How to Start (Spot) a Pyramid Scheme

Do you want to get rich without adding value to the economy? Do you want to actively harm others in your path to wealth? If so, a pyramid scheme may just be the right business model for you. Essentially, a pyramid scheme is a business model that recruits members under the promise of returns for enrolling others into the scheme.

Now, of course, you heard that it is illegal, and it is. Having a business whose sole purpose is getting others to recruit people, and having those people recruit more people in turn, is banned in many countries and will land you in jail. But who says you must be transparent about it?

You can do the very same thing, while hiding in the veneer of legitimate-looking business. Just get some morally bankrupt lawyers to guide you and brand yourselves as something else. Something like a ‘Multi-Level-Marketing’ company, or direct sales will do. This is not to say that all Direct sales and MLMs are pyramid schemes, it’s just that almost all pyramid schemes call themselves either Direct Sales or MLMs.

Let’s build your exploitative empire in these easy steps.

Step #1: Find Something, Anything, to Sell

It could be shampoo, makeup, supplements, essential oil, and even Foreign Exchange Trading training… anything – it doesn’t matter. Your main goal isn’t to sell those products, their sole purpose will be to help you transfer money into your pocket, legally.

So for the sake of example, you are thinking of selling sponges. Not just any sponges mind you, sponges that are slightly better than what most people use, and just so happens to be sold in bulk on Alibaba. Buy a lot of it, and heavily mark up the price you are selling. Just justify it through extensive re-branding and packaging that makes it look premium. Don’t overthink it.

Congratulations, you are now product-based, which is much harder to prosecute under archaic laws that targets old pyramid schemes.

Step #2: Sort Out the Payment Structure

This is where you get rich. Below is an example of how a simplified pyramid scheme would work.

1. A distributor (you) recruits 10 salespeople who each pay RM500 for a starter kit of sponges to sell.

2. The distributor gets 10 percent of each starter kit that's sold.

3. The distributor also gets 10 percent of each product that any of his recruits sells, including more starter kits that the recruits sell to new recruits.

The people at the top of the pyramid get commissions from everyone in their downline, the many levels of recruits below them on the pyramid. Of course, you have to make this as complicated as possible so no one sees the obvious pyramid-shaped payment structure.

When the recruits couldn’t push these sponges on families and friends to make ends meet anymore, they will be ‘nudged’ to instead recruit more people into the business, thereby unwittingly growing the pyramid, for you. Making more money, for you.

Remember, you are not selling these sponges to actual customers. You are selling it to your recruits, who may or may not even be able to sell it. What matters is that money goes to you, and all the work in recruiting - the begging and guilt-tripping - is done by them. But to really keep jumpstart this scheme, you need more than just a payment structure or an overpriced product, you need a story.

Step #3: Create a Story, Preferably that of a Fantasy Genre

What sophisticated pyramid schemes mainly sell, is a story. Specifically, a financial fantasy, one that is too good to be true.

We all want flexible working hours, we all want high pay, we all want an early retirement, and we like to be called an ‘independant business owner,’ bravely diving into the world of risk taking. So sell your scheme as something that enable that! Just by investing RM500 in a starter kit, you too can begin your journey as an independent businessowner (we call you that way to reduce our liability) and financial independence.

The story should serve one purpose and one purpose only, to get more recruits, who’ll get you that money. Thus, you should consider who to target these fantasies to. Here are a few suggestions.

a) The Young

Get them while they are still inexperienced, naïve, and wouldn’t bother asking “if this opportunity is so good, why hasn’t everyone joined it yet? Arbitrage should have made this ‘investment’ unprofitable long ago. Could they be lying, inflating their numbers, to get be to join this exploitative scheme?”

Target those that specifically have high aspirations and an over-optimistic view of their chances in life, better yet if they are just fresh out of secondary school and haven’t been crushed by the reality of capitalism.

They want to get rich quickly, so market to them heavily, provide them the ‘path’ to the financial success they always dream of.

b) People Dissatisfied with Their Lives

Get them while they are down. This could be the office worker dissatisfied with the mundane task they are doing at their end, or the recently unemployed who could use any source of income and is desperate enough to try anything. Sell them a dream of ‘taking charge of their own lives.’

Of course, your recruits are the ones that are actually doing the recruiting, so hold free seminars to help them make you more money.

Step #4: Sustain It

An exploitative ‘business’ model will inevitably invite criticism, both by the general public, your own recruiters, and disgruntled former recruiters. This is not good: how will you make money if your downline realizes that they are in a scam and stop roping people into your scheme?

That’s where the propaganda comes in. First things first, deny all accusations by stressing that you are a legitimate business, insist that you are direct sales, or MLM. Maintain that you sell products (even if those products are only sold to recruits), and pyramid schemes don’t sell products. Check mate, Haters. This won’t convince those who criticized you, but that isn’t the point. The point is to mislead the public who may not know better and sow doubts in the mind of the public over the intentions of those who criticized you.

But that’s for the public. Your recruiters require a different blend of manipulation: the last thing you want is for your money m(t)akers to leave your scheme. Thus, reframe the narrative around your business’ detractors:

Those critics? They are just jealous. It’s not like the business itself is inherently unsustainable.

Those that left and is now speaking out against your practices? They are quitters, that’s why they failed. Not because you can only push so many poor-quality products on to your friends and family; and there’s only so many people that can be recruited.

Encourage groupthink, make your recruiters think that they are under siege, constantly under attack by those that wants to take them(you) down - tie those who attacks you to your recruiters, so they will come to your defense.

Lastly, ensure that you drive the point that success for them is just around the corner, it isn’t, but it helps to keep your recruiters invested in your scheme so they will always think twice about leaving. Show some examples of those who have succeeded before, just hide the fact that they entered the scheme early and thus gained a substantial amount of cuts.

Step #5: Profit

Congratulations. You have succeeded in being rich, and all it costs you was ethics, which, let’s be honest, costs very little.

Sure, your recruitment is down because of the inherent unsustainability of your business and the economic reality faced by your recruiters won’t keep them going. No matter how you spin the story, the entire world seems out to get you. This thing won’t last, and you know it. Now there’s a charge against you for operating a pyramid scheme. Don’t worry, with these simple steps, you ca[redacted]

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The purpose of this piece is not to encourage any criminal acts, but rather, for educational purposes. It is important that we take down unethical businesses, and the best way to achieve it, is by first understanding our enemy. Only then, will we be able to recognize the insidious practices of these unscrupulous actors, identifying them for legal actions to be taken. We must also tackle the problem on an individual level, do not buy into these schemes, and try to get those in it to understand your position and give them a way out. Those peddling these may not be bad people, just misguided.

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About the Author

Yap Per Hung

Yap Per Hung is a year 2 Economics student who is currently serving as the president of the Nottingham Economics Society. He believes in doing the public good and will most likely enter the civil service.