A legal way of robbing.

Last week I attended a presentation about a business. Most of you have come across it, Referral marketing they call it. Let me give a small overview about that business.

Generally in referral marketing, your investment will be a certain amount that u pay to the company to become an agent. You generate money in that business in two ways. First, by selling their products at a higher margin than what u actually bought it from the company. Second, by referring other persons to market their products, and in turn getting a commission for it. Even when the referred person refers someone else, you will get a share out of it(but the amount will vary, like when you are referring some person you are getting Rs X, if that person refers some person you will get X/2). We call this kind of marketing as MULTILEVEL MARKETING(MLM).The thing i came across is a little bit different and seems to make it more popular than MLM.

Before saying about the differences I will say a little bit about that multinational company. It belongs to a network of a few companies, where each one deals with either technical products or automobiles or tour packages etc. The company of our concern is dealing with numismatic coins. They manufacture gold coins imprinted with great people or events and sell it. To make that coin as a rare piece they destroy the mould. so that they cannot make the coin like that afterwards, good way to make things rare and increase the demand na, the products which we can buy is this only, others are too expensive.

Now we will see the differences. In MLM you have to buy their products every year, where as here if you buy once it is enough. The other strategy is they are following a binary tree like structure where you can refer only two people, and you will get money only if those two people refer another two. So if you have three sales on your left side and three on your right you will get money. The person above you will help you because only if you refer a person he will get money.

Clear about the business? ok now we will deal in numbers. The product range starts from Rs 33,000(includes agency fee and product price), and it is a gold coin i suppose, and on every six referrals ( you have to get three on your left and three on your right, you will not get any money for a 4 2 or 5 1 combination) you will get 11,500.

Let us make ourselves clear with the money flow. From where are we getting that eleven thousand or 2000(approx) per referral? Is the company going to pay you from their hand? Absolutely not. Its the money of the person you refer, am i right? Let us assume the best probabilistic event, a perfect binary tree. The hierarchy goes like this 1, 2,4,8,16,32,... How long will it continue, may be up to one crore people. Let us consider it is saturating at that level. How many will be in the last level of that binary tree?? Half right?? i will justify my statement with this example. Consider this tree 1,2,4,8,16. Total no of people is 31. And the no of people in the last level is 16 which is half the total number of people(31). So at any point, seventy five percent of people will be leaves, i mean they will be in last levels.

For one crore people, the number will be 50 Lakh in the last level and 25 lakh in the penultimate level. From where will these 75 lakh people get the money? So the people above them are getting money eventually by robbing others money who are at the last two levels.

Let us take for each person that company is gaining some 1000 rs and also huge share from last two levels will go to the company. You are robbing your own peoples money and giving it to some person outside the nation right? If it is going up to one crore people, minimum of a 10,000 crores will be going outside the country( 1cr*33,000*0.75 ~ 20,000cr. Out of this half,we could consider, would be shared by the 25lakh people above the last two levels.) With that money we can construct a new IIT which will turn the life of few thousands of people every year and it will generate a large knowledge base to the country.

I really feel very bad about this, because most of the persons who are involved in this business are from top engineering colleges. In the presentation that I attended, a guy was very proud that he earned lot of money and got a car. I don’t know whether he is aware that he is robbing others money or not. Is this the way to use our potential, think?. don’t rob your own peoples money. Keep a share with you and give a share to that company which taught you the strategies how to rob. Think, use your potential in right way.