A secret-gift-giving scenario with a Christmas theme has resurrected itself on the internet this week. My goal is to show you how to decide if it’s legitimate.
The description: (how do I write this without triggering a fr@ud alert?) In the scenario, women are asked to send 1 gift of $X to a name they will be given, and there are promises of Y or more gifts in response.
Beyond the US Postal Inspection Service naming it as gambling and mail fraud, physical safety questions, and identification-privacy issues, I wonder why people fall for it (and why some still defend it, even after learning the police warn against it).
I learned from Mariah Nemeth PhD (author of “The Energy of Money”) that the #1 reason for such a decision is…. We humans look for shortcuts, a fast way to create the desired outcome. Our very human drive to “make my life simpler, better, as fast as possible” trips us up, especially when we encounter the subject of money.
But even if we set Dr. Nemeth’s idea aside, how can an ordinary person with no business-analysis experience tell the difference between legitimate requests and Ponzi schemes?
Before launching my first business in my 20’s, I had the same question.
Let’s look at three major sections of launching a business or a Commerce Structure ™ (which I define as a method of giving value, typically financial-based, and receiving some value of any type in response).
I call this the METI ™ Test:
- YOUR Money
- YOUR Effort
- YOUR Time (preparation and after launching) until receiving desired result(s)
All creating a wanted result: Income of money (or other financial value)
I used capital letters to emphasize what you, as an investor or business owner, have to do from conception through reaching the financial break-even point, regardless of the size of your employee staff or distributor team.
Let’s take a look at three Commerce Structures ™ .
Franchise: Your Big: Money, Initial Effort, and Time Commitment. Product Sales Generate the Income.
Lots of time researching and interviewing before signing, lots of money before signup for legal paperwork, lots of money at signup (around a quarter of a million dollars is average), and lots of time and effort to staff and run in its first 3-5 years. You will be lucky to financially break even in the first 3-5 years. Product sales generate the wanted income.
Solo Professional (product or professional service paid via invoice): Your Low-to-medium Money Commitment. Your Big: Effort & Time. Product Sales Generate the Income.
Nearly the same time commitment as franchising, lots of money in education for the proper credentials and/or marketing. You ARE the business, so when you stop working, the money stops coming in. Product sales generate the wanted income.
Mom-and-Pop Retail: Your Low-to-medium Money Commitment. Your Big: Effort & Time. Product Sales Generate the Income.
Nearly the same time commitment as franchising, money at startup will vary, and creating ongoing profitability may be something that you’re continually juggling. Product sales generate the wanted income.
Here’s the pattern.
You must contribute heavily in at least one area, likely 2 or all 3, to successfully launch a business and get it self-sustaining.
Leveraged sales or independent personal distributorships typically require the highest contributions in the Time and Effort categories.
Now consider: How long would each require to cumulatively earn 6 times their initial financial investment?
I’m guessing in terms of years– not months — for Franchises, Solo Professionals, and Mom-and-Pop Retail.
Let’s return to the secret-gift-giving scenario. The METI ™ test shows:
- The commitment: Low Money, Low Effort, Low Time.
- The claim: Receive 6 times (or more ) your initial investment in two months.
If I described a business that way, would it sound realistic?
Probably not. (Because you’d be asking me, “What’s the catch?”)
For this secret-gift-giving situation, the only way I see money (or money-related value) enter this network of participants is through their initial investment (buying the gift then shipping it; it’s truly “input” when it is received by the other participant). There is a highly imbalanced input of 1 gift into the participant network generating an “income” of 6 or more from that network. Combined, these should signal caution about the stability and fairness-to-latecomers of the model. Adding the Postal Service’s and police’s warnings to the mix, I personally agree this secret-gift-giving scenario is illegal. If it was a “send x number of gifts and receive that same number in response” situation, that is much less questionable.
When there is no “Big” commitment in any 3 of “YOUR” areas and your promised returns are significantly higher than your initial investments … and/or your income comes solely from other people’s initial investment, in my personal opinion it signals an illegitimate or illegal situation. In such a case, don’t realistically expect a fast, leveraged, high-quality return. (I am not an attorney and this blog does not constitute legal advice.)
–LYnn Selwa, “The Rocket Science Coach” ™
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P.S. This METI ™ analysis also applies in other areas:
Earning a college degree: Big Money, Effort, and Time. Years to recoup 6 times the initial investment.
Bench pressing twice your weight: Big Effort and Time. I’m guessing years instead of months.
Investing in the stock market: Big Money or Effort or Time. Again, I’m guessing years (the less financial education, the more money and time are required)
P.P.S. I receive no compensation for mentioning Maria Nemeth PhD or her work, nor for any sales generated.