Motivated by the growing discussion on the resemblance of multilevel marketing schemes to pyramid scams, we compare the two phenomena based on their underlying compensation structures. We show that a company can design a pyramid scam to exploit a network of agents with coarse beliefs and that this requires the company to charge the participants a license fee and pay them a recruitment commission for each of the people that they recruit and that their recruits recruit. We characterize the schemes that maximize a company's profit when it faces fully rational agents, and establish that the company never finds it profitable to charge them a license fee or pay them recruitment commissions.