Pyramid Schemes

The main characteristic of a pyramid selling scheme is that earning money and gaining promotion within the scheme depends primarily on recruiting new people to the scheme, and those new people recruiting more people into the scheme, and these new people recruiting more people, and so on. Pyramid schemes are unfair trade practices because they are likely to be unfair to most participants in the scheme, the rewards for those at the top come from those below, and because eventually it will become impossible to recruit the number of people needed to produce reasonable financial rewards to participants.

Example:

In this example the scheme depends on each participant recruiting 6 new members into the scheme. The figure below shows how many people will need to have joined the scheme at each level, in order for those above to be paid.

• 1 6
• 2 36
• 3 216
• 4 1,296
• 5 7,776
• 6 46,656
• 7 279,936
• 8 1,679,616
• 9 10,077,696
• 10 60,466,176
• 11 362,797,056
• 12 2,176,782,336
• 13 13,060,694,016

The total population of the world is approximately 6.2 billion so after only 13 levels there's not enough people on the planet to keep the scheme going. Schemes also include those that involve participants using an agent, provided by the scheme operators, to recruit others on their behalf, instead of having to recruit new participants themselves.

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