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How to spot a pyramid scheme

In 2004, a nutrition company offered a life-changing opportunity to earn a full-time income for part-time work. There were only two steps to get started: purchase a $500 kit and recruit two more members. By 2013, the company was making $200 million. There was just one problem — the vast majority of members earned less than they paid in.

This dynamic happens online, too. Rebooted pyramid scheme examples have recently surfaced on Snapchat and Instagram.

What is a pyramid scheme, how do you spot one, and why don’t they work? This TEDEd by Stacie Bosley, directed by Wooden Plane Productions, can help you avoid them. In their Dig Deeper notes, TED-Ed adds:

In the end, if you remember anything I hope it is this: if the offer asks you to pay and recruit, reject and report! Remember, pyramid schemes require recruitment within networks so they can’t catch fire if we know how to detect and reject.

pyramid schemes - TED Ed
pyramid schemes from the top
Related reading at The Street: What Is a Pyramid Scheme and How Do They Work?

Watch these next: How to spot a misleading graph, how to understand power, and how much sugar are you really eating?

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