Multi-Level Marketing

Everyone has heard of, and knows to avoid, "Pyramid Schemes".  But what is Multi-Level Marketing or "MLM" and how is that like or unlike Pyramid Schemes?

First off, we must know how Pyramid Schemes work.

From Wikipedia:  "A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products or services. As recruiting multiplies, recruiting becomes quickly impossible, and most members are unable to profit; as such, pyramid schemes are unsustainable and often illegal."

It becomes unsustainable very fast, as past a few levels, there aren't enough people to be recruited into this.  1 - 3 - 9 - 27 - 81 - 243 - 729, and you're usually the in the 729 group, the scam having been going on for a bit.  True, the population of Earth is 7 billion, but this usually depends on knowing the person, and long before the numbers get "too big", you have the phenomena of people trying to recruit the same people.

So you and ten friends from the fitness club are recruited, and you each seek after three people...from the same gym!  With everyone trying to recruit everyone, it soon collapses. 

(Ponzi schemes are basically the same thing - pyramid schemes, but instead of each level recruiting the one below it, the originator is often the sole specific recruiter, with the other levels downline only "endorsing" or praising the originator.)

In Wikipedia, it interestingly goes on to say that some MLMs are classified as pyramid schemes.  And yes, some are.  But the truth is, they all qualify, and this article will explain why.

A Multi-Level Marketing company is the one that says, "We aren't asking people to simply send money upline and recruit others downline to send them money!  Oh, no, we're selling a genuine product!  Or whole line of products!"

And they are.  The products range from "utterly worthless" to "average but over-priced", but sell them they do.  At least they're there to be sold.  So now instead of just asking three guys to send you money, and they to then recruit three a piece, etc., which is a "pyramid scheme", you are asking three guys to be your "downline sales staff" and they can then recruit three more "sales staff" a piece.

But since there's toothpaste or dishrags or make up or tupperware involved, it's all good.  And regrettably, as far as the law is concerned, it is "all good".

Here's why it's not.

In the old timey "pyramid scheme" it was basically preying on men's greed, but all participants mostly knew it.  They knew it would end sometime, they just were banking on it not ending in their time.  This kind of thing has even gone on in modern times, when Bernie Madoff was doing his investment scams.

Many - not all, but many - knew that his rates of return were so high that it had to be a Ponzi scheme.  But they were banking on being able to get in and get out before it blew up.  And some did.  Some who pretend that they knew nothing about nothing.

Others, some who were in the know, were unlucky.  And most unlucky of all were those who not in the know, not realizing it was a scam, got completely took.

It is said that you cannot con an honest man, and that is often times true.  But when some honest people see all the big people - who are presumed to know better - doing a thing, they figure, mostly wrongly, that it must be safe.  So they invest the pension funds and the retirement savings.  And they lose.

MLM works the same way.  The cover of "selling products" has to be very well-developed to comply with the law.  So since it is going to be well-developed anyway, they actually do go ahead with selling some products.  Be it Amway or Herbalife or Norwex or Vector, you can actually get some products.

True, they usually make it so that it is much easier to get the products if you become a "distributor" or "representative" or "sales person" or such.  But you can buy the products.

Some seeing this know that it's a scam, but figure they can get in, milk this a bit, and get out before it blows up.  Why not, others have, right?  So they put in their initial costs, which can be $100 to buy the "sales kit" or $200 to buy the products they'll sell, and then go big into it so as to get as many others in their downline as they can.

They quickly make back their investment and more, and get out (by simply going inactive) while all those they recruited later realize that there is no market for them to sell the crap in, as the person who recruited them already sold to everyone who wanted the crap - and recruited everyone who wanted to be recruited.

So those folks go inactive, too - but not with having got their money back, let alone their time and effort.

And this is why ALL Multi-Level Marketing "opportunities" are really pyramid schemes.  Few, and I mean few, have had some normal career simply selling Amway products day in and day out, no recruiting, no scamming others, no building a downline.

And by "few" I mean "none".

Always the only money to be made is in recruitment.  It's how you get your products cheaper, it's how you get your kits, it's how you get your investment back, it's how you do anything in that company.  And that it is set up that way tells you all you need to know about the corporation's motives.

Corporations that are about selling products sell products.  Companies that are simply pyramid schemes in disguise go on and on about downlines and recruiting.