The Pyramid Myth
The confusion between volatile investment games called Pyramid Schemes or Ponzi Schemes and the worldwide 250 billion dollar business called Network Marketing (or Multi Level Marketing) is as old as when they both were created – over a 100 years ago.
I have been in Network Marketing for over 20 years and I am still confronted on a daily basis with this misunderstanding.
There are two reasons for this continued mix-up:
- Both still exist
- Superficially they look similar
Pyramid Schemes or Ponzi Schemes can now often to be found via a simple google search for HYIP’s (High Yield Investment Plans)
The scheme (or matrix) operates on the financial input of each “investor” who then is motivated to present the scheme to other ‘investors’. The system supposedly pays out ‘interest’ on their own input and a % bonus on the amassed financial input of their ‘investor’-network.
It consists of simple duplication: I look for 2 people, who look for 2 people (2 x 2 = 4), who look for 2 people (4 x 2 = 8), etc etc
Visually represented, this forms a pyramid – hence the name:
Money gets added into the system at the rate more and more people join (and put in money) so for a while, the system is able to pay out interest.
This continues until the interest that is supposed to be paid out becomes larger than the money coming in (simple calculus), at which moment the pay-outs stop – the organisers of the scheme pull out the finances – the website gets taken down and most people – certainly those who joined last (the bottom of the pyramid) – lose their money.
This was formerly known as “the pyramid collapsing”.
These days usually cryptocurrency is used as an investment form.
I am not on a crusade against it – as with many things, it is something people continue trying out and maybe one day, who knows, it will evolve into a validated official business.
If you’re looking for a gambling game, by all means, participate – just know that’s what it currently is: a game: you can win some money – you can lose some money.
Here is an example of a current running matrix and the profit they promise:
Right here a profit of up to 70% is promised – so clearly there is no guarantee – it is a gamble.
Network Marketing (or Multi Level Marketing) however, is not a game.
Although the duplication practice is evenso used (which makes it look the same) – this is the only comparison – everything else is different.
But the biggest difference almost no one knows about …
A schematic representation of any Network Marketing organisation, in reality, never results in a simple pyramidal structure.
Wherever you find yourself structurally in a network, whenever you joined or however long ago that was – it has no effect on your income.
This is because as there is no financial investment – return on financial investment does not exist.
Bonuses or commissions are calculated on the achieved sales results of every individual (and their network) every month.
As the counters are reset to zero every month, every individual must continue their activities to achieve an equal or better result.
There is no such thing as ‘earned my stripes’ remuneration.
It is entirely possible that a newcomer makes far more money than a complacent, structurally higher-placed old-timer.
Put in another way, it is not because someone joined 20 years ago, they were successful for a while and went into coasting mode, they are currently still making a lot of money.
If somebody in their network is working hard on their own sales and building a stable network, their earnings will rise to a point where it is even possible for them to surpass the oldtimer’s level, at which point the latter loses their percentage commission on the newcomer.
Therefore the representation below is a way more realistic one.
It does not matter where you find yourself in the network – what matters is your results for which you will be compensated accordingly.
Long story short: the comparison to pyramid schemes – where duplication is used to quickly amass capital in a network of gamblers (or unaware people) – is not valid in any way or sense.
Network Marketing always has a long term set up.
The percentage commission on the sales results of one’s network is relatively small.
It only translates in large, monthly amounts through consistently building a stable and continuously active network.
The globally accepted economic break even point for any starting business, is 2 years.
This is no different for Network Marketing, where yes, there is already an established company, but you are an independent reseller, building your own commercial network.
90% of start-ups quit within two years.
This is so for Network Marketing, but equally so for any other business start-up.
It depends on the people executing the endeavour – their personality, their perseverance, agility and their capacity to hold a vision and do the work at the same time.
The advantage of Network Marketing however compared to most other entrepreneurial endeavours one might want to undertake is:
There is little to no upfront financial investment nor are there heavy operating costs later on.
The monthly packages, often questioned, are not investments; they are a cost with products in return, which can be sold or used personally.
Also, anyone can end the agreement at any time – that is the law – the people ending with large stocks at home are probably the people not equipped for this business or maybe even any self-employed undertaking.
I myself work with a company where there even isn’t a monthly package; it’s optional. You work, you get paid. You don’t? Equally okay.
If you don’t like your company’s products and don’t want to use them personally, you are either working with the wrong company, or Network Marketing simply is not for you.
This touches on the core of why Network Marketing is so successful:
The enormous budget that mainstream companies allocate for marketing and promotion across diverse media, offices, shops and employees, is, in Network Marketing used to pay out directly to their most successful marketers – the ones who can transmit their love for the products as well as their enthusiasm for the commissions-based system (the marketingplan).
The myriad of possibilities Network Marketing provides attracts an equally diverse variety of people engaging with it.
Some are fortune seekers; they usually get disappointed when they realize there is actual work to do and personal growth to be had.
Some treat it as a hobby and for social contact. A hobby usually costs money – one simply needs to be aware of that.
Then there are people serious about residual income, putting in the effort to obtain a decent monthly amount.
And finally, true entrepreneurs, who know building anything worthwhile takes time, effort and personal development.
The best example to compare Network Marketing with I have ever found is something we all know.
The Gym Membership.
Enormous amounts of people get started in it – most with high expectations of their own results.
They pay a monthly membership to achieve their goals.
The tools are there, the doors are open, and the successful ones provide inspiration, but they cannot do the work for you.
How many people actually become consistently successful in obtaining their desired body shape?
This question probably doesn’t even need an answer.
It is truly the same with Network Marketing.
Anything is possible.
Network Marketing generates more millionaires in a year than any other business structure.
Making a lot of money usually is not just for yourself – read “My Big Why” here.
The question is not whether it works – it clearly does.
The question is: do you have what it takes and are you ready to put in the work?
Saying yes to a dream is easy.
Making it happen, is another story!
To your success,
Dietrich Sven Corthouts
Elegant Network Marketing
