CHAIN LETTERS AND PYRAMID SCHEMES - WHY THEY DON'T WORK!
If you are active in
mail order, you've no doubt seen tons of chain letters and pyramid programs.
In case you're not familiar with them, here's an overview, so you know what to
watch out for.
Chain letters are those letters you get, instructing you to send, say $5, to
the 4 to 6 people on the list, who will send you a report, or some product, or
sometimes even nothing. Then, you add your name to the bottom of the list,
moving the others up, and the top one off. You then print and mail out as
many as you can, hoping others will do the same as you. The letters are
liberally sprinkled with references to how much money you will make, and how
many people are sure to participate. Some even go so far as to promise you
$1,000,000 and more, sometimes in less than a month!
Pyramid schemes are what chain letters are based on. You buy into one, then
you need to recruit others below you, to move you up the line. The people you
recruit, in turn, need to recruit others, and so on. Pyramids go by all kinds
of names and formats. For example, "Airplanes" are a popular pyramid scheme.
There are 8 "passengers," 4 "stewardesses," 2 "co-pilots," and 1 "pilot."
When you buy in, you pay a predetermined amount, like $10, to the pilot. That
makes you a passenger. When you recruit 8 more people, you become a
stewardess. Your 8 people then need to recruit 8 more, to move you up, and so
on. You're promised that you will get hundreds of dollars when you're the
pilot.
These programs all share many characteristics. First, they're illegal. Don't
believe what the chain letters say, that someone "showed it to the postmaster,
who assured him it was legal," or "it's legal, check the postal codes."
Pyramid games are illegal because you're paying money for nothing, in a shaky
con game which can fall apart if recruiting drops off. With a chain letter,
it's the same, but it's conducted through the mail, which opens up mail fraud
laws, also.
Second, the mathematics used in the letters and schemes is flawed. Most chain
letters will say you should expect a 5% - 10% response from your mailings. As
anyone in mail order will tell you, this is absurd, especially in regard to
chain letters. But, let's go with a 5% response on a chain letter with six
levels. For the sake of argument, let's say that everyone who participates
mails out 2,000 copies (though most people drop out without mailing more than
a few). This table will show you how many people will have to participate in
order to fulfill the promises in the chain letter.
Level you're on Total # mailed by everyone Total # of responses
--------------- -------------------------- --------------------
1 2,000 100
2 200,000 10,000
3 20,000,000 1,000,000
4 2,000,000,000 100,000,000
Do you see what's happening? In order for you to get to the sixth level, more
people than have ever lived on earth would have to participate!
Let's look at what will realistically happen. Chain letters get horrible
responses. 1/4% is probably the best you should expect. Plus, three-quarters
of the people who DO join in will drop out without doing more mailings. Try
this table on for size. This is what REALLY will happen when you participate
in a chain letter.
Your level Total # mailed by everyone Total # of responses Dropouts
---------- -------------------------- -------------------- --------
1 2,000 5 3
2 4,000 10 7
3 6,000 15 11
4 8,000 20 15
5 10,000 25 19
6 12,000 30 23
---
105
That's 105 responses, ASSUMING that everyone that participates mails 2,000
copies out. That won't happen. Some will only mail 1,000, some only 100 or
50. In other words, what you are doing in a chain letter, is relying on
others to do the work that will make money for you. There just aren't any
free lunches, though. Somewhere along the line, enough people will drop out
that the letter just can't continue. Who loses? Everyone who's
participating, including YOU.
It doesn't matter if the chain letter/pyramid involves sending money, recipes,
stamps, dishtowels, cigarettes, pencils, decks of cards, envelopes, toilet
paper, or any of the other crazy things floating around. It's still ILLEGAL,
and a poor business proposition.
