Skip to main content

Posted 08 March 2022

Pyramids and Investment Schemes

In Egyptian history, the top of the pyramid would represent the pharaoh, the next layer would be the government officials, the next the soldiers, and so on. The pyramid in present times is used as representation for a variety of different things. Usually this representation focuses on a hierarchical system. This same idea can be found in hierarchical investments, also known as pyramid schemes. The central thought of the pyramid scheme is to move up to the highest level. The pharaoh is not only considered the king, but the wealthiest in the Egyptian community. Of course we all want to become pharaoh or, in modern terms, high level investors. However, pyramid “investments” are considered schemes because they are most times unsuccessful and can be illegal. 

Building the pyramid

In ancient Egyptian times those who were responsible for building the structure of the pyramid would represent the bottom level of the hierarchy status. Anyone at the top of the pyramid enjoyed the fruits of the labor with producing little to no hard work at all. Essentially, this is how an “investment” pyramid is built. There is a hierarchical setup where founding investors recruit members with the promise of a profit when committing new investors. This process repeats itself forming a pyramid of investors, layering investments/investors on top of one another.

For an “investment” pyramid to stay continual the base level must stay wider than the crown level. If base level investors dwindle in size the support of the pyramid will no longer exist, eventually causing it to crumble. This is where a pyramid “investment” becomes a pyramid scheme. It is unrealistic that the pyramid will sustain permanently. When investors lose money or struggle to frequently recruit, profits will decay causing the base to no longer support the scheme structure. Also, when profits are made solely from recruiting and not the sale of any type of product, the scheme is considered illegal in most states.  

Types of pyramids

There are different architectures of ancient pyramids. Some made with steps, some with straight and flat surfaces. Pyramid investment schemes also come in variety and can be disguised. For example, chain emails can be considered pyramid schemes when the email seeks to influence recipients to contribute money. Everyone in the email chain is promised a profit from others as the recipients grow in size. By adding on a new email recipient, each person continues to receive until eventually their name is no longer on the email. This is a layering of investments with no product for sale, which is considered a pyramid scheme.

A Ponzi scheme is another sample of a pyramid scheme. It is structured off of investors getting high returns based of the investments of new recruits. These schemes have different names but ultimately have the same concept.

Bottom layer, bottom line

While there are pyramids that have survived in history and are wondrous to look at, pyramid schemes are not as strong and everlasting. Avoid a pyramid scheme by recognizing the signs of the scam. Investments made off of recruiting others with no product or service are probably not legal and most certainly will not last forever. These schemes can be presented through email, social media, or even by text message. Regardless of its presentation, these hierarchical structures will not continuously provide the kind of legitimate and reliable income we all need. Avoid the pyramid and find another sustainable way to become a high investor, or pharaoh.

©2023 Reseda Group LLC, used under license.