Pyramid schemes are misnamed. They should be called parabolic cone schemes. The top tier are basically the one percenters.
And that 15-20% figure seems suspectfully optimistic to me. At the shops with which I'm familiar, about 2% went on to AOW. At PADI updates they were constantly saying the number of people who never went beyond OW was a huge problem. Most of PADI's revenue comes from people who get OW, go on one trip, and then it's off to get the next hole punched in their "been there, done that" ticket.
You seem to be working with a unique definition of pyramid scheme, so maybe it's best you give it a different term and define it for us.
The U.S. government describes a pyramid scheme as follows:
In the classic "pyramid" scheme, participants attempt to make money solely by recruiting new participants, usually where:
- The promoter promises a high return in a short period of time;
- No genuine product or service is actually sold; and
- The primary emphasis is on recruiting new participants.
All pyramid schemes eventually collapse, and most investors lose their money.
In the classic "pyramid" scheme, participants attempt to make money solely by recruiting new participants, usually where: The promoter promises a high return in a short period of time; No genuine product or service is actually sold; and The primary emphasis is on recruiting new participants. All...
www.investor.gov
A gray area that is not legally considered a pyramid scheme but is often informally referred to as one is multilevel marketing (MLMs). Think Herbalife, Mary Kay, or Amway. They're not technically pyramid schemes because they do sell actual products, so theoretically they could function as legitimate businesses. But realistically, hardly anyone likes the products enough to really want to pay what they charge. Instead, the sellers at the bottom end up having to eat a lot of their own inventory and often lose money, but the people above them still get a cut and a few on top come out ahead. They're legal businesses, but they're shady and exploitative.
The scuba industry clearly isn't a pyramid scheme in the strictest sense, because there are actual products and services for sale. But one could make an argument that it's shady and exploitative in the vein of MLMs if people are being manipulated into paying money to the agencies to "go pro" with the promise that it'll pay for itself and then some, but then finding out the only real way to make money is to "go course director" and recruit new people to work underneath them.
That may be a fair criticism, based on what I've heard about how little DMs and instructors earn. But I'm still not sure what point you're making about the number of people who ever progress beyond OW.
As I understand it, the fundamental problem with pyramid schemes and MLMs is that they require exponential growth. In a classic pyramid scheme, I get five friends to each give me twenty bucks, and instruct them to turn around and do the same to five of their friends. Everybody who pulls this off ends up a hundred bucks richer. But it would only take about 14 cycles before all 8 billion humans on earth are sucked in, and then the pyramid collapses with everyone in the last cycle losing out. An MLM ends up being similar, despite the fig leaf of an actual product or service, because hardly anyone actually wants the product; everyone involved is just trying to sell it.
You're arguing that 1) hardly anyone progresses beyond OW, and 2) this makes the industry a pyramid scheme. I'm not sure you're right about 1), but even if you are, 2) doesn't follow from it. A lack of repeat business is not a characteristic of a pyramid scheme. My husband and I took dance lessons before our wedding from a teacher whose entire business was people like us. Since most people don't get married on a regular basis, she was constantly having to hustle for new clients, but she made it work. There are apparently enough people getting married in the LA area every year who are willing to drop a grand on dance lessons to show off at their wedding to keep at least this one woman in business. And with people getting engaged every day, she might never run out of clients. There's no theoretical reason the scuba industry couldn't work the same way: a small number of instructors make a living teaching a large number of people to dive, so those people can show off their awesome vacation photos and then promptly forget how to attach their first stage, just like all the newlyweds promptly forget which foot to start with when dancing salsa.