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Okay - let's clear it up!
The first widely reported ‘pyramid scheme’ on record was one created in the USA by Charles Ponzi. He stated that he was able to offer high returns to investors, supposedly from buying and selling international postal reply coupons at differing rates, due to the effects that the First World War was having on the economy.

Ponzi sold promissory notes quoting a 50% return within 90 days.
However, he never bought any coupons with the money. He merely used the money from later entrants to the scheme to pay off the earlier ones!

The scheme ran for 9 months, before he was arrested for fraud and jailed.
In those nine months (bearing in mind this was back in 1920) he received more than 9 million dollars – although he probably owed ten times that much to later investors in the scheme.

Fifty years on the success of MLM Companies did not go unnoticed by unscrupulous people. They realised that the MLM concept could be manipulated. Money could be made from people without bothering too much about the sale of quality products to a satisfied clientele. Thus, ‘pyramid selling’ was born.

All of these pyramid selling schemes were based on one or more of these ingredients:

*Large entry fees (we’re talking thousands of pounds here) extracted from people on the understanding that they would profit by receiving similar payments from new entrants that they introduced;

*Encouragement to purchase as large an inventory of products as possible at the highest discounts available, before obtaining orders from customers or other distributors, and with no refund policy;

*No written contract or agreement between the company and the distributor;

*No training in, or any real concern about, selling products to the public.

That’s why pyramid schemes became attached to MLM. It’s just like the cowboys who move into respectable industries like double glazing and the financial services industry and give them bad names. Every industry has this type of people, but thankfully, due to the laws now governing MLM, they are usually winkled out and prosecuted.

Fortunately, as more time passes, this silly ‘pyramid’ label is beginning to disappear from our industry. However, there have been at least half a dozen pyramid schemes started in the last couple of years, that I can recall, and I would guess that there are quite a few more bubbling under the surface.
One of these sprang up on the Isle of Wight, and another one did the rounds that involved lots of females parting with lots of money, called Women Empowering Women.

As if they don’t find enough to spend their money on already!

This is not withstanding the fact that the MLM companies in Britain are governed by Acts such as The Pyramid Selling Schemes Regs 1971, The Trading Schemes Act 1996, Trading Schemes Regulations 1997 and in general terms the Fair Trading Act 1973.

I hope that helps.

Oh - I left a bit out. Ian asked to share the solutions for responding to cynics.

Here's what I do. I simply say:

“It’s interesting that you should ask that. What do you know about pyramid selling?” and listen to their explanation. 
It will be so far removed from what you do that they will sound ridiculous, even to themselves.....but you must let them tell YOU what they think pyramid selling is - never try to defend what you do!

www.wikaniko.com

Very interesting stuff. Thanks Paul. Listening and not going in with all guns blazing sounds highly sensible. Any other tips for dealing with cynics?