A Psychotherapist talks about MLMs - part 1
The Greatest Grift on Earth?
Just to make sure we're on the same page, what is an MLM?
There are a lot of different definitions, or at least different people have very different understandings of what they are!
They have a bunch of different names that they use to describe themselves, partly to distance themselves from past bad press attached to the original name of ‘Multi-Level Marketing’. So they’ll label themselves as doing Network marketing, or Affiliate marketing, or Direct marketing or, most recently, Social media marketing instead. But it’s all lipstick on the same pig.
The core structure is unchanged and thus the core problems remain too. This picture shows the structure and contrasts it with normal corporate structures.
Essentially, in an MLM there are products to be sold and there is also the opportunity to recruit more people into the MLM and you’ll receive a portion of their sales as commission. So you are told you can make some money working part-time from home selling products and if you recruit a bunch of people beneath you, you can make a lot of money. What they omit is the fact that per the independent research, 99% of people who join MLMs make no profit or lose money, sometimes a LOT of money.
To be writing all this, I obviously have a strong interest in MLMs. Where does that come from? Why do I care?
Well aside from a professional interest due to the financial and psychological harm, there’s a personal side since MLMs have directly impacted my life twice.
In 1978, my mother was in a cosmetics MLM called Mill Valley both before and after my parents' marriage breakup. She was quite good at running parties selling cosmetics and her upline started pressuring her to quit her job as a teacher to focus solely on Mill Valley. I was only a 10 year old kid at the time but Mum told me about the dilemma since my Dad wasn’t around. Thankfully, she decided teaching was more meaningful and quit the MLM instead. I don’t know if her MLM involvement contributed to the marriage breakup but financial stresses and overspending was a big issue between them so I doubt that it helped.
My second brush with MLMs was 10 years later in 1988 when I was a uni student studying computer science and I didn’t get out much. At a rare party, I met a young woman who I’ll call Alice, plucked up my nerdy courage and asked her out. I was sharing my triumph with my best friend Max, when he told me the same woman had also accepted his offer. We had become unwitting romantic rivals. Our respective dates seemed to go OK-ish and Alice told each of us she’d be in touch. Now, we waited anxiously to see which of us she’d choose.
I was over the moon when she rang to invite me over to her place for dinner because there was something exciting she wanted to share with me. I even bought a new shirt. I’m somewhat embarrassed to admit I couldn’t resist gloating to Max that she’d invited me over. He frowned and told me he’d been invited over for dinner too. I had a sinking feeling and asked him what night and it was the same date and time. We looked at each other half in shock for a moment and then said in unison “It’s Amway”.
And yes, it was Amway. The dinner party was a group of nine and after dinner but before dessert was ‘ready’, Alice escorted us to the lounge and there was the dreaded flipchart. Bob, now revealed as Alice’s upline, began extolling the wonders of Amway to his captive audience.
But hell hath no fury like a pair of nerds scorned. Max and I had prepared for this eventuality (‘we did the research’). At a key moment in the pitch when Bob misdefined the term ‘Net Profit’, we disputed it. The other dinner guests were eager to hear us out so Bob got rather flustered and ended his presentation prematurely. I’ll come back to this key misdefinition later. Alice announced that dessert was ready after all. Dessert was a rather tense affair as Alice and Bob both had faces like thunder and were sending death-stares at me and Max. We promptly ate up and left.
What we didn’t know at the time was that most of the other dinner guests were probably signed up Amway members and part of Bob’s downline. Rather than adding me and Max, Bob was facing the risk of losing them. That’s probably why he abruptly stopped the presentation to contain the damage and why Alice and Bob seemed so furious with us.
This is a common deception that MLMs reps use to this day. The other people at the party who excitedly buy the products and sign up may have already drunk the Kool-Aid. MLMs use Conformity Bias to subtly coerce you to follow suit without thinking it through.
For a while, I told myself Alice might have been open to a romantic relationship with me. But given the way this whole affair played out, that’s likely a fiction to soothe my bruised geeky ego.
So yeah, MLMs and their embrace of deception offend me on multiple levels.
Why do I care about this right now? Well, we’re in a cost of living crisis and I think lots of people are going to be looking for a way to boost their income. MLMs know this too and will be out hunting so I want to get the word out to as many people as possible before they get their personal invite to the Greatest Grift On Earth.
We're living in 2025. MLMs seem like something out of the 1970s. Why are people still getting sucked in?
It’s still happening today because of two simple facts.
MLM corporations are highly profitable for the people at the top and other investors.
MLM corporations are legally and politically protected despite being predatory and deceptive.
It goes back earlier than the 1970s. The first business that pioneered the MLM structure was called Nutrilite and started doing that in 1945 to sell its vitamin products. Nutrilite eventually folded into MLM powerhouse Amway which perfected the con and just exploded in the 1970s.
What do I mean when I say they are protected? Well, in the 70s, Amway was actually under serious investigation by the US Federal Trade Commission as an alleged pyramid scheme. Amway didn’t take this threat lying down and billionaire co-founder Richard DeVos embedded himself deeply in the Republican Party and personally befriended Gerald Ford who became US President from 1974 to 1976.
Under the Ford administration, the FTC changed tack and resolved in a 1979 consent decree that Amway was not a pyramid scheme as its members could focus on selling the product and not stockpiling or aggressively recruiting. Amway essentially won and enshrined the ‘Product Exception’ fiction which protects MLMs to this day. Coincidentally, Richard DeVos later founded a charitable foundation in Gerald Ford’s name and funded the building of his Presidential museum.
MLMs remain very politically active, funding the Direct Selling Association lobby group and making generous campaign contributions to politicians on both sides of the aisle. This helped ensure the FTC exempted MLMs from its 2012 Business Opportunity rule which requires detailed disclosures be given to all other kinds of potential new business owners except MLMs. They provide thin voluntary disclosures on their website which their reps seldom highlight to prospects.
As an aside, if you really want to really reach back, the first example of the MLM structure is arguably the Spanish Inquisition. What most people don’t realise about the Inquisition is that per papal decree the lands and goods of those convicted of heresy were confiscated and went to the Inquisition to fund its expanding activities: running prisons, performing investigations, and following its lengthy process which slowly tortured people financially, physically and spiritually. It was thus self-funding and financially incentivised to keep finding more heretics to ‘feed the beast’. One of the other things not commonly known was that one way to escape the penalties for heresy was to join the Inquisition as a familiar and assist in the successful prosecution of a number of others for heresy. So you had to name and ‘recruit’ a down-line of victims to make up for your admitted sins. Sounding familiar?
With definitions and history covered, in the next part of this series, I’ll be exploring the MLM connections to destructive Cults and more.
I’ve always thought MLMs and Pyramid Schemes were the same thing. But it seems Amway is the former but not the latter. Would be interested to understand the differences