Friday 7 March 2014

Want to see the pyramids?

I’ve never been to Egypt so I’ve never seen the pyramids. But I have seen a number of pyramid schemes and you don’t need to travel far to see them too.

One of the first we encountered called itself “Success University”. Like many pyramid schemes, they claimed to have a product that they sold. In this case it was a range of mass-produced DVDs containing supposedly “motivational” materials. In fact these were nothing of any value, the real business they were selling was recruitment. Rather than selling the worthless DVDs your real task as a new recruit was simply to recruit other people beneath you and then to encourage them to recruit others beneath them. And so on as you build a pyramid beneath you with each level funneling money upwards.

Of course, as with all pyramid schemes, this doesn't happen easily. There simply aren't enough gullible and naive people around to recruit, certainly not enough to form multiple levels beneath you. We sent people undercover to several Success University presentations and the story was always the same: Join the scheme and you can be rich. They even went so far as to promise specific earnings, saying that you could earn $50,000 per year (currently about half a million Pula) from the scheme. Lies of course.

One of my biggest learning experiences with pyramid schemes came after we first started warning people about Success University. They don’t take kindly to criticism. I arrived at our office early one morning to find four men waiting at the door. They were, they said, from Success University Head Office in South Africa and they were going to speak to me. Fortunately they were polite, even when they said that what we had been saying about their scheme was untrue and they were going to sue us. What, I asked, had we said that was untrue? Could they justify their promises of riches? Were their products of any real value? Were they actually entitled to call themselves a “university”?


Nothing. I think the secret recordings we had made in their presentations helped persuade them that we had evidence on our side as well as some understanding of how pyramid schemes work. They were also somewhat subdued following rulings by the Bank of Namibia that they were an illegal pyramid scheme and that Namibians should steer clear of them if they valued their money. They went away from our office without the apology, the retractions and the retreat they’d expected from us.

Within weeks Success University disappeared from Botswana.

A few months later a new pyramid scheme appeared, this one lasted a lot longer and did a lot more damage. TVI Express was founded by an Indian man called Tarun Trikha and again the key part of this scheme was the recruitment of other people but they also claimed to have a product to sell. Their "product" was a range of holiday and travel discount vouchers. Apparently these got you massive discounts on flights, hotel stays and car hire. Despite what you might suspect, this was actually true. Yes, you could get these discounts but only if you chose from a VERY limited number of resorts, airlines and hire companies, none of which operated in Botswana. In fact I could only find one holiday resort in South Africa was associated with the scheme.

But there was another factor that they neglected to mention and which the victims recruited failed to notice. A discount voucher is not a product. It's just a price reduction against a product that you still have to buy for real money. Then add in the other fact that nobody ever has to buy discounts from hotels, airlines and car hire firms. Almost all of them offer discounts for free. A little internet searching will get you all sorts of discounts for nothing.

So TVI Express had no actual product and the riches it offered its victims were all based on recruiting other people beneath them. A pyramid scheme.

TVI Express lasted longer than most pyramid schemes but inevitably it finally collapsed when they ran out of people to recruit and when more and more potential victims knew about them already.

Then another came along. This was called WorldVentures and was yet another holiday discount scheme. However the curious thing that emerged was that WorldVentures had taken recently control of Success University. All the poor fools recruiting others into a business supposedly selling motivational DVDs had to switch to selling discount vouchers. Doesn’t that hint that the “products” are entirely irrelevant to the business they are trying to run? It’s a bit like your company changing one day from selling second-hand cars to selling funeral policies. It would be unthinkable in a real business.

But pyramid schemes aren’t real businesses. They’re scams. Yes, they’re persuasive, yes they promise riches and fabulous lifestyles and yes they have very smart-talking recruiters. But they’re still scams that will take your money and that will never give it back to you.

WorldVentures is one of the longer-lasting pyramid schemes but it won’t be around for much longer. I’ve known of them for over 4 years and they’re still quietly active here in Botswana but the net is closing in on them elsewhere. The Gaming Board in Norway has recently announced that following a lengthy investigation they are certain that WorldVentures is a pyramid scheme. Their main criteria for deciding this was simple. 95% of all the money paid out to recruits in Norway was for the recruitment of other people, not from actually selling things.

The fact that regulators around the world are closing in on a scheme is usually a sign that it will collapse soon, just like Success University did. The bad news is that you can rest assured that within weeks they’ll be back again using a different name and a different “product”. Pyramid schemes are as old and tenacious as the pyramids in Egypt.

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