“Tiered Marketing” Firms Cheat and Exploit Ordinary People on a Large Scale
Well, I define it as a cult racket, and I use the term “Ponzinomics”, which I think captures two basic realities of multi-level marketing. First, that it is a pyramid scheme; it is his model. This is how he scams people – using the classic money transfer, the closed market pyramid scheme: people come in and give their money; the money goes to the people who came earlier; newer people have to bring in other people in order to recoup and get the promised income. This is the classic pyramid scheme. This is basic fraud. The second part, however, is that it has become, since its inception – and we’re talking about an identifiable economic movement with structure and leaders, not something that evolved from nothing; it was invented at one point in 1945, it worked for about fifteen years, then it evolved into another stage in the 60s – it became a belief system and a real ideology. It has become a sect itself, with a sectarian mindset and sort of all-encompassing belief system. It was pseudo-economics. It had moral connotations because the two leaders who made it a cult were these very pious, devout, and extremist Christian Calvinists – Richard DeVos and Jay Van Andel of Amway.
So my take on MLM, in terms of public understanding, is not that there are nuances that escaped people, but that the basic reality was covered up and replaced with a myth and a disguised operation. It’s not that the average person understands part of it but not all of it, but more importantly, what they think they understand is actually a propaganda story that is completely wrong. The two things they are told are, first, that it is an income opportunity. Well, my God, we all need income opportunities right now, more than ever in our history. I mean, I’m old enough to remember that coming out of school there were income opportunities everywhere. They were called jobs and careers, and they were plentiful, promising, and interesting (and of course, they declined).
The second identity he claims is âdirect sellingâ. Direct selling has products, people buy the product and then supposedly sell it. But, again, with a little common sense, with a little water splashed over it. . . . Who could make a living selling 21st century homegrown products, selling against Costco, Amazon, Walmart, or any other online retailer? Who has time for someone to be at your house to present a product to you? Who needs a salesperson for such a thing? Actual direct selling was dead by the 1970s and had all but disappeared as a business model. Direct selling is in fact extinct. MLM has assumed its old identity, which still lingers in cultural memory as a model of personal initiative.
On top of all this, the particular way multilevel marketing is designed cannot be direct selling. Let’s say I sign up and can now sell this anti aging cream to all of my friends. But then I find out that the company has basically recruited all of my friends, and they’re salespeople too. And they advised me to go talk to my friends and sign them up. But wouldn’t they become my competitors? It is therefore not a direct sale. This model is obsolete. What it really is, when you walk into it for five minutes, is a recruiting plan. You cannot make money by selling. You recruit. And as part of recruiting, the recruit has to buy. This is not a sale because I added something to the transaction that I will never be able to deliver. I add that you will earn money when you sign up. You won’t, and that’s by design.
The income opportunity component requires a little more study. But that too is in total violation of how direct selling works, if not how all sales work. If you look at the compensation plan in these plans, it’s very complicated. Reporters called me and said, âHelp me understand the compensation plan. I just can’t figure it out. And, like I said, you won’t get it. You are not supposed to have it. It has too many variables for you to possibly figure it out. No one could, but I think you notice one thing immediately without going through all the ranks and titles and percentages and all these qualifying rules and so on. That’s it: when the last person buys the product, there is a sum of money that they pay, say a hundred dollars. And out of those hundred dollars, there will be a percentage that will be allocated to the recruiting chain.
But the way they attribute it is that the majority of the commission dollars – that’s usually around 40 percent of the total price – will go up the chain, but the majority of that 40 percent goes straight to the top, not to the top. person who recruited you. In actual sales, it’s the opposite: the person making the sale gets the majority of the total amount of commission allocated on that transaction. So you can’t make any money. You couldn’t even make money selling. Instead, you need to recruit recruiters who recruit recruiters! You have to get to the top before you can actually make any money on these types of trades. So you have to recruit. Of course, only a tiny percentage can be at the top, so everyone else is doomed to lose.
This is how I identify multilevel marketing. It is a sectarian racketeering that has integrated into our economy, disguised as a direct selling and income opportunity and protected by the government through corruption and lobbying – and ignored, even by the left, as an economic force and destructive social.