What is the difference between a piramid scheme and Tupperware’s business?
In: 6
The difference between a pyramid scheme and multi-level marketing is the reason one is a crime and one is not.
In a pyramid scheme, you collect investments with a promise of unrealistic returns. In order to pay those returns, you must collect more investments. If you don’t collect enough money, you can’t pay out the claims against your investment. The people at the top of the pyramid owe more than they can pay out. This is true right from the beginning. When that gets called out, either because too many people want their money or too few people buy into the scheme, the scheme collapses instantly.
In MLM, you aren’t ever in a position where you owe more in claims than you earned in revenue. Your business model is still dependent on bringing in new recruits, but they don’t have any claims against you of promised returns. If they don’t bring in more recruits, they just don’t make any money. The people at the top of the MLM don’t owe more than they can pay out. It’s never in a position to collapse like a pyramid scheme inherently is.
Latest Answers