Seriously.

Yes, share it with 5 people and watch the power of exponential growth — uh, pyramid schemes — like HerbaLife or Amway.

This entertaining but informative video shows how modern-day pyramid schemes work, but it doesn’t explain how they keep getting away with it.

If you join one of these MLMs, or pyramids, you make nothing by selling the product. You only earn by signing up new sales-people, who give you money. But to get the right to do that you have to buy a lot of product, which often ends up in garages or closets.

And here’s the kicker: if you actually do everything right as per the recommendations of the MLM scheme, you run out of human beings. This is classic exponential growth: the founder gets 5 salespeople to sell under him. Each one of them gets 5 more so that generation is 25 people. Then each of those gets 5, for 125, each time multiplying by 5.

I just had my calculator compute 5^10, which means 10 generations, which really doesn’t sound like that many levels,  and I got nearly 10 million people, larger than quite a few states in the USA. Ten generations of friends and coworkers and family getting friends and  coworkers and family members to sign up should only take a few months, right, at about a week per generation of suckers salespeople?

Then: After 15 generations my calculator says, uh, I’m having a hard time counting all the decimal places, because it reads 3.051758713E10, also known as 30,517,578,125.

Of course, that’s impossible. Most folks who get sucked into the MUlti-Level Marketing morass actually earn nothing at all — even by the companies’ own admissions. (See the video!) but they all buy a LOT of product, benefiting the people above them.but I think that means a bit over 30 BILLION people, with a B. Now, last time I checked, we only have about 7.4 billion human beings alive today. So, each and every single Homo sapiens on all seven continents or even sailing on the ocean or living on a remote island somewhere, would have to be a distributor/salesperson/supervisor/sucker, about four times over, just on level 15. If we add in all of the  people from levels 1 through 14, we actually get about 38 BILLION suckers customers dealers.

Why are these things still allowed? Is it because they have paid off some important legislators? On the face of it, pyramid schemes (think Ponzi) are all illegal. How do these companies continue to operate and prey on folks who dont know better?

## You need to watch “Last Week” with John Oliver

John Oliver is one of the funniest, and most serious, people on TV. In my opinion, he is a better comedian and anchor than Jon Stewart of the Daily Show where he more or less got his start, tho Stewart (and Steven Colbert) are both quite good.

You can watch his shows on YouTube at this link. I don’t agree with everything John Oliver says or with his approach*, but he’s both funny and serious at the same time, as I said before.

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* For example, with the bit on gambling, it wouldn’t hurt to show that in blackjack, the average payoff is  negative  3% but for the lottery it’s negative 37%, which is a lot worse. In other words, if you are playing blackjack in a casino, on every bet of \$100, on the average, you get back \$97, losing \$3. With a state lottery, if you bet \$100, then on the average, you get back about \$63, losing \$37. It is very difficult to find any game of chance with worse odds than the lottery. In fact, we math teachers have a little saying: The Lottery is a tax on those who don’t learn anything about probability. And there’s this.

Published in: on November 18, 2014 at 2:47 pm  Comments (5)
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