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A friend of mine join a network marketing organization by investing 10,000 because his girlfriend is in it. He introduced his handler/manager and he gave a speech about how easy it is to earn by only investing 10,000 and his main selling point was that its possible to earn 2-4 million in a year. And my job is to just get my left and right node(of the tree).

The product the company is selling is some online tutorial/course which is totally useless(esp to me).

I have done some online research on it and got mixed reviews regarding the company hence I am really skeptical about joining it. Additional reason for being skeptical are:

  • I find the whole 1:2 and 2:1 ratio rubbish. Its more reason for not getting paid.
  • And that I will get paid 2700 when I get that 1:2 and 2:1.
  • By my calculation I(or my child nodes) have to get 18 people to join to break-even my investment.
  • Every year I have to deposit 3500 to remain active in the company, else my account gets expired.

I think I should not name the company here. And I know Company name/brand/goodwill plays a major factor in deciding whether to invest in it or not.

I need advice, should I invest? Is the probability of getting returns in network marketing good?

What are the chances that I will get a good return in investing in this network market compared to investing in some other places like SIP?

mhoran_psprep
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j4rey
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    Read your own question out loud and I bet you are smart enough to come up with an answer. – Pete B. May 17 '16 at 11:47
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    haha...then I guess I should delete this question before someone starts downvoting my question......（⌒▽⌒ゞ – j4rey May 17 '16 at 11:53
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    This is not Stack Overflow. People come here to seek and provide help. In your case it was much better of you to ask then to rush out and do something. – Pete B. May 17 '16 at 11:55
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    I had a friend like yours, once. Now he is not my friend anymore because he was willingly and purposefully trying to scam people. Run. – STT LCU May 17 '16 at 14:12
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    Due to a number of similarly themed questions in the last few weeks, we should really have a F.A.Q. or somehow linking such questions together, in the means of: "Is your question whether a scheme which promises for your investment an earning of orders of magnitudes larger than what can be found on the normal markets, while promising no or negligible risk, a scam? Then our answer is: yes, it is!" – vsz May 17 '16 at 16:23
  • @vsz: the SE mechanism for that is to vote to close the question as a duplicate of one of the prior instances. – keshlam May 17 '16 at 18:54
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    Are pyramid schemes legal? – Superbest May 17 '16 at 19:33
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    @Superbest Pyramid schemes are usually illegal (depending on local law of course), but there are multi-level marketing schemes that may be perfectly legal, albeit generally horrible "investments." For instance, People have spent years trying to argue that Herbalife is a pyramid scheme, so far without much success. A key distinction is whether there's actually a legitimate product being sold that people want, or whether the compensation structure is really just about recruiting other members. In the OP's case, where you can't break even unless you recruit 18 people, it's pretty terrible. – Zach Lipton May 17 '16 at 21:16
  • I would certainly not delete this question. It acts as a fine placeholder for future Googlers to stumble upon this question and its answers. You can ask the moderators to disassociate this question from your profile if you wish to hide this blemish. Feel free to add the company name before asking for disassociation :-) – MonkeyZeus May 18 '16 at 16:44
  • I think the question to ask here is, why would I "invest" in a company which is selling a totally useless product? –  May 18 '16 at 20:14
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    I think I should not name the company here. Whyever not? Seems like a faster way for you to get a definitive answer... and it's good for the rest of us to know the name of the company peddling another MLM scam. – HopelessN00b May 18 '16 at 22:28
  • @Michael With pyramid schemes, they don't actually sell a good product, otherwise they will have to incur the cost of producing that good product along with giving commission/incentives. Without the actual product they only have to distribute the incentives and the rest is all profit. Like in my case, there is no actual product, what they are selling is an online course, therefore they will only create an account for me in their website. But that's not what MLM are selling, what they are selling is an chance to earn huge sum of money, that's how they attract people – j4rey May 19 '16 at 05:22
  • @MonkeyZeus if someone ask something with an obvious answer in StackOverflow, his question will get 20-30 downvotes in a few minutes..... – j4rey May 19 '16 at 05:36
  • @HopelessN00b some people maybe aware Pyramid Scheme/MLM is a scam, some don't. But the thing is these companies are registered, and thereby in a way they are operating legally, if they weren't, I suppose the government wouldn't allow such company to run. – j4rey May 19 '16 at 05:47
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    @j4rey89 Yes, StackOverflow can be a mean beast at times. For context, this site has 14,318 questions and SO has 11,704,121. It's a significant difference which produces a noticeable difference in culture between the two sites. There was a hugely popular meta post which discusses your observations. I have seen, and sometimes appreciate, plenty of heavily upvoted duplicate questions on SO which slipped through the cracks in the early days of the site. – MonkeyZeus May 19 '16 at 12:31
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    @j4rey89 Basically, think of this site as a small company just starting out and everybody high fives each other and has fell-good feelings all around. Think of StackOverflow as a huge and popular company where a missed "TPS Report" is a source for being chastised. – MonkeyZeus May 19 '16 at 12:36
  • @MonkeyZeus I think of it more like a small store in a mall. I visit lots of stores in the mall and they all have different feels because they are selling different things, but overall I still feel like there is really just one mall. I tend to forgot or not even realize that each SE site is so different, it's not like there are any barriers to linking your account to another SE that interests you. –  May 19 '16 at 16:44

3 Answers3

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The basic way that these "work" is this:

Every year I have to deposit 3500 to remain active in the company, else my account gets expired.

You are paying money into the system. The only way you make any money is to:

By my calculation I(or my child nodes) have to get 18 people to join to break-even my investment.

Intuitively this should tell you that:

  • The only way you make money is if more people join (who then do not make money unless they also get more people to join)
  • Everyone at the "bottom" loses money

What normally happens in this sort of thing is that people get conned/excited/tricked/whatever and sign a few of their friends up, but then quickly run out of people to bother/annoy/hassle/harass into joining and then they lose money on the whole thing.

enderland
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    exactly......the whole concept of the business is to collect money from the bottom guys and distribute some of it upwards.....the whole concept of 2:1 and 1:2 means not all upwards guys gets paid......Thanks... – j4rey May 17 '16 at 13:33
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    In layman's terms - this is a classic example of a Pyramid Scheme - https://en.wikipedia.org/wiki/Pyramid_scheme – SnakeDoc May 17 '16 at 17:04
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    And, of course, even bigger tragedy than losing the money (and what makes these scams so despicable) is that in the worst case after the friends and family members you've recruited lose their money, you lose your friends and sever ties with family members as well. – Moyli May 19 '16 at 09:29
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"if it looks like a duck, walks like a duck and quacks like a duck, then it's a duck"

This cliche is appropriate for your situation. Every aspect of this endeavor says "scam." It's a classic pyramid scheme with a product for sale that you don't even believe in. Too bad it's a friend that brought it to you.

JTP - Apologise to Monica
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    Just want to note that most of these schemes are not scams per se (being completely legal) but they are absolutely "pyramid schemes". – Kaz May 17 '16 at 15:42
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    Pyramid schemes, by definition, are illegal. – JTP - Apologise to Monica May 17 '16 at 16:07
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    Indeed. Some schemes (called MLM - multi-level marketing) might be on the verge of plausibility, where you don't have to "invest", you just have to buy the product and try to sell it, and additionally, you can earn some percentage from the sales of those who you recruited. But on the other hand, having to pay a huge sum of money up-front, with a promise that you might get back some of it if you convince enough people to also pay huge sums of money up-front, is no longer a MLM, but an outright pyramid scheme. – vsz May 17 '16 at 16:27
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    I stand corrected. – Kaz May 17 '16 at 16:32
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    @JoeTaxpayer: Can we collectively say that pyramid schemes are illegal? I'm not that deep into this topic but.... I doubt that international there isn't any country that is not prohibiting this.Or is this se site restricted to specific country and I just failed to read the corresponding about site here? – Zaibis May 18 '16 at 09:49
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    Not every last country. https://en.m.wikipedia.org/wiki/Pyramid_scheme and, unfortunately, we do not know where OP lives. Keep in mind, the legality wasn't critical to my answer, legal or not, it's a bad investment. – JTP - Apologise to Monica May 18 '16 at 12:30
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    "With friends like that..." – HopelessN00b May 18 '16 at 22:23
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If you're selling a product of actual value, and willing to do the recruiting hustle then a Network Marketing Scheme might work out for you.

If you can't make money just selling the product, or it's not a product you'd support I would stay far away.

In the US, it is my understanding that MLM is legal if your earnings can surpass your sponsor's.

Disclaimer: I did Quixtar (Amway online) in college. But I didn't succeed because I didn't nag all my family and friends to join nor hustle the products. I have met folks who have actually done well with it, and I think without really screwing anyone else over.

Aaron McMillin
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