It is often said that recognizing “pyramid schemes” is difficult, complex, and confusing. Over the years that I studied “multi-level marketing”, I came to realize that the challenge of recognizing pyramid schemes is not complexity or disguise; it is political protection, denial and avoidance.
Pyramid scheme hallmarks are obvious in all MLMs – you have to recruit new participants to get the promised rewards. You have to keep paying/buying to “qualify” for the rewards. The recruiting chain is “endless.” The classic pyramid consequences are fully documented – 99% or more each year lose money and the promised rewards, which are the losses of the “last ones in,” are transferred directly to the top 1% of recruiters. As for “retailing”, no one has yet found a successful MLM retailer. This is not complex.
I came to see that the difficult reality to confront is not the pyramid scheme itself. It is the terrible truth that MLM pyramids are sweeping the world while trusted regulators and politicians take money from the schemes and protect them, respected universities and law schools pretend the entire phenomenon doesn’t exist, celebrities take the scheme’s money to endorse them, consumer protection groups ignore them, and Wall Street feasts upon the losses the schemes inflict on Main Street. And so now, even as the Media finally is beginning to describe MLMs as pyramid schemes, these harder truths continue to be avoided.
Avoidance and Diversion
One strategy to avoid the hard truth and divert attention – even when noting the pyramid reality – is to focus on MLM “products.” Vice News, for example – usually known for its edgy and unflinching take on world affairs – averted its eyes when it reported on MLM, preferring melodrama and superficiality. Like other Media that are now beginning to report that MLM just might be a gigantic pyramid scam, even a destructive cult, they spent most of their coverage ridiculing and “exposing” MLM products and featuring emotional victims of bad products. Even when addressing financial losses, the storyline connected the losses to the “bad” products.
The tough-talking comic, Samantha Bee, also picked on the “products” while reporting on MLM, citing the MLM, LuLaRoe, which is being sued and prosecuted. She derisively characterized the products as tasteless, garish, overpriced, defective or damaged. Whereas Vice implied better quality products would resolve the victims’ troubles, Samantha Bee seemed to say that better styled products were in need.
LuLaRoe is becoming the poster-MLM for focusing MLM investigations on “bad” products. Meanwhile, a marauding pyramid scam, disguised as a “clothing company” is only briefly and superficially described. The consumer is left with the false and misleading impression that LuLaRoe’s main flaw is poor style and quality along with shipping or return problems.
Current parallels to the “bad product” stories include “revelations” that MLM potions and lotions don’t actually stop aging, its vitamins don’t increase “energy” (it’s a caffeine-high), or its “supplements” don’t cure or prevent cancer, autism, arthritis and obesity. The MLMs are criticized for exaggerations, distortions and making “unfounded” medical claims.
This focus on MLM products or their false advertisements, even when also hinting at a “pyramid scheme” is almost as misleading as the earlier news stories in which MLM was routinely described as “direct selling” though no MLM “customers” or profitable “retailers” could be found. It is as misleading as other stories featuring MLM “winners,” without describing the deception used and the harm caused to recruit “losers” or the stories in which false “income averages” were reported without fact-checking.
MLM products, true, are often useless pills, potions and lotions, ordinary cans of powdered soy beans, overpriced and unneeded household goods, foul-tasting “meal replacements”, costume jewelry, and commodity cosmetics. Some make outrageously and dangerously false medical claims. Yet, these ridiculous offerings, price gouging, phony health claims and false advertising do not in any way distinguish MLM from the larger, wasteful, deceptive, commodity market we all encounter online, in stores and on the street. Indeed, talking negatively about these ridiculous MLM products serves to reinforce the false identity of MLMs as “sales companies”, even if devious and dirty ones and even if the terms, “pyramid” or “cult”, are also included somewhere in the story.
Of Mice and MLM
MLM products – all of them – are actually bait, as cheese and peanut butter are in lethal mouse traps. Imagine warning a mouse that is approaching a classic mousetrap with cheese as its bait by telling him that the cheese is really of low quality and not very fresh or is only eaten by mice without class or good taste, while not explaining the elegantly-designed killing machine that the cheese is sitting on. Vice News spent most of its time talking about MLM clothing products that are hard to retail (as if a better grade of garment could be retailed profitably by tens of thousands in the MLM model). Vice spent almost no time on how the MLM business model is carefully designed to cause financial homicide on a mass scale.
When interviewed by media, I try to pull the journalists out of the MLM fantasy story and away from their distracting interest in the silly products. I ask them to personally consider the absurdity and implausibility of selling MLM fruit juice, vitamin pills, “anti-aging” creams, commodity clothing or jewelry from their home, on their own, by themselves.
You have nothing unique to offer. You compete with all retail stores, Amazon.com and other online retailers that have similar and lower cost products. You must cover all your own marketing, customer service and sales costs. Your supplier keeps adding more and more competitors in your area and even urges you to recruit your own retail competitors! You have to hit up your friends and family to buy your stuff and keep buying it yourself as well. If you attend a “sales” conference sponsored by your supplier, you are charged a fee to attend. The leaders do not help you “sell” but exhort you to recruit more competitors, direct you to think about your “dreams”, warn you to avoid anyone who recommends due diligence, and they proclaim – with pretended moral authority – that you have no other options; this is your “last chance”; failing or quitting will prove you are a “loser”.
Reality: the MLM “distributorship” is a ruse, an absurd, pseudo-business to facilitate and cheaply disguise a blatant pyramid recruiting scheme and to draw people into a cultic fantasy world that dominates their thinking, keeps charging money, and promises “unlimited income” based on the illusion of an “endless chain.”
Media and other organizations that focus attention on MLM “products,” without urgently warning and fully explaining the pseudo-business and financial trap in which the “products” are only props, leave consumers in the position of the mice who approach the mousetrap thinking they have discovered food. Like the proverbial mousetrap, MLMs are financial traps so well designed they have not changed since their “invention.” They multiply in number with only different offerings of bait.