Among the most common questions received by Pyramid Scheme Alert are “how can I  recognize a pyramid scheme?”  and “what about this one?”, referring to a particular MLM. Some people also say they don’t understand what a pyramid scheme is.

Spotting a MLM pyramid scheme is simple, but often made to seem “complex”. Just ask this question: Could you make a sustainable profit without having to recruit other salespeople? If the only ones in the MLM that claim to make money have “downlines” (recruits they make money off of), the MLM is an “endless chain”, a pyramid scheme.

But now comes a powerful and illuminating little video (6 minutes) that uses animation to answer the questions and to explain what a pyramid scheme is. Produced by Pershing Square Capital, which has taken a “short” position against the stock of Herbalife and will profit if the stock goes down, the video applies information and analyses developed by attorneys, economists, academics and other writers. Most important, it applies common sense!

Warning: After asking the one key question noted above and watching the video, you may conclude that “MLM” and “pyramid scheme” are one and same.