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Pyramid Schemes

"Edwin never tells me exactly what he sells."

Listen to this commentary!

By Greg Willis

Internet fraud is catching a lot of victims this year — some 89,000 according to Attorney General John Ashcroft (NYTimes, May17). The Justice Department is cracking down on a long list of frauds including get rich quick schemes that abound on-line. Many of the people being swindled are teenagers. They are as desperate for cash as adults. So it’s hard to turn down a get-rich quick summer job offer. Youth Radio’s Greg Willis has lots of friends signing on the dotted line for work they call multi-level network marketing. The rest of us might call it a pyramid scheme. This phenomenon is both suburban and urban, attracting kids of all socio economic backgrounds hoping to make hundreds and/or thousands of dollars by drawing in their friends and family.

I just graduated from high school and more than anything, I need a summer job. So when my friend Edwin said he was making hundreds of dollars a week working for a phone company, I was skeptical, but curious.

Edwin: Basically, what I do is work with marketing and public relations. It’s kinda odd the way our business structure is, but in a sense, I guess, just to wrap it up, I’m in multi-level marketing. I have two forms of income — residual income and the other is off of leverage. I could go in deep into how that works but it would take a lot of time.

Did you notice — Edwin never tells me exactly what he sells. And the company? Well, there’s no building and no place to send a resume. What’s up with that? So I tagged along for one of the weekly “meetings.” It turned out to be a presentation to lure more young people into the company. But here’s the catch: you have to pay $299 to get started. And to make the big bucks, you have to recruit more people to join. I went to my dad for advice, and he said right away, it was a pyramid scheme.

Dad: If for instance, you’re being told not to tell your parents about this until after you’ve already signed up to go to work for them, and you’re being told not to tell your friends until you’ve done likewise. Then you know, perhaps there ought to be a signal there…

People my age are perfect for pyramid schemes: An average teen’s perspective is “if everyone else is doing it, I should too.”
But by now, I’m used to seeing my friend Edwin throw around money on all these lavish things.

Edwin: I’m driving a Honda S2000 right now. The bulk of my money goes into modifying my car. I’m actually gonna get lowering springs in the next couple weeks.

These friends of mine have rich families anyway, and they live in big houses in the suburbs. But pyramid schemes are a big deal for urban kids, too. Nzinga Moore was stunned when she started seeing all these kids in the city dressed up and acting like miniature CEOs.

Nzinga: What is going on? Why are so many kids like, high profiling? They were wearing matching suits…you could tell they were all together.

A young guy from another company tried to recruit Nzinga at a movie theater, and for a second, she was tempted.

Nzinga: It’s appealing because um, it seems like it’s fast money and it’s easy money. And as a struggling young person, I know that you wanna be, you don’t wanna be underneath your parents. And the reason why you’re underneath your parents is because you need money.

Nzinga didn’t sign up and neither did I. I was way too uncomfortable with the whole thing. Company reps told my two friends to lie about their identities and use their parents’ social security numbers for work. I’m searching for a part-time job that will probably be really boring and pay six bucks an hour. But at least I’m not getting caught up in a fantasy world based on lies.

In Berkeley, I’m Greg Willis, for Marketplace.

Host Back Announce: “Pyramid Schemes” is part of an occasional series, Young Bucks, produced by Youth Radio.