A friend of mine asked me the other day whether Uber and Lyft is a pyramid
scheme and, honestly, that's a really good question.
Now the first thing that we need to discuss is the difference between a pyramid scheme and multi-level
marketing. The difference is pretty small. In multi-level marketing there's a
product sold by salespeople and they receive additional money if they recruit
new people to sell things. Usually this is in the form of percentage of earnings
but it can also be in the form of a bonus. Multi-level marketing usually
requires purchase of items that are then intended to be sold. These items can
either be sold to customers or they can be sold to new people that you've roped
in. Examples of companies that use multi-level marketing are Tupperware,
Avon, Mary Kay, and Pampered Chef. There's a very interesting discussion that you
could have about how these companies tend to prey on women. Particularly
because they often advertise that you can work from home, choose your own hours,
things that are often attractive to stay-at-home mothers. Now the only
difference between a pyramid scheme and multi-level marketing is that a pyramid
scheme has no real intention of selling product. The focus is much more on
recruitment and they are really just trying to get your money. Pyramid schemes
are illegal in the US, Canada and many other countries. One quick test is
whether or not it's easy to sell back product that you were unable to sell.
So does Uber and Lyft use multi-level marketing? In short, yes. But that doesn't
necessarily mean that it's bad. The way that Uber's recruitment bonuses work is
the new driver has to complete a certain number of drives. Once they hit that
number of drives, they receive X dollars. The number of drives and the amount that
they receive is entirely dependent on what city they're located in. I've seen
some as low as $10 and I've seen some as high as $1,000. But that amount
has received in full once the person reaches that number of drives they're
required to reach. The person who referred them also receives a certain
amount of money once they hit that limit. The original driver who referred them is
usually receiving a lower number than the new driver. For passenger referrals
drivers do not receive money. Instead they receive rider credits so if I
wanted to go somewhere and someone has used my code I might get five dollars
off on my ride. Now the driver referral program on Lyft used to be set up like
Uber's, but they actually changed it. Now instead of receiving the lump sum once
you've hit the number of drives, you have a certain time period in which to
complete your drives and during that time you'll receive a certain amount for
each drive that you do. So for example if you have to complete 100 drives to
receive $350 you'll receive $3.50 for each drive
you do up until that point. And it's the same for the driver who referred you. For
each srive that you do, they'll receive X dollars. For the passenger referral for Lyft,
every time someone uses your code you'll get $10. Now an important difference is
that you're never giving these companies any money directly. You could say that
for each drive you are purchasing a product because they are taking 25%, but
Uber and Lyft are not going to ask you to give them any money. The only things
that you pay for are things that you do yourself such as gas, car washes, the
extra perks, seat covers. You're also not getting a percentage of what someone
else would be earning. The driver that you referred isn't receiving less
because you referred them. Companies that utilize multi-level marketing also tend
to have these grandiose examples of people who have made millions selling
their product. Now first of all, those things just generally aren't true, but
also Uber and Lyft aren't really making those claims. They may say you can make
$850 a week or something, but these aren't unattainable goals.
No one is getting rich doing Uber and Lyft. In fact, Uber and Lyft are only just now
starting to turn a profit. This is in part because of their referral programs.
But now that they're doing upfront pricing shady practices, which I
mentioned in a previous video and I'll link to at the end of this one and in
the description, this is how they're going to be turning a profit very soon.
But importantly, the focus for Uber and Lyft is definitely not on referring new
drivers. In fact drivers are kind of disincentivized from referring new
drivers if they want to continue driving. A lot of drivers in an area are going to
make it so you personally are getting fewer drives so a lot of drivers see
other drivers as competition. I personally don't but I also am not the
average driver. In really most demographics. So even though it can be
helpful for a small bonus, most people aren't really going to make a lot from
it. Now it's really important to be able to recognize when companies using
multi-level marketing are trying to take advantage of you. The things that make
multi-level marketing attractive are exactly the things that Uber and Lyft
advertise. Make your own schedule, be your own boss.
People who drive are also especially vulnerable for new multi-level marketing
that pops up. Trying to get you to wrap your car in advertisements or sell
things in your car. These things can be good and people make a lot of money from
them. But you have to be careful that you're not getting too sucked into the
tell other people to do it aspect. When it comes down to it if the product isn't
something that you're comfortable selling, you shouldn't be bringing other
people into it. I personally enjoy driving. I know lots of people who don't.
People who don't enjoy driving shouldn't be trying to get other people to drive.
I totally understand if the referral bonus part of Uber and Lyft makes
people squeamish. But if you want to be a driver and you're signing up, you should
be using a referral code. Otherwise you're just not gonna get that money.
As always my referral code can be found in many places including the description.
But if you're interested in supporting me in a more direct way, I have created a
Patreon account. Patreon is a website where you can support content creators
directly and often receive extra pieces of it. This is actually my second time
recording this video and the first time I recorded it I had some weird things
happen so probably will be releasing part of that on my Patreon if I actually have
anyone sign up. If you want to, no pressure. It's just, you know, sometimes
nice to support people that you like doing something that you like. I hope you
have a great day and if you have any questions feel free to email me at
munchkym@gmail.com. I'll always respond unless you're a huge jerk. I'll probably
still respond then and tell you that you're a huge jerk. Okay bye!