Multilevel marketing is often ridiculed for its exaggerated promises of income freedom. People often gasp at some of the, admittedly rare, cases where individuals have lost 100s of thousands of dollars, relative to the others that have invested in the scheme. For nearly a decade, writers like the Finance Guy, Sequence Inc, Talented Ladies Club and Ethan Vanderbuilt have offered an incredibly thorough analysis of the financial consequences of becoming a distributor in nearly every major direct selling company.
Today we want to highlight those costs that aren’t captured in this financial analysis.
This list is neither exhaustive or ordered in any particular manner.
This is a looonnng read. It is stitched together in one large post to illustrate just how large of an impact these companies have, and how little understanding we all have of their true COST.
If you need a tl;dr check out the tweet thread.
The 12 ways have been hyperlinked below for your convenience:
1 – Undermining Science 7 – Harming Local Small Business
2 – Subjecting Yourself to Online Harassment 8 – Exacerbating Inequalities
3 – Hijacking Professional Legitimacy 9 – Marketing Near-Instant Withdrawal Products
4 – Propagating Fake News 10 – Profiting off THE Struggle
5 – Straining Personal Relationships 11 – Cultivating Novel Insecurities
6 – Reinventing Language 12 – Granting Self-sponsored Certification
1 – Undermining Science
Science is a constant in our life. There is a specific way to get answers from science:
- You start with a question.
- You examine theories that relate to the question.
- You build a hypothesis that gives an answer to that question.
- You test that hypothesis via a thoroughly documented procedure and recorded observations.
- You discuss those results and offer a conclusion and pose new questions.
- Finally there is a review process where individuals critique your approach and the conclusions derived from your analysis.
In MLM this is undermined as the scientific method, described above, is compromised in terms of profit. And yes, this is found in ordinary companies that do not use a network marketing strategy, but the problem is made worse in MLM.
Like traditional companies, MLMs must maintain a continuous cycle of new products with a seasonal launch schedule, at minimum. This speeds up the development, testing and review process for the products (a review process that companies often claim involves testing the products on the reps themselves as a pre-launch special). A story must also be crafted around these products that can be marketed by nonprofessionals in a manner that compels people to commit to the ask.
In an MLM, the ask is not just to buy the product, but adopt the lifestyle that is the repackaging of the same opportunity you are being sold. Along the way the nuance of the scientific conclusions are lost, and people carry with them simplified explanations that impact the validity of future decisions made on those results. In addition, science that forms policy is now being based on surveys conducted by MLM companies. Don’t do this!
2 – Subjecting Yourself to Online Harassment
Let me be clear here, any form of attacking an individual for the way they look is abusive. We do not support the culture that is colloquially known as “Karen-shaming” even though the intention may be to correct destructive behaviors and fragility (OK, we laugh sometimes, but regret it later – we human, you know?) it cannot be the way this community seeks to educate those most impacted by MLM, the consultants themselves.
But even beyond the Anti-MLM community that engages in certain abuses and bullying, which we can’t deny exists, there is a whole other layer of abuse taking place online. While researching this piece several posts were discovered that revealed representatives posting about their products and receiving very suggestive messaging and attention from males. Now perhaps it can be assumed that the individual in this post had wanted this attention, and that is their decision. But, beyond that individual there is a culture of duplication. MLM companies encourage reps to share practices that work and challenge others on their team to at least try it themselves.
The decision to establish an identity and brand image that involves yourself online is often made when you don’t have a true understanding of the costs. And once those costs are realized, it is very difficult to reverse the damage that has been done. If you have attracted traffic to your post, whether that is wanted or unwanted attention, in the name of branding, both add value. In the name of value, these companies don’t seek to rectify or offer support to those that experience the more harmful effects of click-driven postings. As a consultant, you’re encouraged to view these posts positively and not report these actions. The internet rewards engagement regardless of its toll.
3 – Hijacking Professional Legitimacy
MLMs are aware of their reputation. They don’t need to admit openly that they are fighting an up-hill battle, you can see it in the way the seek to extract legitimacy from well respected professionals and brands.
Very recent examples showcase this draw, whether you consider Beautycounter’s partnership with cosmetic powerhouse Sephora, Arbonne’s near staggering list of medical professionals that operate as consultants or Market America’s February conference that featured Jamie Foxx on stage dancing alongside the founders and other executive members. If grifting is the MO of MLMs, legitimacy is its lifeblood.
For the momentary legitimacy the MLM company gains from these events, and the platform it receives, there is a long-term cost that isn’t accounted for until much later. The main draw for these professionals is the captive and engaged audience an MLM offers. It’s as if a religious organization, with devoted followers that celebrate in the success of others, was in need of a new celebrity savior. This legitimacy is stolen because those that enter into this agreement are most likely not fully aware of the costs of the bargain. The star’s reputation will waiver in time if their association is built alongside the MLM brand. Many still fault Oprah for offering a platform to Dr. Oz, but imagine the costs associated with giving rise to the belief that a stretchy clothing product held financial freedom for all those involved that worked hard.
Charities are a special category for deriving legitimacy. These companies serve two purposes to an MLM beyond the benevolent actor hypothesis that is very difficult to resolve in the face of the general harm exercised by these systems and those that run them. The first is that people may be drawn to join these companies based on no experience with the product, but an alignment of values through these charitable organizations. Companies have offloaded massive stock to aid organizations and have dedicated segments of their annual conferences to raising money for many worthy causes. The second is the legitimacy granted in saying you’re a sponsor, or worse, a partner with a charitable cause with some weighted legitimacy for the general public.
It remains to be seen the value these organizations bring to these charities, and in some cases, may even use them to recruit new members. What is known is that at the start of the US outbreak, and a shortage of materials, many companies used the essential business guidelines to produce hand sanitizer in otherwise non-essential businesses in order to maintain their supply lines with distributors/customers. This brought with it a wave of positive press. The media needs to get better at seeing through this charade and stop playing into the hand of these companies – offering a free cleanse on the MLM’s toxic reputation.
4 – Propagating Fake News
Anti-vaxxers, flat earthers, the deep state, QAnon, WayFair child trafficking… there is no end to the endless stream of conspiracy theories. It becomes more difficult to deconstruct these theories as they are often self-reinforcing. MLMs love this aspect, and they lean on this same group of anti-mainstream society members. Not only are they part of the mom influencers propagating the theories above, but they have also created their own:
- All companies are pyramid schemes.
- Spend more time with your kids.
- If you fail, it’s your own fault.
- Your “why” isn’t strong enough.
- “Pure” and “natural” is best.
- A J-O-B makes you Just Over Broke.
- I’m a business owner.
- Live your life on holiday with my company.
- Retire at 25.
- This product CHANGES YOUR LIFE!!
Like begets like in social media content. Breaking with convention (“not being a sheep”) is, in effect, the mainstream on social media, and also creates a more emphatic follower base for distributors within MLM companies. There is also a toxifying hatred towards “big” government regulators that serve to threaten your business – which also draws the MLM crowd closer to conspiracy theorists, both of whom more closely align with conservative, small government values. There’s also large support from the elites within these MLM companies that contribute heavily to conservative political groups.
Not all MLM reps will adopt Republican political affiliations, in fact they are normally encouraged not to announce such affiliations, but their value-systems will be challenged and channeled to adopt very similar thought patterns to those sharing and spreading fake news.
5 – Straining Personal Relationships
This is the most disheartening cost. In the beginning when you are first acquainted with an MLM opportunity you are presented with the upfront costs: the make-up kits, the shake packs, the coaching material, the product samples, the website fee, etc… But there is one key offering that you are giving the company that they desire most. It remains in the subtext of your distributor contract and you don’t realize it’s value until it is gone.
You see, according to economics we all possess a limited and quantifiable measure of capital. It takes the form of both physical capital (possessions, real estate, cash – anything that holds a value and can be exchanged with others) and the more difficult to measure, , human capital (skills, knowledge, personability – cannot be exchanged). These companies yes, take our cash, but their more valuable asset is our
Those lists you complete that include 100 of your closest friends and relatives are the people you are asked to target with the opportunity. Over the course of your association with the company, you will be asked to rely on smaller threads of commonality (the bookstore owner, the waitress at the restaurant or the person occupying the toilet next to you). This desperation not only puts a strain on the relationship most external to your outer support network, but the inner network itself.
Your immediate family, closest friends and significant other become instruments to your business and that relationship is strained with each passing month and each new commission activation requirement in rank advancement. The worst time for this strain won’t be at the very beginning, it will be the ongoing stress that you feel from your team and impose on those closest to you. You won’t be able to display your full authenticity with them either as you’ll be encouraged to only build those real honest relationships with your upline. Only spread negativity upwards, not outwards or downwards. Your friends don’t know how to support a friend they no longer know. They see you are struggling, hate to see you going through this, but also feel there is nothing they can do to help. Buying from you only further commits you to the idea this can work out. Arguing with you only pushes you further away. You’re creating distance and destroying your network capital while the company profits and you receive only a small portion of the monetary value of lifelong companionship.
6 – Reinventing Language
Entrepreneur. Bossbabe. Work from home. Income. Profit. Franchise. Legal. Science. Certified. Team.
These are just some of the words that require redefinition when you adopt a new lifestyle as an MLM distributor. This relearning happens swiftly as there’s a near daily onslaught of re-education taking place through targeted self-help material and team calls. The effects of which last long after one decides to or even begins to consider leaving the company. There is also special coded language that is unique to MLM teams, including:
- the naming of ranks
Diamond Star Plus, Blue Crown Galaxy, National Vice-President International Field Director
- the naming of teams
Team Rororo, The Locked Arms Tribe
- the plan associated with advancement
The 2-2-10 weekly plan, Power Hour
- the ingredients in products
America’s Own Superfruit, Moringa, AgeLoc
- the glorifying of top earners
Yager, The Bowlings, RIch Dad Poor Dad
Now developing language unique to your specific business practices is not unusual. If you spent a day in a software start-up or a new church of a different affiliation than your own, you would feel vastly out of place. There’s a learning procedure you go through in continued exposure to these new terms. WIthin MLM, instead of complementing already established knowledge, these new definitions serve to sculpt a new vision of reality.
This sculpting of reality, is what language does for us. It not only gives a basis for our communication with each other, but also offers a vehicle for interpreting and understanding our own thoughts. As MLMs, unlike traditional businesses, seek to upend both our work lives and our entire lifestyles in the name of freedom, they exact far more lasting damage on the latter while preventing us from receiving the traditional rewards of the former. One of the most representative consequences of this is weaponizing the term ‘hater’ to protect individuals in MLM from any legitimate critiques of the sector. Haters never do ‘the research’ or haven’t even tried to succeed in the business. Their evaluation of the company is without value, and the information they present is not considered, as any breath of a complaint is trained to be labelled anti-YOU. It treats facts as opinions, and company word as gospel. Examining the effect MLM language has on you, can be a powerful way of evaluating the lifestyle cost these companies hold on you.
7 – Harming Local Small Business
Another term that MLMs have commandeered is small business. As an independent contractor for a company that spans multiple countries around the world and generates revenues that far exceed half a million dollars (with several hundred thousand consultants of similar authority) individuals involved in MLMs are investing in anything but a small business.
Small businesses take on a sizable portfolio of risk upon opening their doors. They have often spent months establishing supplier contracts, consulting with various other businesses to present a customer facing image that is appealing while also establishing a back-end to their business that will support it long into the future. All of this risk brings with it incredible mastery, and yes, there is a certain likelihood the odds get the best of you, but you leave with a solid foundation for beginning your next business. Within MLM, you have a set of knowledge that is strongly geared towards marketing an opportunity. You build some retailing skills, but the vast majority of learning takes place centered around self-help that breeds personal resentment in the face of failure and withdrawal, and recruitment that holds no real role in ethical business practices of the 21st century.
The consequence of the recruitment based nature of these schemes, that effectively impregnate our social networks with exhausting established social capital through guilt-induced purchases, is that local small businesses lose out on the spending dollars that otherwise get filtered into these large middle men oriented businesses (Clark you are the middleman if I’m shopping off a website made by your company!). These companies also continue to expand their product offerings and seek to out-scale locally-sourced products. Even those companies that attempt to build separate point systems out of credit purchases at local businesses do leverage themselves in terms of strong-arming those businesses for premium discounts, all while exaggerating their market reach.
The collapse of small business leads to further issues, with many turning to the open-armed network of MLM companies seeking to embrace victims of job tragedies, that they in large-part created. The retail sector was collapsing before COVID-19, with most large shops transitioning their sales strategy to online platforms, but MLMs have helped tighten the grip on the neck of outlets crushing middle-class employment opportunities in these directly competitive markets.
8 – Exacerbating Inequalities
The above discussed what was the effect of income being poured into these companies, but this cost is associated with how these companies handle the revenue as it flows into the system. The compensation structure, fundamentally at odds with all ethical business practices, ultimately concentrates income at the top of the organization. Those victorious have not built a consumer-led sales structure, but rather the largest and deepest (or possibly widest) sales organizations. This is true of any MLM compensation system, including:
- stair-step breakaway
- binary (binomial)
- Australian X-step
- spill over
The result of any of these plans is a concentration of revenue in a shrinking percent of the minority in the entire network. Attempts have been made to build models for this mechanism, and have successfully been modeled within economic field studies. Attrition impacts these models however and the calculations become difficult to represent using visuals. In any case, this strategy effectively create the “winners” championed in almost every company. A group of winners that claim you can be just like them, however their success only grows in your ambition to achieve their results – it’s by design. And that space they occupied, that grew your desire for success, it shrinks as the business expands upwards. The carrot is always being raised over your head as new rank levels are created.
The problem with this is that it concentrates a tremendous power of authority in very few hands. These individuals not only can transplant these networks into other organizations when an attempt to leverage their influence fails, but it also creates a deeper investment in the program and the faith that the system can, and does work. It should do the opposite. This power also helps buy political favors and influence that helps hide the dark elements of these businesses from the view of others. This effectively grants them more power to exert more influence and generate more profit for the early adopters of the scheme.
9 – Marketing Products with Near-Instant Withdrawal Symptoms
So this one is going to be controversial. It needs to be examined, and change not only the way MLMs release product studies, but also cosmetic, weightless and health supplements in general. Our body is a wonderfully complex system. We have only recently mapped the vast majority of functions it is capable of performing, but the unknown mechanisms left unexplained still may leave us in the dark for several more decades.
MLMs, like any company, and religion for that matter, occupy the space of this unknown. Not sure how the body ages… “don’t worry we’ve designed a product that counteracts the effects of aging.” Don’t know how to regulate body-weight while maintaining a mixed and variable diet… “don’t worry this supplement supercharges gut bacteria.” Need immunity support to boost your body defenses, “apply this fast absorbing skin cream.”
None of us are hearing any of these claims for the first time. They are made in the void of science for which we have no standard model or mechanism. MLM companies swoop in, provide a product that generally resolves the primary concern of interest, and in the process develops an adaptive dependency on the product to serve other consequential needs. As complex as the body is, it will adapt to an environment, so in an attempt to correct wrinkles on your face with a moisturizer applied twice a day or more, your skin will also stop producing its natural oils as it prioritizes other areas of functional efficiency. If you ever stop using the product, your face may very quickly return to it’s original condition OR WORSE, presenting new undesirable symptoms.
This is the area where studies on these products fail to examine. The vectors for withdrawal and the potential side effects, not from continued use, but in a decision to stop a daily regimen of the product. Companies want to create loyal customers to their products, and that is especially the case in MLM where consultants are expected to maintain a regular monthly order of key essential items. The consultants are also bred to use positive language around a product, such that one that works is not only good, but a revolutionary innovation in skin care that has changed their life. The products themselves are designed to be exhausted on a monthly basis as evidenced by their volume capacities. Data is needed in this area and ingredients must be evaluated for the immediacy of adverse results after exhaustive usage – as there is certainly a large incentive for companies to select ingredients that present these immediate downsides following reduced usage.
10 – Profiting off THE Struggle
With the odds stacked against consultants, and the advice of equally struggling uplines being to consult more self-help material, some distributors turn to MLM success experts. These individuals have often had their own experiences in MLM companies and, despite achieving a formidable rank, decided to leave it all behind and help others grow the business for others. The product they sell is self-help, which intends to resolve misery and suffering. That misery is embedded in a system from which their books also demand a loyal commitment. This is incredibly effective for a seller when there is limitless demand .
If you’ve been in the Anti-MLM circuit long enough, you know these names. These individuals take a persistent and growing network of sellers that never can achieve the success they are being promised. But provided they follow the magic steps contained within the product funnels of their training groups they will achieve their dreams. These individuals don’t just sell a book, oh no, its a total life-changer! They start with a leaflet, which leads you to a small guide that’s about $5.00 then a 1-on-1 consulting appointment with the purchase of a book, that then recommends you to participate in an online course via their own customized platform. Once you have made your way through this system, you will have spent nearly your entire investment in an MLM company and still, on average, have almost no new leads. The advice you get from these seminars are summarized in two words: find bodies. Not people, but bodies.
This is one of the great unresolved paradoxes of MLM, if it’s not all about recruiting, why are the trainings almost exclusively focused on finding people? These trainers offer no skills in necromancy, so you’re simply just going to have to bite the bullet and start talking to people. BUT, we suggest you don’t, because you’re only expanding the harm and impact of all these costs we’ve already covered. Instead, stop these contrepreneurs from exploiting already exploited individuals and take your business skills over to an actual enterprise with proper ethics.
11 – Cultivating Novel Insecurities
Where the hucksters of self-help have a near limitless supply of unactualized success in MLM, the companies themselves create problems people should feel uncomfortable about (cellulite, toxic build-up, anxious skin, gastric emptying time). With a near endless supply of imaginary ailments, these companies can propel into our consciousness and propagate them through established and trusted networks. A network that then recruits friends, family, and acquaintances to join the company and learn more of the pseudo-science that underlines these insecurities. There are many more of these insecurities, all taken from current members of the Direct Selling Association (a trade organization that lobbies on behalf of these companies interests, and publishes data that crafts a positive representation of these companies that is suspiciously nonfactual):
- counterfeit makeup
- faster hydration
- reduced raw nutritional value
- ugly greeting cards
- makeup depleting natural resources & repeated usage (ignore the packaging)
- “whole” child learning
(with tests and quizzes)
- not feeling results
- video but for email
- unconcentrated products
- tote bags MUST HAVE buttons
The list will continue to evolve as companies have an incentive to invent these problems. Much like the late-night infomercials when consumers tend to be sleep withdrawn and at their most vulnerable, these companies seek out consultants that have an identified issue, whether it be their weight, skin condition or children’s education and replace it with a perpetual system of growing concerns for which the company serves up solutions. When people say “oh, you just haven’t found the right company,” what they’re really saying is “oh, you haven’t fit into the perpetual fear machine, you should try a different product that preys on the concern specific to you.”
12 – Granting Self-sponsored Certification
When building these insecurities there needs to be walls established that grant proof of professionalism. In addition to the stolen legitimacy discussed before, these companies fund or sponsor their own certification process in the unregulated markets they operate within. Whether it be with essential oils or cosmetics, these companies have invented standards and held themselves and others within the industry to these invented concerns, or unmeasurable standards, that they claim insures professional quality. Some of these include (again, all DSA member companies):
- Better Business Bureau accredited
- Direct Selling Education Foundation’s Ethics Program
- The Herbalife Gold Standard
- Independent Business Owners Association International
- CPTG Certified Pure Therapeutic Grade®
- Frieberg and Sterling Clinical Tests
- Business Ethics Standards Team (B.E.S.T.)
- Skin Carotenoid Score (SCS) – not this SCS
An important case for considerable analysis, that serves to undermine the core principles we’ve sought to investigate in this series is the certification of dietary supplements under the established NSF (National Sanitation Foundation) brand. This is a recognized global standard in most every household equipment. It is based in Michigan, also home to the largest network marketing / MLM company, Amway. When NSF launched their NSF Dietary Supplements Certification Program, Amway was the first company to receive certification. Although, more research is needed to disentangle this cause and effect relationship, many of the product standards designed by NSF around Dietary Supplement were developed at the same time they also had product from Amway’s Nutrilite brand. This did not just happen with supplements, however, similar coincidences in timing are also found in the certification of Amway’s at-home water filtration systems. Even brands that are trusted can become corrupted with influence of those seeking to leverage their reputation in seeking higher profits.