you plus your 110 downlines) only 1 will make money. That’s less than 1%. If I tell you to join a business where you will have a 1% chance of making money but 99% chance of losing it, will you join it and let go of your money? Always look at the big picture and statistics to avoid becoming a victim of these scams.