Pyramid Schemes

My workmate who I regulary play basketball with recently asked me if I was interested in making a little extra money on the side. He said he had a business idea that he wants to discuss with me. Immediately I thought "Pyramid Scheme". But I figured I'll hear him out to see what he has to say. We arranged to meet after work one evening and have a chat.

He went through the usual preparatory speech of the 4 types of people (Employee, Self Employed, Investor and Business Owner), the later being what he's offering. Then it was the "What do you want to achieve with extra income?" speech where I assume is to get me really focussed on what my dreams are (new car, new home, holidays etc) and thus maybe lose my logical thinking. I was wary of that. So I played a very non-commiting role and nudged him to get to his point of what he was offering.

It turned out that it WAS some form of Pyramid scheme. There was this entity called an OCS which would purchase goods and services from manufacturers which then you buy from then sell/use. This bypasses the wholesaler and retailer and thus saves you money. The more you sell/use, the more "profit sharing" is returned to you thus producing an income. The more people you refer, a portion of their sales/usage also goes back to you in profit.

Straight away I was against this. More on moral grounds than anything. I had 2 major issues with this. The first is that the person who has referred you will make alot more than you in 99% of the case. In order for you to make more than them, you need to do an extreme amount of work compared to him. This in my books is wrong. The second is slightly personal. The fact that he's referring me means that he is (in my books) taking advantage of me. It's almost an insult.

During our dicussion I managed to show him through calculations that if I was to join, he will always make more money that me unless I do a ridiculous amount of selling and he does bugger all. He was immediately placed in the hot seat. He was red in the face at this stage and kept saying he must have his calculations mixed up. I gave him time to correct his calculations, all the while watching him squirm his way out of this, but he never managed to do it. He apologised for not preparing his calculations beforehand. I wasn't impressed that someone who I would call friend would offer me something like this. However, I politely declined the offer and wished him luck. Things will never be the same between us.