Pavalam asked invaders to join a business he himself was new to. You know what he said
1. Confirmed profit
2. Your job is nothing. You need to put some money and stay calm.
3. There are branches all over the world and advised Ranjith and Danush to contact US office.
Fortunately no one joined. In a separate event, one of my friend with who I was staying that time, named RK, asked me to go out with him on a Saturday evening. He took me to a house which was full of guys of age group 25-30. They seems to be in high energy and looked like they were born to achieve something.
They invited me into a room and started some kind of seminar. Within few minutes, I understood where I was. The tutor was a guy with heavy north accent. We introduced ourselves. Surprised to see that room was filled 100% with software engineers.
As he went on, in the same way as Pavalam did, that is without explaining what the business was but explaining only the benefits, one guy in the room started asking number of questions. His questions seemed to be very valid. They are based on how profits come without a value addition. But the reply was not satisfactory. Tutor said “Chup Kar” and the issue diverted and people started cursing each other based on where they are from(Bihar etc.). It was very disappointing to watch.
Suddenly one hero jumped in and he started explaining things. He was very straight forward and explained everything. It was so compelling to listen and at the end I felt how could I miss something so great. Apart from that my friend’s(RK) friends, were really ready to put me under somebody. Literally they were fighting for me. They have shown me lot of proof of cheques and awards they have got.
I told them, I have a friend(Pavalam), who asked me first and at that time thought it would be better to discuss with Pavalam, in case I join. These guys were really upset. Then I called Pavalam immediately and shared my experience. Pavalam, being a very decent guy, said “Machan. Think panni paaru, enga comfortable ah irukko anga seru.. if you want to join with me, let me know”
Not having much information, I started analysing the business model, with KK(Karthcik Kalidoss, C CSE). And we found out that this is a pyramid model, which rewards only early birds. It is not legal in many countries. And after that I thought it would be good to share my experience before any other invader decides to join and send out a mail.
Till now I am not sure what happened to Pavalam’s money. Here is the mail I have sent for your reference.
What is this shit all about?
Referral Marketing/ Multilevel Marketing[MLM]- Kind of business/marketing in which customer refers other customers to consume a company’s product and gets commission for that.
Its the Amway stuff. You all know that. You give some amount of money to purchase some product and join this marketing scheme. Next get more people to join below you and you get commission for the sale you make and people beneath you make.
Is this legal?
Normal MLM schemes are perfectly legal and sustainable. But there are similar kind of businesses which are illegal in some countries and not sustainable.[Courtesy Wikipedia: 1]
Oh I see? What are those businesses?
This are two categories here. MLM and Pyramid schemes. Here is the description of how to identify the difference.
MLM -> People act as a marketing agent to a company. People in this network sell products to people outside their network. They make money to company, out of which, they earn commission. Eg is Amway. Even though you need to buy some amount of products to become their marketer, you can make sales to guys outside. Intention is to build a sales force network, which is clearly different from consumers.
Pyramid Schemes -> Here people sell the product of the company to only people below their network. So both marketers and consumers are the same. So as you grow your network you build very big network of consumers/marketers. People from computer science knows about an ‘n’-ary tree(if n=2 its binary, n here is number of associates u can introduce into the scheme). Simply put, the number of people in your tree/pyramid/network will grow exponentially, if everything goes fine. Hence the name pyramid. So sustainability of this business is less.
Why do you speak against Pyramid schemes? Aren’t they profitable?
Basic idea behind the pyramid scheme is to push the money up to the top of the pyramid(towards the root node of n-ary tree). Top 15% people will see excellent returns, which is really unimaginable. Some 15% will get the money they invested. Remaining 70% will loose. If you take a binary, at any level K, the number nodes in that particular level will be greater than sum of all the nodes above that level.
This means, if you are at level 5 from top, and if all the guys at level 5 work correctly and fetch people, then number of people at level 6 alone, will exceed total number of people in levels 5,4,3,2 and 1.
So, the growth here is exponential. Can anybody guess, what could be the number of people at level number 13, if each people has to get 6 people under him? Thats more than world population, if everybody fetches 6 people.(I mean a complete balanced hexary tree, where n=6).
So, If you assume such system exist, the number of people at levels 1 to 12 sums upto X which is less than total number people in 13th level alone. So straight out you can decide more than 50% are losers.
So unless you sell products to people outside, this is not at all profitable. This is like chasing people.
How to identify the Pyramid scheme and avoid it?
Okie, now you know the difference. Here are the points,
1. Product will be extremely costlier than market value, as the company has to pay the commission all way up to the root. Actually company is not paying that. Its only the people at the bottom of the pyramid.
2. There will be restriction on number of people you can have directly as your associate.
3. There will be conditions, that say, you have to have, some x number of people on both of your sides to get commission
4. An income stream that chiefly depends on the commissions earned by enrolling new members or the purchase by members of products for their own use rather than sales to customers who are not participants in the scheme.
All of the above concentrates on building a pyramid.
Oops!! So you mean Pyramid is bad. What about MLM in general?
(Warning: This is my opinion). This usually depends on the individual. Here are my general opinion about MLM.
1. MLM teaches you no skills, except sales pitch. So even if you think of starting something in your spare time, do something that teaches you some skills, like event management, NGO stuffs, developing software as freelancer, technical writing, paid product reviews, website development, mentoring, stock markets, clubs etc. Basic ideology is add value, get paid. Or get responsibility, get paid. Or take risk, get paid.
2. MLM money is ethical. But it may not have enough moral weight age as expected by some people
3. MLM spoils your relationships as you look your network as a sales executive. People would jump out and run, if you are too obsessive.
4. Its not really part time money. If you value your time, I bet, you can find some good usage for that.
So why are you telling this to me, f**king moron?
Good question.
I am saying all this, as Pavalam has given out a open invitation to all of Invaders to join his business. I don’t want to name the company, that Pavalam has engaged in. It seems to be a Pyramid stuff. So I want Invaders, to make an educated decision, if they want to join him. I also wish, Pavalam should get back the money he invested.
Apart from him, as this fever is spreading out fast in Chennai, you may get to hear this from other friends too. May be, someone may ask your suggestion. Show them this. If you want to join, follow a rational decision making process. Ask your common sense.
Ain’t you lying? How do you the company that Pavalam associated with, is doing a pyramid style business? What the hell u know about them?? It’s a certified, multi billion, international company, you know?
Yes I know, and I am not lying. The group of companies that Pavalam is associated with is as good as Tatas. But there is a difference in this. Before coming to that, I will explain the ‘business’ completely. Let us call this company X
X makes lot of products. To be in ‘business’ you have to buy any one of them. Lowest one costs 27K Indian bucks.Thats what Pavalam invested in. Business has to have some product to sell right? Here it is medallion. That is, medals made of gold and silver. On that, famous personalities faces are engraved. It is made only in less numbers, so possession of one means, you have one of thousand mints(pieces). X ensures that what you receive for ur 27K is original and they certify that. Medals are made at one of the best minting presses in the first world. Thats all the straight relationship.
X also has a scheme, in which if you get six people below you, and make them buy these(and hence be root part of your own tree with six people beneath), they will issue a commission of 11500. You will get this cheque issued from HK in the immediate Friday once you have this amount of people. Here the tree is binary tree. You will have 2 direct associates below you. And if they have 2 more each, you have 6 and hence your cheque. As people join and tree grows exponentially by power of 2, the time taken to join 6 more reduces to half and it goes on… till a point you get multiple of 6es each day, but getting paid on all Fridays. So this is what X advertises as ‘Wanna earn a weekly income of 30K Indian bucks?’. All money is white and you get TDSed at 5.61%(IT on commission, I guess).
So as I said, there is a difference. The company never promises you anything. The relationship is simple, like you are interested in the medallion and you buy it. If you refer somebody, and if they do in turn and if you reach 6, we will pay u commission. Great.!!
So the company is out of shit and clean, but our guys made a business out of it. So here is why I feel this is pyramid stuff.
1. I am not going inside the business for their medallions. So my motive is the referral commission.
2. I am not allowed to refer anybody to buy this, without getting them as my associate or my associate’s associate. I still can do that, but I don’t enjoy any benefits, which I won’t do.
3. Literally I am convincing some person A, to join under me, so that he can enjoy the same commission benefits as I do. Because, very less people genuinely interested in medallions, and I advertise this as ‘earn 30K a week’.[Why I have to burn my ass in my office, if I can do this?]
4. The medallion is over priced. 27K for 5000K worth of Gold and Silver. Even if you take the royalties of faces engraved and minting charges, I don’t think it will cost more than 10K.
5. So motives of point no 1, 2, 3 is to build the pyramid, but not to sell and earn my bread.
6. They do have web based interface, which shows the tree below me, but not up? What the f**k?? Why not show everything?
So, all symptoms. The catch here[and what could have convinced Pavalam] is that they work as a team. Here, ‘they’ means a team of really innovative[I mean it] people in the pyramid. So they do these
1. Team of experts, with good convincing power, takes classes abt this business and its advantages.
2. Formally they have offices(monthly rent of 30K), and conduct classes.
3. All they request you is to bring ur friends and make them sit in their classes. Thats why Pavalam is so much interested in making us to meet them, where ever they are[Us, Chennai, Italy, Blore etc]. You need not to roam around and get people for you. They will do it for you. At the same time, you won’t sit idle, once you have got your associates. Its really a great team work.
4. They say, they have earned much, and they want you to earn, and hence they earn again. Similarly, you earn, by making your friends earn. Wow what a concept??
5. This team has a name and its professional.
6. They have tree leaders, which take care that next 7-8 nodes below them are complete. So if u don’t have people, the guy above you comes down and questions you and offers u a helping hand.
It may look easy to get 6 people below you. But its quite daunting task. So u have to work hard, as a team, to get what u have invested. Leave the profit.
Great! I feel informed, What questions should I ask them, if I see anything similar?
Thanks, Here we go.
1. Why do u focus on building a pyramid?
2. Why can’t I sell this stuff to some 3rd party, without making him as an associate?
3. Why the hell, ur product is so over priced?
4. What if the tree grows skewed(One side goes on, other side flops, common problem in compsci data structures)?
Ask these urselves,
1. Am I interested in this?
2. What will I learn apart from making money(if that happens)?
3. Am I ready to burn my network, because of this?
4. What will be my image among my friends, relatives, if I am persistent of them being in this crap?
5. How much money will I get in the same average period, if I invest in MF, Shares etc.
6. This is ethical. Is this moral?
So whats the message for me?
At any point of time, u r cheating somebody or getting cheated[Courtesy: Janakiraman]. Learning is an integral part in financial success. Your goal may be top of the mountain. But,its the rough route that makes the journey interesting.
Thats all folks.
Sources:
1. http://en.wikipedia.org/w/index.php?title=Pyramid_scheme&oldid=87352986
2. http://www.iwillteachyoutoberich.com/archives/2006/11/network-marketing-is-a-big-fat-scam.html
3. I personally have spent 2.5 hours at their premises, listening to what they have to say.
4. US ruling to advertise MLM with average revenue per week.[Courtesy: Digg.com]
5. Comments from Janakiram.
Warning: All of the information given here are from above said sources and my own opinions. I am NOT advising anybody. Intention is to aggregate the information and educate the recipients so that they make a rational decision.The execution of what you think right is at your own discretion. And you CANNOT bind me for the decisions you make. If you intend to forward this to somebody, please do so with this warning. Removal of this warning is equivalent to tampering of this content and any damage caused thereof WILL NOT bind me.
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Thanks for reading and sorry for such a long post