Eli5: what is a pyramid scheme?

Question

I know the term but I’ve never actually been able to understand what it is and what happens in one

In: 2

Answer 1

Pyramid schemes both refer to legally legitimate businesses that rely on signing up new members and obligate them to buy inventory from the owner of the corporation and sell it for them (which is typically predicated on some kind of high pressures sales tactics or dishonesty) and etc, and also to what are now referred to as Ponzi schemes, where an individual or organization defrauds investors/customers by promising some kind of valuable investment service that doesnt exist, and sustains their magic trick by continuing to attract clients.