Your Own Personal Pyramid Scheme
Are you familiar with pyramid schemes? No, I’m not suggesting you start one. I want to talk about how and why pyramid schemes work, and relate some of those concepts to you. Knowing more will positively affect the mentality you have about your finances. I am not, nor would I ever, suggest or endorse that you be involved in a pyramid scheme. But I definitely want you to start considering the value to be gained from learning about the various ways money changes hands.
How Pyramid Schemes Work
To describe it simply, the basic pyramid scheme functions by preying on greed. It works based on the premise that by sacrificing a little now, you’ll gain a lot down the road. Usually, involvement in the scheme requires the victim to purchase some kind of information or product that is supposedly the best of its kind or is a well-guarded secret. When you buy into the scheme, you’re essentially buying the right to then sell that information or product to others.
Just imagine if you were such a great salesman that you were able to convince a million people each to give you a dollar. You’d have to be very convincing, of course. Now think about if you told each one of those people that all he or she has to do is pay you $1, and in return you’ll tell him or her how to easily make a million dollars. For many people, obtaining such potentially profitable information for such a low price is enticing. While this is an extreme example, this kind of salesmanship creates massive amounts of intrigue and leads a great number of people to say “well, what have I got to lose? It’s only a dollar!”
The ‘base’ of the pyramid grows every time someone who has sacrificed their dollar wants to make it back. So you have a million people each trying to convince a million more to part with their hard-earned dollar. The best and most convincing salesmen get the dollars of their friends, family members and co-workers, while the bad ones (and the overly pushy ones) just get on their nerves. Each person at the base of the pyramid becomes one of multiple income streams for the person at the ‘peak’ directly above them. There are more elaborate and complicated versions of the pyramid than the one I described to you above, including schemes where the base pays ‘membership’ fees or some other type of recurring charge.
And Now, A Story
When I was in middle school, a kid I knew walked up to me before first period and asked if I had a dollar. He told me he didn’t have lunch money and would pay me back the following day. Even by the tender age of 12 I had already begun to develop shrewd financial tendencies, and that, along with the fact that I knew him to be of somewhat questionable character, led me to turn away his request. Lucky was I, for later that same day (during fourth or fifth period, I believe) we had a class together. Imagine my surprise when he pulled a fat wad of $1 bills and several coins from his pocket and began to count them at his desk. His friend – the girl sitting next to him – saw the pile and exclaimed, “I thought you didn’t have any money!”
“I didn’t,” he replied. “Until I told everyone.”
I watched him count out no less than twelve dollar bills and a few bucks more in coin – at the time, that would have been enough to buy lunch in the school cafeteria for nearly two weeks straight (a day’s lunch cost $1.65 in the mid-90′s). So what did I learn from this experience? That money finds those who have the wherewithal to get it.
You don’t have to be dirty and underhanded to make money, but it will make you that way if you let it. Just as greed leads people to fall victim to confidence scams and pyramid schemes, wisdom leads people to make the most responsible choices based on knowledge rather than conjecture. Don’t guess or gamble, take risks or roll the dice without doing your due diligence and having a backup plan.
Building Your Pyramid
Now that you know a classic pyramid scheme relies on the greed of the base to benefit the peak, realize that there are tons of ways to make money legitimately and without pulling the wool over anyone’s eyes. You can easily build a pyramid and collect income from multiple sources without it being a ‘scheme.’ At the time of this writing I have seven different online income streams, and I hope to grow that number moving forward. Each source in the stream may only yield a few bucks, but if the total is enough to buy groceries for the month or pay my auto insurance bill, I’m satisfied that the time spent setting them up was worth it. Here are some ideas for ways you can start building up small amounts of extra income online. Some require more technical knowledge, some more artistic talent, and others just require you to get traffic to a website:
- Stock photography sites
- Stock media sites (audio clips, video clips, website themes, 3d objects, 2d graphics)
- Amazon affiliate program
- eBay partner network
- Google AdSense
- Mobile application development (android, iphone, blackberry, windows)