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House of cards
TO UNDERSTAND how multilevel marketing (MLM) works, let's look at a hypothetical pyramid as envisaged by Carlo Charles Ponzi, our hero. In a typical scheme, you are promised Rs. 3,12,500 in return for an investment of Rs. 100. The humungous sum awaits you provided you send Rs. 100 to the first person named in a list of six persons, remove the top name, move all the other names up one position, add your name as the sixth, and send it on to five people who, you are confident, will do what you did.
Let us assume that five of your friends oblige, and each of them gets five people, and so on. As the pyramid grows below you, here's what supposedly happens: the level below you has five people; the next level has 25; the one below that 125. The number grows exponentially to 625; 3,125, and so on. Thus, by the time your name in the list on the postcard crawls up to the top, 3,125 people would have received such cards. This means you would receive a hundred times that amount - Rs. 3,12,500. Only, you don't.
At the subsequent levels, the number of participants will be 15,625; 78,125; 3,90,625; 19,53,125; 97,65,625; 488,28,125 and so on. Apart from the 25 lakh who have already joined, the 10th level would require close to a million new participants. At the 13th level, we need 122,070,03,125 new members - only a shade more than the population of the entire country! Which means that if the chain were to go on unbroken (as it should, if the moolah were to keep flowing in), sooner than later, we will find ourselves sending money to each other! At this point, the pyramid collapses. And when it does, a solid majority who would have paid to get in will lose. Because the hope they will profit, as people join below them, will never be fulfilled.
K. T. R.
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