The Snake Oil Salesmen Of Silicon Valley

from the it's-all-a-big-pyramid-scheme dept

Not so long ago a friend called me to tell me about a “great opportunity” that he had become involved with, and he wanted to set up a time to have a “meeting” to tell me all about it. This alone seemed suspicious to me, because I don’t set up times to “meet” with friends. I set up time to hang out, or to go to dinner, or to watch a movie, etc. My suspicion turned out to be correct as he told me all about a multi-level marketing pyramid scheme he had become involved in (founded by a former senior Yahoo exec!). Many years ago another friend of mine lost an amazing amount of money (as well as a fairly large number of friends) due to a similar scam, so I’m fairly familiar with how they work and exactly why they don’t work. I ended up writing a long, detailed email to my friend explaining why MLMs are a bad idea. There are a ton of reasons, but the most basic is that it’s a business based on the idea of bringing in as many perfect competitors as possible. You are killing your own market by trying to set up exact competitors who have no competitive advantage over you. If you have a good product, you sell it, and not the “opportunity” to have other people sell it. Anyway, it seems that with the collapse of the tech boom, people who expected to get-rich-quick from dot coms are rediscovering the pyramid scheme as a replacement for those stock options they never got. According to the article, it’s particularly noticeable among immigrants who came to Silicon Valley to be successful and are now looking for any way to prove to folks back home that they are successful.

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Comments on “The Snake Oil Salesmen Of Silicon Valley”

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Ryan Bethencourt says:

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Hey Mike,

It seems that this is becoming a worldwide trend again, during the dot com boom I didn’t encounter many people interested in pyramid schemes but recently I’ve had several people approach me about “exciting opportunites” here in london. The schemes tend to vary from telecoms to vitamins … I listen to them because they’re fairly amusing! I guess it just reinforces the fact that there are still a ton of suckers out there with out much common sense …. remind me again on who invested in ? Ha!

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