White Man Behind A Desk is the work of satirist Robbie Nicol and playwright Finnius Teppett.
SATIRE: Kia ora! My name’s Robbie and I’m another white man behind a desk. Today I’m talking about why you got a random Facebook message the other day from that girl you vaguely remember from high school. That’s right, we’re finally talking about MLMs! Multi-level marketing schemes!
So, first things first: what are we dealing with here? Well the first thing your friend probably told you about their MLM, is that it’s an opportunity to become an “independent business owner” (IBO) by giving you access to products that you can sell to your friends and family – making a little commission on every sale, and saving the company’s head office millions in advertising.
But! As with every good-sounding thing ever, there’s a catch: MLM recruits also have to pay an upfront fee to get registered, and then they have to pay recurring monthly fees, or minimum monthly orders, to stay registered. There’s usually also a bunch of seminars and conferences you’ll want to pay for too, if you’re really serious about making money. And they can get expensive, quick!
* Side hustle: How multi-level marketing can turn social circles into profit pools or empty pits
* Here’s a get rich quick scheme for you – become a consultant
* The dark side of a side hustle: My brush with multilevel marketing
But don’t worry if you’re not quite selling enough fizzy drinks or scented oils to cover your costs: the MLM has you covered. All you have to do is find some people who aren’t IBOs yet, and get them to sign up! That way, you’ll get a cut of all the fees that they pay, and you’ll be able to stop selling altogether! And if those people can sign up their own IBOs beneath them, even better! Soon enough, you’ll be making money in your sleep and retiring at 30, and oh my god it’s a pyramid scheme.
That’s right, while MLMs might sound like a promising little side hustle to make a few extra bucks, there’s one crucial fact you should know before you sign up: according to one American study, over 99% of people who join MLMs lose more money than they make. Now, as far as percentages go, it doesn’t get much closer to 100% than “over 99%”, so what’s going on here? Why are MLMs so ridiculously bad at making the vast majority of their members’ money?
The answer is pretty simple: it turns out that MLMs are pyramid shaped. And the problem with pyramid shaped schemes is that, thanks to geometry, there will always be more people putting money in than getting money out. Always. That’s why pyramid schemes are illegal basically everywhere in the world – the vast majority of people who get involved with them get massively ripped off.
“Well, sure,” you might say, “but that’s only the recruitment part, Robbie – didn’t you just say that MLMs also sell products?” And to that I’d reply: that’s true. Thank you so much. You’re a great listener.
However! If you were hoping to make money off an MLM product, I have some terrible news for you. It turns out, there’s this thing called… “the internet”. And everything is already on the internet for cheap. Which is why MLMs themselves will tell you that the only real way to earn cash is by recruiting new members – one of the schemes in New Zealand, fragrance company Scentsy, lists 10 ways in its compensation plan that recruits can make money, and only one of them is “commission from selling our product”. The other nine all involve signing up more members and earning rewards for growing your “downline”.
That’s unusual. If I started a business selling coffee, it would be weird if 90% of the reasons I made money were unrelated to selling coffee and were more related to convincing other people that selling coffee was a great idea, and I’d love it if you considered starting a rival business.
Each member needs to recruit multiple new members beneath them to recoup their costs, which means that MLMs can burn through communities quickly, leaving more people than not on the hook for hundreds or thousands of dollars. Or, in the case of The Legacy Collective, an MLM in Northland that sells scientifically disproven water machines for six grand a pop, you might be left on the hook for tens of thousands of dollars.
They’re also extremely unsustainable – if an MLM gets members to each recruit, say, five new members beneath them, then after only 14 layers the pyramid has to stop because you run out of human beings currently alive on the planet earth.
But obviously, it’s unlikely you’ll hear any of that in an MLM pitch. They’re more likely to focus on vague, positive-sounding catchphrases like “becoming your own boss”, “escaping the nine-to-five”, and “building your future”. For that reason, they often thrive in university settings, where young people are ready to get into huge amounts of debt and don’t know what to do with their lives. Which is, incidentally, the same reason they were tricked into going to university in the first place.
An MLM called Vemma took off in Dunedin in 2014, and had Otago uni students recruiting each other to sell an energy drink called “Verve”. Student magazine Critic reported that Vemma affiliates were coughing up $211 a month just to qualify for compensation benefits, with some also paying an extra $800 to qualify for a “Premier bonus”, which according to some secret maths only Vemma knew, made you more money, somehow.
And while Vemma convincingly denied being a pyramid scheme, saying: “Pyramid schemes don’t have offices. We have a head office and lots of offices,” they were shut down the following year by the American Federal Trade Commission for… uh… let me just check my notes here, oh! It says here, “being a pyramid scheme”.
MLMs turn out to be pyramid schemes so often that some of them don’t even call themselves “MLMs” any more, opting instead for “network” or “affiliate marketing schemes”, or, in the case of one MLM, a simple “mentorship opportunity”.
Let’s just say that if anyone’s ever asked if you’d like to “meet their mentor” or talked about “developing leadership skills” and “retiring early by achieving financial freedom”, or something mysterious and generic like that, then you get the hell out of there! You run from that person, and you don’t ever look back!
If you’re thinking about signing up to this mentorship – which, it goes without saying, isn’t free – I can save you some time: the “secret business skills” they want you to pay for are all about… surprise, surprise, how to recruit more people into the scheme.
At this point, avoiding MLMs might seem like a no-brainer. We’ve all heard the true crime podcasts or seen the John Oliver monologue. So why do they keep sticking around?
First of all, times are hard and people are desperate! Between the cost of living, house prices, and wage gaps along gender and ethnic lines, something that pitches itself as an easy way to make a few extra bucks and “get ahead in an unfair system” doesn’t seem like such a crazy idea. Especially if it’s being sold to you by a friend, or a relative, or someone from your church – which brings us to the second reason MLMs do so well.
MLMs take advantage of people’s personal relationships and trust within their communities. One MLM, the Forex tips and tricks company, IM Academy, arrived in New Zealand last year and has acknowledged targeting single mothers, and the Māori and Pasifika community. The person who brought it over from America even explained in an interview with RNZ that she recruits from those communities because “a lot of them have financial hardship… and when they see people like me who look like them… it’s trusted, and they feel like, if she can do it then I know I can do it also”.
Add social media and FOMO into the mix, and soon enough it can seem like everyone you know is thriving in an MLM, and you’re missing out – when in reality they’re almost certainly struggling to keep their heads above water. (Fun fact about IM Academy: one of the main guys there was also one of the main guys at Vemma. I’m sure his new venture is totally legit though!)
Because of the atmosphere of relentless positivity, people in MLMs are encouraged to cut haters and naysayers out of their lives. This can lead them to isolate themselves from friends and family who don’t have the right “mindset”, devote more of their lives to their MLM community, and slowly lose touch with the real world.
One member of essential oil MLM doTERRA, who sunk so much money into the scheme that she qualified as a “Platinum Wellness Expert,” also co-founded the anti-vax group Voices For Freedom! So it’s good to know that you can use your MLM recruitment skills for new and exciting opportunities!
And then there’s the main reason MLMs won’t go away: they don’t have to! As long as they involve “commercially viable products” which present genuine “income-earning opportunities through sales to clients” then they’re legally in the clear. Thanks to this loophole, MLMs will often frame recruitment as an optional “bonus” income stream, despite the fact that, in practice, it appears to make up the bulk of members’ incomes – if they’re making any income at all.
However! Like any other business, MLMs can still fall foul of the law if they make misleading claims about their products, or the earning potential of joining as a member. And if their products are found to be “gimmicks” that have little to no actual value – for example, Forex tutorials that are worse than what you can get on YouTube for free, or mentorships full of meaningless business clichés – then they could legally be found to be a pyramid scheme, and thus liable for a fine of up to $600,000.
Unfortunately, the Commerce Commission doesn’t proactively investigate MLMs for being pyramid schemes, which means, most of the time, people are left to do their own due diligence. And, unsurprisingly, most of us don’t know what red flags to look out for.
So! Here I am! Ready to arm you! If you only share one bit of this monologue with your friends, this is the bit to share. Here is a quick list of some red flags to look out for to make sure you’re not joining an MLM.
First! If the “exclusive business opportunity” you’ve been invited to join has any kind of joining fee, or monthly fee, or compulsory purchases, that’s a red flag.
If you hear phrases like “be your own boss” and “this is not a get rich quick scheme” and “I promise this is legal”–red flag.
If you get told the “business” or “mentorship” or “opportunity” can make you rich, but it’s kind of unclear exactly how you make the money? Red flag!
And, most importantly, if anyone ever, ever mentions the book Rich Dad Poor Dad around you, then, that is a huge red flag. That one’s not about MLMs. We just don’t think you should hang out with people who read Rich Dad, Poor Dad. That’s just good life advice in general.
There isn’t a secret way to hack life and get rich in your sleep. The only way to actually make money for doing nothing is to be a Boomer and buy a house 30 years ago. So don’t join that MLM, and if you’re in one, get out now. You will not make your money back. Cut your losses and try something else.
And if that advice is too late for someone you love, then look up some articles about how to get them out, be nice to them as they come back to reality.
Most importantly, if you become aware of an MLM that’s breaking the law, or might really be a pyramid scheme with a dummy product, then put together some evidence, and go on over to the Commerce Commission website to make a complaint. Anyone can narc on an MLM if they believe they’re breaking the law, and trust me – you won’t want to miss out on this exclusive, once-in-a-lifetime opportunity to destroy your very own business.