Good Business Model or a Scam?

I was reading an article about when a good business model is a scam over on the Shoemoney blog and it got me to thinking about business models. There must be times when a business model is both good and a scam at the same time.

Some case studies


Take for instance those fake emails from the bankers in Nigeria. Obvious scams, but at the same time, since they still send those out, there must be a good number of people still falling for them. Seems like a business model that continues to generate revenue, even after everyone is talking about how much of a scammer you are, is a good business model.

Another scammy business model is MLM, aka Multi-Level Marketing. I know I’m going to catch some flack for this, but the only people making money at the whole MLM game are the people at the top. MLM also seems like a classic pyramid scheme where the only way to pay off the early investors is by bringing in new “recruits” aka “investors” at the bottom.

If you really want to make money with MLM, you have to start your own MLM company and put yourself at the top. I’ll let you make the ultimate call on whether it’s a scam or not, but I’ll venture to say that a business model that continues to attract new investors, despite it’s bad reputation, is a good business model.

What kind of business model do you want to avoid?

Besides being a scam, the business model that you definitely want to avoid is the business model that is both bad and a scam. There’s no way to win with that model.

I can only think of one case of a bad business model and a scam at the same time and it’s Dubai.

Why Dubai?

Basically, you have a country in a desert, with no water, and no real resources other than oil. So, they borrowed a ton of money, based on oil revenue and started to build, build, build.

Then, they attracted a bunch of speculators to come and buy up the real estate, so that Dubai World could build more real estate. Eventually, oil prices fell, the real estate market dropped and credit ran out. The banks finally figured out that there’s not enough oil to pay off the debt, and no one wants to move to a desert nation with no water, no sewage plants, and no jobs.

I think that anytime you see a business that relies on “speculators” you’re looking at something that is both a bad business model and a scam.

What do you think?