Saturday, 28 July 2012

why I believe MLM is a scam

I have had a couple of life partners that have become involved in network marketing, otherwise known as MLM or multi-level marketing. For more on why MLM is a scam, see http://www.mlmwatch.org/

http://business.time.com/2013/01/09/is-herbalife-a-pyramid-scheme-the-target-of-market-manipulation-or-just-a-good-gripping-yarn/?iid=biz-main-lead


This is why I think MLM is a scam, however:

1. They approach you dishonestly. They talk about "working from home", "being your own boss", "ditching your boss", "earning thousands from home", etc. But when they approach you they never tell you that it's MLM, otherwise they know you'll run miles. They trick you into letting them into your house, like certain religious groups, by preying on your hopes and dreams of being rich for getting money for nothing. Apparently there's a new scam out called 'prosperity theology', which does more or less the same thing, except the promise comes from God.

2. Sometimes they'll lie and say it takes "hard work" and "lots of selling" - but actually what they don't make explicit is that the only way you can get rich with MLM is with LOTS OF RECRUITING, ie tricking your friends and family into joining.

3. The rely on guilt. When you accede to their request for an appointment, they sit in your house and make you feel guilty about all the time they're taking to talk to you and come see you, and don't you want to make lots of money working from home? In my case they effectively bribed my partner to force me to sign up as well with "Don't you want a free trip to Paris?" Liars. What they don't mention is the "Free trip" involves spending your whole time in Paris in a conference centre praising the company and shouting hallelujah, and paying thousands to go to the conference.

4. They lie. They tell you about hundreds or thousands of success stories and how much the main company is worth. They will tell you that it owns a large ranch in the USA, or that it's the biggest landowner in the USA, or similar arbitrary statements. This is to impress you that it is a legitimate company. Imagine going to a shop and they say, "hey, you should buy microsoft office! It's written by a really wealthy company and their CEO is the richest man on earth!" -  you'd be like - "go away! you don't need my money, then!". Of course, you've never heard of the particular MLM company before, generally, because they're not legitimate. They're clandestine and cult-like. How could they be that rich, and you've never heard of them? I smell a black market or underground market of some kind, like drug dealers, when someone is rich and you've never heard of them. MLM advocates don't tell you that 98% of people lose money to MLM buying overpriced products to earn "points", and that only less than 1% make substantial money - by recruiting, not by pushing products. They don't tell you that most people drop out once they realise that MLM is parasitic and that they're poorer than when they started off.

5. MLM is a pyramid scheme, illegal in most sensible countries, but because they're "selling" a "product", they're generally allowed to operate in countries that ban pyramid schemes. The fundamental premise of a pyramid scheme is paid membership fees go to the level above. Look at how it works. Suppose you want to make money for nothing. The easiest way is to persuade people to give it to you for a future benefit. The church is an example; you pay a tithe, and they promise you a future in heaven. Same thing. Now: how does it work? Well, suppose there are 10 people who sign up, and they pay $100 to join (excluding monthly membership fees). That's $1000 that goes to the two people that signed up those 10 people (the "uplines"). So they (the uplines) each get $500. But because they have to pay $50, say, to their uplines who are higher-up in the chain, for each new member, they each give $250 to the person higher-up, who gets $500 for nothing. And so it grows. If each of the 10 bottom-feeders picks up 5 people, there will be 50 underneath the pyramid: the 3rd level then "earn" $5000 each, and the money filters upwards. In MLM, what typically happens is this money is exchanged for "training materials". Just try to opt out of these "training materials" and see how much pressure they put on you! The "training materials" mostly consist of books, CDs, DVDs, etc., that "teach" you how to sign up others, or, how great the product is. They're sold as "sales training" but actually, they're just a highly-marked-up and expensive way of ensuring that money goes up the pyramid with the pretext of a legitimate product purchase. Some MLM companies charge for membership or charge direct debits to your bank, monthly, for membership or "regular new training material".

6. You have to buy "stock" to "sell". In reality, the stock or products are just a smokescreen to ensure that the government doesn't shut the operation down. The stock is invariably way more expensive than equivalent products in stores. Many MLM companies do sell good products. I will grant that. There are exceptions - for example, one company that my current partner was involved in sold cookies and energy drinks. They were mediocre and crap, respectively. On the other hand, another company they signed up with sold aloe products, which we still use, because they're good. The trouble is, you end up buying $100s-$1000s worth of stock, and you're forced to try sell it to friends and family - because the MLM company prohibits you from selling online or in stores. Why? The reason they give is that it will "give you an unfair advantage over other sellers" and "MLM is the future of marketing". Both are crap. The future of marketing, is, and has been for the past 17 years, internet/online shopping. Physical shops are likely to disappear. MLM is a throwback to the 1970s, where unemployed housewives would have nothing better to do than get together and enthuse about kitchenware. Yes, that famous kitchenware company is an MLM company. The only reason they still exist is because their stuff is actually good. But technically, they're just as creepy and refuse to let you sell your stuff properly. They really want recruits, that is how their 'uplines' make the real money. But selling face-to-face and door-to-door by devious means (i.e. by not warning the person that you're selling MLM), is archaic and, more importantly: dishonest.

7. MLM isolates you and forces you into a cult-like social circle. Because you become a nuisance to your friends and family, you end up being forced to socialise with other members of your MLM company. The reason it becomes cult-like is that you become isolated and start to get into a kind of groupthink, where everyone cheers and gets enthusiastic about the great company and the great products and this great way of making money. No-one dares admit they're losing money in buckets. Where's my proof that it's cult-like? Well my partner went to a certain meeting of a certain company and found that their WAY of doing things was to play music and cheer and clap along - like a born again christian meeting. My partner's "upline" - ie the person who signed her on, recently contacted her and said that it was "worship" time again (the upline's exact word!). When you try to leave they pressurise you to stay on and say "Oh, so you don't want to ever live your dream?!" or "Look at how many people you're letting down!" etc etc. Guilt and manipulation. Only a cult forces you to never leave it.

8. MLM is profoundly devious and dishonest. I've said this before. Let me list why. (a) They don't tell you what they're about; they trick you into seeing them, like timeshare salespeople who trick you with "you've won a prize, do you want to come to our offices and discuss your prize?". They use guilt and psychological manipulation. They play on your hopes and dreams of financial success and an easy income that just is self-sustaining without work. (b) They don't tell you that their products are way more expensive than equivalents in stores. If you notice this, they excuse it as "higher quality". Meantime it's not - it's usually the same quality. In some cases it's good (and in rare cases better), in most cases it's equivalent or crap, but it's certainly not twice as good as what you find in stores, to justify the double price tag. (c) They don't tell you that the real objective is recruiting more "sellers" or as they evilly call them, "prospects". (As in, "prospecting for gold"). They tell you that the objective is to move stock. That is a complete lie. If they were interested in moving stock, they'd let you sell online and in stores. The fact that you legally may not do so in terms of the contract that you accept when you sign up, is proof that they want you to do facetime - speak to people and recruit them. (d) The bulk of MLM earnings is from selling training DVDs, CDs and books to your downline or getting them to pay membership fees, i.e. recruitment. The only people who make a lot of money with MLM are those who are able to recruit all their immediate friends, family, and their friends and family, ruthlessly, without regard for how they appear to people (namely as money-obsessed cultist freaks.)

If you want to spend the rest of your life in a desperate pursuit of "prospects", annoying people to join a cult, being rejected by friends and family, and trying hard to explain why MLM is not a pyramid scheme and not evil, go ahead, join it.

--ps. addendum: Vimeo's TCs: "You may not upload videos pertaining to multi-level marketing (MLM), get-rich-quick schemes, cash gifting, work-from-home businesses, or any other dubious money-making ventures."

http://seekingalpha.com/article/3555536-unsustainable-fragile-overvalued-and-under-attack-the-case-for-going-short-herbalife-now?auth_param=kqm39%3A1b19kj2%3Ae064350c18fd76ee570325cc33d44b6a&uprof=55

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