Well, I define it as a cultic racket, and I use the term “Ponzinomics,” which I think captures two basic realities of multilevel marketing. One, that it’s a pyramid scheme; that’s its model. That’s how it swindles people — using the classic money transfer, closed-market pyramid scheme: People come in and give their money; the money goes to people who came in earlier; the newest people have to bring in other people in order to recoup and gain the promised income. That’s the classic pyramid scheme. It’s basic fraud. The second part of it, though, is that it has become, since its inception — and we are talking about an identifiable economic movement with structure and leaders, not something that evolved out of nothing; it was invented at a specific point in time, 1945, it operated for about fifteen years, and then it morphed into another stage in the ’60s — it became a belief system and an actual ideology. It has become a cult itself, with a cultic mindset and a kind of belief system that is all-encompassing. It was pseudo-economics. It had moral overtones because the two leaders who turned it into a cult were these very pious, devout, and extremist Christian Calvinists — Richard DeVos and Jay Van Andel of Amway.
So, my take on MLM, as far as public understanding of it goes, is not that there are nuances to it that have escaped people, but that the fundamental reality has been covered up and replaced by a myth and a disguised operation. It’s not that the average person understands some but not all of it, but that mostly, what they think they understand is actually a propaganda story that’s completely false. The two things they’re told are, one, that it’s 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 when coming out of school, there were income opportunities everywhere. They were called jobs and careers, and they were plentiful and they were promising and interesting (and of course, they have diminished).
The second identity that it claims is “direct selling.” Direct selling has products, people buy the product, and then supposedly sell it. But, again, with a little bit of common sense, with a little water splashed on that. . . . Who could make a living selling products from their home by themselves in the twenty-first century, selling against Costco, Amazon, Walmart, or any online retailer? Who has time for somebody to be in your home, pitching you on a product? Who needs a salesperson for such a thing? Actual direct selling had died by the ’70s and was pretty much all gone as a business model. Direct selling is actually extinct. MLM assumed its old identity, which still lingers in the cultural memory as a paragon of personal initiative.
On top of all that, the particular way multilevel marketing is designed couldn’t be direct selling. Let’s say I sign up and can now sell this anti-aging cream to all my friends. But then I find out the company has basically recruited all 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? So, it isn’t direct selling. That model is obsolete. What it actually is, when you get into it for five minutes, is a recruiting scheme. You can’t make money selling. You recruit. And as part of the recruiting, the recruit must buy. That’s not a sale, because I added something to the transaction that I can never deliver. I add to it that you’re going to make money when you join. 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, or indeed how all selling, works. If you look at the pay plan in these schemes, it’s very complicated. I’ve had reporters call me and say, “Help me understand the pay plan. I just can’t quite get it.” And, as I said, you won’t get it. You’re not supposed to get it. It has too many variables for you to possibly understand it. Nobody could, but I think you notice one thing immediately without going through all the ranks and the titles and the percentages and all of these qualifying rules and so on. It is this: When the last person in buys the product, there’s an amount of money that they pay, let’s say a hundred dollars. And out of that hundred dollars, there’s going to be a percentage that’s allocated to the recruiting chain.
But the way they allocate it is that the majority of commission dollars — it’s usually about 40 percent of the total price — is going to go up the chain, but the majority of that 40 percent goes right to the top, not to the person that recruited you. In real sales, it’s the opposite: The person who makes the sale gets the majority of whatever total amount of commission is allocated on that transaction. So, you can’t make money. You couldn’t even make money from selling. Instead, you have to recruit recruiters who recruit recruiters! You have to get to the top before you can actually make money on those types of transactions. So, you must recruit. Of course, only a tiny percent can be at the top, so all others are doomed to lose.
So, that’s the way I identify multilevel marketing. It’s a cultic racket that has embedded itself in our economy, disguised as direct selling and an income opportunity and protected by government through corruption and lobbying — and ignored, even by the Left, as a destructive economic and social force.
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