Who is PONZI ?
Charles Ponzi (March 3, 1882 – January 18, 1949) was one of the greatest swindlers in American history. His aliases include Charles Ponei, Charles P. Bianchi, Carl and Carlo. The term "Ponzi scheme" is a widely known description of any scam that pays early investors returns from the investments of later investors. He promised clients a 50% profit within 45 days, or 100% profit within 90 days, by buying discounted postal reply coupons in other countries and redeeming them at face value in the United States as a form of arbitrage
Source : http://en.wikipedia.org/wiki/Charles_Ponzi#Collapse_of_the_scheme
What is MLM ?
MLM stands for Multi Level Marketing. This is synonymous to Network Marketing or Pyramd Scheme..Where you start the pyramid by buying a product or a service ]. The price that you have paid for the product or the service can be completely recovered by selling the same product or service to others .No wait it gets better (or worse) when these people in turn sell it further you get a trail or a part o the revenue .So when the matrix or the pyramid continues to grow you continue to get money.
Sound’s great so what’s wrong with it?
Devil lies in details.
1. The products are exclusive i.e. You can’t buy them in a shop next door
The products or services are said to be exclusive or of better quality and are not available in market. Why would you not sell it in an open market? You can sell it and also continue with the matrix.
Well the truth is that the products which sound competitive, unique are actually not competitive enough a toothpaste of Rs.125 next to a tooth paste of Rs.25 will not sell .A laptop costing Rs.25000 of the matrix scheme and a laptop with similar configuration selling at Rs.10000 which one will you pick ?
Second it creates the illusion of exclusivity which is an attempt to make the buyer feel “special”
2. Do smart work instead of Hard Work, Retire Rich ,Think Big
All these claims are partially true .As long as the network grows you will get paid, the minute the network stops growing, your income stops. However once hooked to it, it’s unlikely that you will stop .Secondly these groups organize motivational seminars to make sure you keep running their show.
In fact many networks have condition that the first two members that you make have to keep growing on both sides [Left & Right] so that you get the money.
3. Ex-Finance minister’s wife is a member.
Let’s take two cases
She is in to this ponzi scheme .No wonder it is not stopped by the law.
She is not in to it & feels cheated she cannot admit that publicly and probably does not know that her name is being used since these kind of claims are on a one to one basis
4. Who pays for it?
You will get income for a life time but who will pay for it? The Person at the bottom of the pyramid will pay.”Meri Topi Uske Saar”
Simple maths, if you pay for a 32000 product and they money comes back to you when you make 5 level of network that means 1+2+4+8 = 15. That per person you will get Rs.2133 .Interesting isn’t it ?
Wait it gets better to pay the second level guy the network will need 2133 x 14 = 29862
Similarly we have
|
No of Persons |
Commission needed in the network |
|
|
1 |
= 2133 x 15 |
32000 |
|
2 |
= 2133 x (15 – 1 ) [person above pyramid not included] |
29862 |
|
4 |
= 2133 x (15-3 ) |
25596 |
|
8 |
= 2133 x (15-7 ) |
14931 |
|
|
Total |
1,02,389 |
If the product is of zero value you will need a sum of Rs.1 lakh to give all the members their share i.e. You push 32000 and the system should have one lakh to pay its members. Not possible right, then how does it not fail?
One may argue that in any business the inflow has to be less that the outflow, since there are products being added .However in MLM the focus is on the network and not the product which makes it as the ponzi scheme.
The secret the network has to keep on growing. Each member is bringing additional 32000 to fuel the fire. By using the left right growth approach the scheme creators ensure that the network keeps on growing and with the population base like india this is a child’s play.
5. So why are all keeping quiet?
Though RBI has issues circulars more stringent action is required .Schemes like the famous GOLD quest has gone bust and many such schemes have gone down but some still thrive thanks to us who think more by heart than by head. The main reason why people are keeping out coz it’s hard to admit that one is duped.
So remember, if it’s too good to be true it isn’t
Inspiration: Nitin Bihani,Mandar Pathare,Ms.Sapna,Ashish Devani,Nishit Pancholi
Source s: Wikipedia,Moneylife