How I Almost Got Involved In A Ponzi Scheme (MLM)
It's so easy to get roped in by your desires.
I know this really well.
I was almost a peg in someone's pyramid scheme.
What is a pyramid scheme?
Also known as multi-level marketing (MLM) or Ponzi schemes, this is a type of business where the people on top directly receive a commission from the people below them. So when the employee sells one of the company's products, the boss receives a direct chunk of that profit.
It's an extremely exploitative business structure, that is actually illegal in many countries.
They tempt you with "being your own boss", platinum/diamond status, and being able to hire people under you as well. There's a lot of incentives to do it.
I was actually a little embarrassed to tell this story, because I was close to doing it. I feel like it has to be told though, so that other people don't get roped into this scam as well.
How a Ponzi scheme works
What happens first is you're identified online and told that you have a lot of potential. This is to butter you up and make you feel like you could actually make a living doing this.
You have to pay a membership fee to join.
If they successfully convince you to join an MLM, your job is to sell a bunch of shitty products that no one's ever heard about. You're encouraged by other MLMers to sell to your friends and family. This will surely ruin your relationships.
You will earn little profit. Other MLMers will tell you that the key is to recruit more people to sell under you. If you want to screw over and basically enslave people, then you will identify individuals online and try to rope them into this trap.
The person who brought you in to the MLM will profit off of you AND those you recruited.
It's a sick game and I'm glad I had the friends and self-knowledge to say no. I feel bad because this structure exploits hard-working people by promising so many things.
I just want to give a warning.
Stay away from MLMs.
Also, friends don't let friends do MLMs.
If you want to learn more about why MLMs are a scam, check out this podcast on The Art of Charm.
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Stats about MLMs to make you mad (from Pink Truth)
- 99% of all distributors in these companies earned on average less than $13 a week in commission income. (In 10 of the 11 companies, the commissions were less than $10 a week.) This isn’t even enough money to cover the minimum purchases they’re required to make in order to “qualify” for commissions.
- Recruitment into these companies is largely based upon the offer of an “income opportunity,” yet these statistics show that the income opportunity is essentially non-existent and falsely promoted.
- The losses of 99% of the distributors are transferred to less than 1% of the people at the top of the sales chain as “commissions.”
- The companies studied have essentially non-existent or unfeasible retail sales opportunities (i.e. participants can’t make much money selling the products because they’re overpriced).
- The promise of profit from retail sales by MLM sales representatives to consumers is the basis for the industry’s claim that it is a form of “direct selling,” yet virtually no multi-level marketing companies sell significant amounts of their products to the public and are therefore not in the “direct selling” business.
- Commission pay plans in these companies send most of the money to the very top levels:. One of the largest MLMs in the world sends 84% of all commissions to the top 1% of its distributor chain. What chance would the newest recruits at the bottom have to earn a profit?
- In half of the 10 companies, 70% or more of participants earned no income at all. For example, 96% of Arbonne’s sales representatives never earn any commissions at all. 80% of YTB’s “agents” also earned no commission at all.