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Too Good To Be True

The unsustainable geometric progression of a c...
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Have you ever heard the phrase “If it sounds too good to be true, it probably is.”?  This phrase speaks more words of wisdom than I ever could, but for some reason people forget it or ignore it. Everyone is in such a big rush to get rich quick that they throw caution to the wind and forget common sense.

Do you believe gas stations have a 50% profit margin?  If you do, then you’re silly.  I doubt most refineries even have those kinds of margins, but one company has somehow figured out how you can get a 50% discount on your gasoline.  Undoubtedly, you probably have to pay to be a member, and then you see phrases like “build your downline.”

Don’t Throw the Baby Out With the Bath Water!

This is very important:  There are plenty of legitimate companies that use these terms, so don’t discount all “network marketing” (aka Multi-Level Marketing) companies.  There are also many fly by nights that border on legality, but use your common sense and don’t discount the whole business model.  Multi-Level Marketing isn’t the only model that has fly-by-nights trying to take advantage of people.  Moral: Use your common sense, but don’t let one bad apple spoil the bunch.

I have friends that use the Amway model and do just fine with it.  I’ve also heard complaints about Amway, but I was surprised at how many of the people either had no direct experience with the company, or just decided to give up on it.  Again, it takes work to make money, and my friends prove that.  Amway has been around for about 52 years, and they provide quality products (which tends to be the important differentiator between a legitimate network marketing company, and a pyramid scheme).  You can’t build a business on nothing.

Don’t Believe The Over-Hyped Infomercials

Don’t become a victim of the movie-fone voice telling you that you can make six figures with little or no effort while you sleep.  Don’t fall for the “Turn your computer into a cash generating machine” gimmicks.  These are sucker bets created by predators that know what you want to hear.

Who doesn’t want to be told that you can be a millionaire with little or no effort?  But it is a lie.  Any millionaire/billionaire will tell you that it takes hard work.  Heck, even the lying, cheating thieves still have to work hard to amass their fortunes.  Ask Bernie Madoff how hard he had to work to build his business of lies and deceit.

Pyramid Schemes From Top to Bottom

Pyramid schemes tend to be the most common method because it takes a relatively wide scope of people to cause the whole thing to crash, and most people give up trying to make money before any issues can be uncovered.  Ponzi Schemes are built off of people who are vested until the very end.

As you can see in the picture above, a pyramid scheme can work until the next tier of people needed to support the structure exceeds the world population.  This is assuming that everyone wants to participate.  Chances are, most people don’t want to participate, and this can cause the structure to crumble.

The Truth About “Testimonials”

If you look at the pyramid, one thing is quite clear, the people on top get rich, the people in the next tier get rich, heck people in the 3rd, 4th, and 5th tiers are probably doing pretty well too.  These are the people you see in the testimonials.  When I saw a real-estate pyramid scheme on an infomercial one night, I decided to do the research.  This probably won’t surprise you, but you would be better off learning how to yard sale than following that program!

One guy was claiming “Before I got involved with this program, I was barely making enough to get by, now I make 6 figures a year!”  Who was this guy?  He was an employee of the program owner!  The guy didn’t use the program at all to get his riches, he drew a salary from suckers participating in it.  There are others that blatantly lie as well.  If you want more truth about these testimonials, check out this excellent web page by John T. Reed on Real Estate Guru Testimonials and how false they are.

He wasn’t lying though.  He probably was making very little.  He didn’t claim that his participation in the program made him the money, he just claimed that his “involvement” did.  These statements are carefully, almost artistically, crafted to mislead you into believing false things.

Remember, if it sounds too good to be true, it probably is.  Now I leave you with an entertaining video of a program that promises 6 figure incomes and half price gas, I better sign up!


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