Considering the near-constant juggling act of tuition payments, rent and leisure spending that higher education demands, it’s no wonder that over 50 percent of American college students are employed at least part-time.
It’s also no wonder that some companies have caught on to this desperation, advertising fruitful (and vague) investment opportunities in exchange for your 700 Facebook friends.
But please—I’m begging you—don’t fall victim to a pyramid scheme.
I realize it’s easier said than done. That’s because I almost fell for one a few years ago.
The summer I turned 16, I started receiving letters from a company called “Vector Marketing Corporation.”
Work-hungry and naïve, I tore open the first letter I received from the company. As I scanned the four-page document, I was filled with glee. A starting rate of $11-12 an hour and I don’t even have to submit my qualifications? So long, Microsoft Word resume template!
I didn’t really consider the fact that there was no real job description in the letter. Nor did I really care: “Work should be fun. Seriously” was all the validation I needed.
But when I performed a quick Google search of the company for some extra information, I couldn’t find a single result (save for Vector’s official website) that didn’t have the word “scam” attached to the end.
I also had no earthly idea that the job required you to sell Cutco knives to your friends and family.
And I suppose that’s the real danger these types of establishments pose to the general public; there’s no amount of corruption a little creative wording and an expert web designer can’t fix.
Pyramid schemes, sometimes called “multi-level marketing” companies by affiliates (though there is an important legal distinction between the two), are easy to distinguish if you are familiar with the business model they employ.
Let’s say Jane joins company x. But before she can join, she must pay an initial investment of $50. Sometimes, this money goes towards buying some of the company product, but not always. Now, Jane is expected to try and recruit more members to the company, who will also pay an investment fee.
This is called starting a “branch.” A portion of the investment fee that Jane retrieves from the people that she recruited goes to her own branch leader.
Therefore, the only way Jane can make a profit is if the people under her are able to recruit more members.
Confused? That’s probably a sign of an unsustainable business model. Alfredo Burlando, a UO economics professor, says that the true mark of a pyramid scheme is in the value (or lack thereof) of the product.
And this is the factor separating multi-level marketing from its illegal counterpart. When most of the company’s “profits are not coming through the sale of their product, but through duping intermediaries,” said Burlando, it becomes a criminal activity.
Some companies like Vemma, an Arizona-based company that promotes a nutrition-energy drink hybrid, mask financial hiccups by portraying an investment in the company as a ticket to social and monetary success. Its tireless marketing efforts have managed to grip even University of Oregon students, cheating them out of hundreds of dollars.
Senior English major Terek Hopkins is one of them. Last year, after a close friend working with Vemma pitched the idea to him and his roommate a few times, he decided to try it out.
But after just two months with the company, Hopkins realized the investment wasn’t going anywhere.
After paying $100, he received a case of “Verve,” one of the company’s drinks. Since he wasn’t required to sell the product to anyone, he ended up drinking most of it himself. It was more of a party favor to hand out to potential investors.
“There wasn’t even an actual product. It was about the brand,” said Hopkins.
He was originally drawn to Vemma after he heard about the potential for financial success. But he now recognizes that these tales were the exception, not the rule.
“Everyone will tell you ‘I know this guy who made a lot of money’ and show you like a picture of them with a car. If you made x amount they’d lease you out a BMW. It was like a money orgy where everyone’s losing,” Hopkins said.