Pyramid scheme

The unsustainable exponential progression of a classic pyramid scheme in which every member is required to recruit six new people. To sustain the scheme, the 2.2 billion people in the 12th layer would be required to recruit 13.1 billion more people for the 13th layer, even though there are not nearly enough people in the world to achieve that.

A pyramid scheme is a business model which, rather than earning money (or providing returns on investments) by sale of legitimate products to an end consumer, mainly earns money by recruiting new members with the promise of payments (or services).[1][2] As the number of members multiplies, recruiting quickly becomes increasingly difficult until it is impossible, and therefore most of the newer recruits do not make a profit. As such, pyramid schemes are unsustainable. The unsustainable nature of pyramid schemes has led to most countries outlawing them as a form of fraud.

Pyramid schemes have existed since at least the mid-to-late 19th century in different guises. Some multi-level marketing plans have been classified as pyramid schemes.[3]

  1. ^ pyramid scheme at the Encyclopædia Britannica
  2. ^ Website admin. (2024). "Multi-Level Marketing vs Pyramid Schemes". Consumer Protection. consumer.sd.gov. Office of the Attorney General of South Dakota. Retrieved February 18, 2024. The difference between a pyramid scheme and a lawful MLM program is that there is no real product that is sold in a pyramid scheme. Participants attempt to make money solely by recruiting new participants into the program. The hallmark of these schemes is the promise of sky-high returns in a short period of time for doing nothing other than handing over your money and getting others to do the same.
  3. ^ Cite error: The named reference Smith1984 was invoked but never defined (see the help page).