The company’s that everyone knows are MLM trash (HerbaLife, JuicePlus, ect). When I was looking for a job I naively joined a seminar discussing CutCo Knives. Come to find out these dud muffin companies have been around since my mom was growing up, and are somehow still operational? Wouldn’t the BBB or whatever business bureau operates in the US (FTC?) have these scams shut down by now? I understand that new ones are popping up all the time but im referring to the ones that have been around forever now.
In: Economics
I once had a short fling with a girl that sold Herbalife, she and all her friends were smoke shows, which is what got them 90 percent of their”business”, in the long run it was just to much to date a girl who was an aspiring MLM guru.
Do a deep dive on these MLMs – its entertaining to learn how they work and it will very quickly answer all your questions.
In short – they prey on the desperate. People who are desperate, in difficult financial situations are the perfect mark and these “systems” are designed to perfectly answer all of their needs. Remote work, “easy money”, low skill ceiling, charismatic and robust support structure. All they need to do is front the cost of the product and they are away. It’s all so simple. Almost too good to be true (because it is).
Almost immediately information about “The Secret Method™” that all good sellers are employing is passed on – namely, roping in other marks to sell this useless shit and pass the profits on to you (as you pass your profits onto the mark above you and so on).
This secret makes you feel special, like you’ve identified a trick. But you are the trick. What’s worse is that when they start to really roll you into all this – they layer on the rhetoric “You can be a winner if only people believe in you”, “Anyone who doubts you is a hater”, “You aren’t succeeding because people in your life secretly don’t want you to succeed” just like a cult, all of this is designed to separate you from your actual real life support structure. Friends, family or anyone else who cares about you enough to warn you that what you are doing is bad news.
By the time you’ve figured out what’s happened, your already likely meager bank account is now completely dry, you have a house full of absolute bullshit you can’t sell and you may have even told the only people who care about you to fuck off because they didn’t believe in you enough and secretly wanted you to fail.
For those that find any modicum of success… the “Inner Party” if you will – they will have seminars and all kinds of high energy conventions with useless prizes and recognition designed to blow smoke up their ass and keep them energized for recruiting more rubes. They are encouraged to post lots of pictures of them on vacation and living the high life to encourage potential recruits and show them how wonderful their life has been since joining this bullshit (even if they are riding the line towards bankruptcy).
It’s cruel and plays on ignorance and desperation.
It varies, but general awareness that something is a pyramid scheme can actually help the scheme. It preselects for people who are unaware of the scheme or people who think it can work despite what they know. Either way, people will stay in the scam longer because getting out requires them admitting that they did something generally thought of as stupid. That’s very hard when everyone you know knows that you’re in the scam because you’ve already tried selling to them. Even common knowledge isn’t universal. There’s always some small group that is out of the loop.
Successful pyramid schemes don’t usually violate the law outright and when they do they have cash to pay fines. As long as they’re still getting new people/income, they’ll keep going.
You should really [look up regulatory capture](https://en.wikipedia.org/wiki/Regulatory_capture) – the US gov’t agencies tasked with regulating these industries have been ‘captured’ by lobbying efforts and corruption.
Greed and short term gains are what drive the market, and unfortunately there’s an unending supply of gullible people that either can’t or won’t understand they’re the rube. Have you seen the state of politics in the US?
I’m not defending MLMs, but can you point to a specific illegal thing they do? Plenty of unethical stuff, but nothing I’ve seen being illegal
The big ones are MLMs or SLMs.
Typical business involves the business selling to consumers.
Something like a used car lot will hire people to sell the used car. That’s legitimate.
An MLM would be like if you could recruit people to sell used cars and got a portion of the funds of the sales from the people you recruited attributed back to you, and everyone they recruit. It’s a legitimate(ish) business that can work if there’s actually a demand for the product from legitimate consumers.
A pyramid scheme on the other hand is literally just like pay me $100 and then recruit two people who each pay you $100 and I’ll get $50 of that, then every 2 they recruit they give $100, you get $50, I get $25, etc. no legitimate product is being sold to consumers.
Where MLMs become problematic is that they often require you actually buy their goods, which is also a legitimate tactic for business / but they also often have their own sales people as their major consumers. If you’re buying their goods to sell to other sales people or just to keep your status in the organization rather to meet demand of consumers then you’re in a bad MLM lol
Because they make enough money that they can bribe lawmakers to turn a blind eye to their clearly illegal (or at the very least grossly unethical) shenanigans. So long as they don’t piss off the really, really big money pricks and they keep paying those bribes, then various regulatory bodies find themselves…peculiarly slothful in their response to any wrongdoing.
Assuming said regulatory bodies aren’t getting preemptively neutered by lawmakers so they couldn’t make trouble for their money-friends even if they wanted to.
There is a podcast called The Dream that goes in depth about this if you are interested OP.
I recommend reading cultish by amanda montell. It has to do with the language they use, and people believing whatever they want to believe over any hard data. Alot of thse businesses are fueling the whole “Girlboss” thing, selling to girls down on their luck or with limited carreer potential, stay at moms as well, the idea of being entrepreneurs and being their own bosses. When you sell people something they really ish was real, you’ll always find people who fall for it.
About Herbalife, I used to have a columbian roommate who argued that MLM is super legit because it’s how they prefer to do business in south america. He claims it’s more legit than stores, who are ripping us all blind. I don’t know whether it really is like that over there, but culural factores can helpo these companies stay alive. I’ve seen articles about how south america is a huge market for these companies.
Actual pyramid schemes are illegal and get shut down when they’re discovered. MLM schemes are basically using a loophole that makes them technically legal but still just as shitty, so they’re *technically* not pyramid schemes despite operating almost exactly as a pyramid scheme. So they’re still around because 1) they’re technically legal and 2) there are enough idiots that fall for them to keep them afloat.
from what i remember i think the only difference is that an MLM isn’t allowed to *require* participants to sign up for product subscriptions themselves, so you can still go around selling subscriptions to whatever the “service” is without having one yourself, whereas pyramid schemes were propped up by requiring the “salespeople” to also be customers. that doesn’t mean an MLM won’t heavily encourage (pressure) people in to subscribing, just that they can’t make it a hard requirement to participate.
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