Why You Need to Stay Away from Multilevel Marketing (Anti-MLM)

Let’s run through a scenario I’m sure you’ve seen before. A chick you haven’t talked to since middle school messages you out of the blue.

“Hey girl! 💁🏻‍♀️🤪 I’ve got the perfect opportunity for you 👉🏻💋 want to be your own boss and make millions from home? 👅😱🤑 I’m hiring ONE MORE person to be a part of my exclusive team and you’d be perfect 🤯🤩 let’s talk gorgeous! 💸🙊 u in? 🙋🏻‍♀️”

At this point, you’re not sure if she’s been hacked or if she’s hitting on you, but it sounds too good to be true. Making millions from the comfort of your own home? Being your own boss? Hi. I’m Lex. Here on PunkStocks, I typically write about personal finance and stock market education for absolute beginners. There’s one topic that I feel compelled to preach about, because if I can save just one person from the financial turmoil of getting involved with MultiLevel Marketing, I can rest easy.

Whether it be from a random message asking you to join their Monat team, or a flyer on campus promising you $25/hr selling an unknown product, what’s happening is MLM recruitment. It’s incredibly important that you do not fall victim to the tempting sales pitch promising you good pay and flexible hours. If you’re already in an MLM, it’s important that you get out as soon as possible.

First off- what is an MLM?

Multilevel marketing companies, which I’ll hereby shorten to “MLMs”, are companies with a triangular structure that focus on pushing a product and recruiting others. They’re not pyramid schemes- no, those are illegal. MLMs just structurally resemble a triangle, which totally isn’t the same thing as a pyramid scheme.

MLMs have several key features that make them easy to identify.

1. MLM employees sell a product or service directly to consumers and usually make a commission. Selling products does not make a company an MLM inherently, but product sales allow these companies to operate without being considered pyramid schemes.
2. MLMs place an emphasis on recruitment. Recruiting others to become their “downlines” enable the “uplines” to get bonuses, move up in rank, or make a higher commission. In turn, the uplines above them benefit as well. If that’s confusing, just imagine all those people assembled in a triangle.
3. MLMs typically have a “ranking” system. Hitting certain milestones such as selling product, buying product, and recruiting others will move you up a rank.

Here are some of the most popular MLMs. I can’t list all of them because there’s so many, but I’ll list a couple just to give you an idea.

• Young Living
• DoTerra
• Mary Kay
• Primerica
• Avon
• Cutco/Vector Marketing
• Amway (Side note: US Secretary of Education Betsy DeVos is heavily affiliated with the founders of Amway)
• Pure Romance
• Monat
• Lipsense
• Lularoe
• Herbalife

For a more complete list of MLMs, click here.

Why are MLMs bad?

None of what I wrote above inherently makes MLMs bad, just a little bit skeevy. Now let’s run through the numbers, shall we?

• According to a study by Jon M. Taylor of the Consumer Awareness Institute, out of 1000 people who join an MLM, 997 will lose money.
• According to Monat’s own income disclosure statements, 99.89% of Market Partners earned less than $40k a year, which is less than working a regular full time job. 47% of Market Partners earned nothing. 94.03% of Market Partners averaged $183 annually.
  • Your chance of earning a living wage with Monat is roughly equal to your chance of death by drowning.
• 98.6% of Herbalife Members were paid less than $5,000 in a year. 86% made nothing.
• According to Arbonne’s income disclosure statements, 88% of members earned absolutely nothing. Of the 12% of members who earned anything at all, over 97% did not earn a living wage. Only 0.36% of all members earned a full time income.

Looking at the numbers, this business model clearly does not work for its members. It is not quick, easy money. If 9-5 office workers had the same chances of being able to make money, nobody would pursue that avenue of employment! So- why do MLMs continue to operate? Why are some people at the top doing well, while their downlines struggle to feed themselves? With numbers like these, it seems like nobody’s buying product- so how do these MLMs stay open?

When you sell for an MLM, you become the target customer. You are often expected to keep hundreds to thousands of dollars worth of inventory on hand. You are expected to own every new release. You are often pushed to buy products yourself to move up in rank or meet sales goals. When you join, you buy a starter pack worth of products (and in the case of Lularoe, that will cost you $5,000). The product no longer really matters- it’s about how much you can sell, even if it costs you your life savings, your friends, and your sanity.

The Cult of Success

Okay- so it might kind of resemble a pyramid scheme, and I know I can lose money, but my friend looks like she’s doing well. She’s going on expensive vacations, she’s living lavish with fancy clothes and a constant stream of free products. She says that all the people who lost money just didn’t work hard enough- it’s all about the mindset. That wouldn’t happen to me- right?

Let’s talk about one of the most pernicious aspects of MLMs- something we’re going to call the “cult of success”.

In dictatorial regimes, a “cult of personality” occurs when the country’s main figurehead or leader, through propaganda, control of the media, and government-led rallies, becomes something of a god for the populace to worship. These leaders are assigned super-human traits through this constant stream of propaganda. Chinese citizens under Mao Zedong were expected to carry a book of his quotes around at all times, as it was believed his wisdom was nearly God-like and something to be revered. Kim-Jong Il of North Korea was worshipped like a God, and collected over 54 titles, including “His Excellency”, “Leader of the 21st Century”, and “Glorious General, Who Descended from Heaven”. Stalin was praised as a “genius” and “father of nations”, and pictures of him could be found in every home. These things are grossly exaggerated versions of reality, but it didn’t matter. The propaganda was so pervasive, that these exaggerations became the truth.

In the case of MLMs, Huns (the peddlers of MLM products) are expected to maintain an image of success that similarly fails to reflect reality. They project an image of financial stability, life-long friendships and connections, happiness, and a desirable lifestyle, all thanks to the MLM. The products they sell are all fawned over and praised as the “best in the game”, even if they’re subpar. This image of perfection is carefully woven to attract outsiders to the MLM, and keep their downlines within the “Cult of Success”. If a hun isn’t personally experiencing the same level of success that their colleagues appear to have, they’re encouraged to “fake it until they make it” and are told that they just aren’t working hard enough.

Think about it- you get recruited into this business because you think it will afford you the success you see others in the thick of it enjoying on the ‘gram. Then, you realize your peers are faking it. That new car is their brother’s, that Cartier bracelet is their mom’s, they just tried on that designer outfit and returned it afterward. The lifestyle that lured you in is a fabrication. In reality, they’re working sweatshop hours for barely anything while getting yelled at by boss babes who profit off their suffering. You’re told you have to keep up this illusion as well, so you can grow into the lifestyle you originally wanted. Your business is going so well, you’re so busy, the products are life changing. You are asked to pose as a successful consumerist so you can lure others into the trap and possibly justify the hours you dumped into this fruitless labor.

In conclusion

Are you in an MLM currently? Get out now before you sink more money into it. You are not going to be the one person to “win” at this losing game. Your job should not require you to fight to make the minimum. Do not pass go, do not collect $200. Your efforts are better placed in a system that actually appreciates you, not in a sunk cost game.

Are you in an MLM currently and doing well? I want you to take a hard, honest look at the people around you. How are the people you’ve recruited doing- honestly? Are they able to live off this? I would like for you to think about the ethics of building your wealth off the backs of others who struggle to stay above water.

Are you thinking about joining an MLM? Well, don’t.