Well its a pyramid scheme like many of the state licensed businesses. The low level agents have to work for a broker who soaks up the majority of the commission. Only after being an indentured slave for a few years do they get the "privilege" of themselves becoming a broker. The problem is that once that happens no one will hire you, so your on your own for finding clients/advertising/etc. That takes capital most low level agents haven't managed to accumulate working for someone else. So its likely they need a significant other/whatever to support them while they build the business while competing with the larger agencies that have the money to plaster signs down the freeway and run advertisements.

Given some luck/skill and a lot of hard work, maybe they become large enough to start hiring agents themselves, and the cycle repeats.

Agents make at least 60% from day one. It is easy to find a brokerage who will offer 70-80% day one. So in that respect I don't think it is a pyramid scheme at all. Also, there are plenty of brokers who work in a larger organization without being the broker of record. But as you noted, advertising is not free. It is extremely expensive to market as a real estate agent, and that marketing cost is why most agents fail. It is just too expensive to start. In my area, I would allot at least 30,000 a year to get going as an agent for the first year, and more each year after that.

Source: On the fence about dropping my license right now.

yah, it's not a pyramid scheme so much as it exhibits power law characteristics (80-20 rule and such).

Sounds like software engineering today.

Where most engineering interns are probably paid more than the median national household income? Where starting salaries are in the 6 digits?

I mean come on, sure 120-150k starting salary out of university is only a thing in SF, Seattle etc but even in other parts software engineers are paid well. 80-90k in some city in midwest where housing is super cheap is a great middle class salary.

Only in Tech Hubs like NYC or SV...

How much lower is the starting pay in Boise, or Kansas City or some non-tech hub? My startup company pays well over 100k for college hires with no experience. And other companies pay more. Yes, we are in one of the tech hubs (Seattle). If other companies don't pay nearly as much, why would people work there?). You might pay 20k a year for your cool apartment in walking distance to bars, shops etc, but you have a great lifestyle.