Spoiler Alert – 99.99% of Get Rich Quick schemes sold in Market are Financial Fraud!
Welcome Riters, today will discuss what are ‘Get Rich Quick’ Schemes, the truth behind them and why/how to avoid them. Lets dive in.
Pyramid Scheme is a business model where you recruit people in return of a future promise of wealth creation via promise of payments if you enroll others into the scheme.
In layman terms, it is a sketchy fraudulent business model that works on commissions received by new recruits you recruit or your recruits recruit.
You pay a upfront cost often misguided by the person selling you this scheme in the name of get rich quick! That said mostly pyramid schemes rely on recruitment fees, but sometime they will even sell you tangible goods and services (which of course are not worth the money) to hide the underlying pyramid structure. Often they have a binary structure where in one person has to recruit two others which in turn recruit two others and the list goes on. As long as the Pyramid base is wide the stability remains
Another terms which we often hear is MLM (Multi-Level Marketing).
Multi-Level Marketing, also called Pyramid Selling or Network Marketing
MLM is often a legal business practice, that unlike traditional pyramid scheme involves actual sale of goods & services. Nevertheless their main motto remains hiring new recruits and getting their money. They will at times sell you educational courses and no-value products at high cost, and in turn make you / motivate you to sell them to the new recruits! These schemes work primarily on commission system.
Now other similar financial fraud is referred to as Ponzi Scheme.
Ponzi Scheme, coined after Charles Ponzi in 1919, refers to as ‘Robbing Peter to pay Paul’, Ponzi Schemes rely on new investors to pay old investors. A certain of people buy into the idea, and Invest, when they sold this to others (new investors) they get to keep the return paying a certain fee to the intermediator a third party.
In a sense, they are similar to Pyramid structure, here instead of recruits you are calling them the Investors and the ideology behind this financial fraud is that of Robbing one to pay other!
Remember the underlying Motto of all these schemes is to steal your money to satiate the greed up the ladder!
- Anubhav teak plantation in India in 1998 was a Ponzi scheme defrauding the depositors of nearly 400 Crore rupees.
- Bernie Madoff’s (American Financer) Ponzi scheme ran for decades defrauding thousands of investors tens of billions of dollars. Finally in 2009 Madoff was sentenced to 150 years in prison and forced to forfeit $170 billion.Read more about it here
Why say No to Get Rich Quick Fraud Schemes?
- They won’t even get you Rich forget about fast.
- They are unethical, and at times operate in a legal loophole.
- They rip many of their life savings.
- Based on True Story – Imagine a 25 year old Kiran from an Indian village get convinced by a few friends to invest (as they say it) few lakhs which he arranged selling a piece of land that he inherited, and unable to further recruit others, in turn he convince his family members who end up selling more of their livelihood, their land, finally losing all they had in pursuit of a secure glaring bright future which was never ever possible by the Scheme!
- They waste you time! Yes, as you know Time is more precious than Money, lost money can be made again but lost time never comes back.
- They can rip you off your livelihood, even if you don’t sell anything like our imaginary friend Kiran these schemes nevertheless instill a hatred in your heart for your job! Now you may never ever gain the promotion you would have easily got at first place, and you may never ever be happy with your Job and that means your future can be bleak.
Now these schemes do have some benefits but the potential risk and damage outweighs these benefits by large (for the sake of discussion lets discuss them).
Benefit – 1. You learn to sell, often network marketing if not anything else teaches you how to sell yourself! Which is a very good skill to learn (You don’t need to be involved in fraud to learn this and should rather pursuit it by other means). 2. They teach you about Investment, yes if you are into a Ponzi scheme and you have lost your money, you now know how to not invest, nevertheless often the cost of learning is too high and you may never learn unless you decide to quit!
How to avoid buying into such Frauds?
- Never Invest in things you don’t understand. Often times these schemes are sold by using complicated terms and indirect ways, and psychology against you.
- Always do your due diligence, and don’t just listen to a random friend.
- Don’t blindly trust people with your money (or anything for that matter).
- Lastly if someone says they will make you rich quick, run away from there.
With heavy heart and tears in my eyes, I feel very bad to tell you NO GET RICH QUICK SCHEME EXISTS. Yes, But I am in fact happy about this fact. The fact is you need to use knowledge, create value, sell value or your time in return of the Money! Once you have, as Tony Robbins called it critical mass of Money, the money will work to get you more money throughout your life. And that is how my friends, Financial Freedom is made! Don’t ever buy into anything that is being sold to you in the name of ‘Get Rich Quick’, more than 90% of the times they will end up draining your wealth and even if you end up getting more return than you invested or wasted in this case, you will not be wealthy. Wealth comes those who knows how to manage their money i.e. why the odds of you going bankrupt a year after winning the lottery (whose odds are itself very low) is pretty high.
Thank you for reading, follow us for more, and if you gain anything from this do share with your friends! Keep Hustling, Keep Learning & Keep Investing!