MLM (Multi-Level Marketing): Job Seeker Beware

The MLM dream has all the elements of a typical gangland paradise: Big resorts by the beach, money to spare, and all the good things in life you can possibly lay your hands on.

The idea that by ensuring the continuous cycle of recruitment and purchasing MLM products, you could end up in the upper strata of the company, is somewhat misleading, because certain market forces will ensure that you will very likely fail in your endeavor, regardless how much effort you may put in.

MLM: A Thinly-Veiled Pyramid Scheme

The pyramid scheme, also known as the Ponzi’s scheme, was a fraudulent scheme invented by an Italian, Charles Ponzi, who managed to scam millions into putting money into his trust banks, with the promise of high returns. While the returns were real enough, he was merely using money from his most current clients to pay for his previous clients. In short, he was merely rolling the money; as long as the machinery kept going, his scheme would work.

Of course, in the long run, he would have to run out of participants, and everything would collapse, though in the case of Ponzi, he was caught before it could happen.

The MLM is merely an extension of Ponzi’s scheme: By using the products as a front to legalize its motives, the MLM promises recruiters grand sums of profits in the hope that the MLM machinery will keep on operating.

Market Forces At Work

One of the greatest enemies of the MLM dream would be the market forces: For every product, be it an investment scheme or toothpaste, market forces would determine the sell-ability of a product.

Say, for example, I manufacture toothpaste in a small city of 2 million people. Would I be foolish to peg my market share at 2million consumers?

Out of 2 million consumers, 200,000 might prefer to use my rival’s toothpaste. Some consumers may not even use toothpaste at all. It would be foolish for me to manufacture my brand to cater for 2 million people without first doing a consumer survey to gauge my market share.

Similarly, in the MLM context, a recruiter would never be able to recruit downlines continuously, even if his downlines persevere with their recruitment schemes. Sooner or later, the recruiting pool will dwindle, and when it remains stagnant, recruiters at the bottom of the scheme will begin quitting the network.

In short, the MLM scheme does not take into account the marketing forces at work, hence ensuring that almost every MLM scheme will suffer an eventual demise.

Why Do Some People Make Millions Out Of MLM Schemes?

Given the networking nature of MLM schemes, those at the upper tiers of the network will inevitably be the biggest winners.

Depending on the level a recruiter has joined in any given MLM scheme, the chances of making big bucks will hinge on his position in the hierarchy, and his pool of potential recruits.

The underlying trend in any MLM network is this: Those at the upper echelons of the network are profiteers, the real sharks in a shady scam. The middle levels are probably slogging their socks off, in the hope of joining the privileged few. They probably do make some money out of it, although it is likely that their money would be rechanneled into the network through lessons and workshops that the richer MLMers churn out, in a bid to fizz more money out of the zealous frock.

The lowest levels of the network tend to spend more than they earn, in the hope of making a decent income.

MLMs: Barely Legal

In short, MLM companies are probably the last entity you would think of to generate any form of income for you. Not only are the odds stacked against you, the barely-legal model of the MLM network should be food for thought: Take away the products, and the whole network becomes an illegal Ponzi scheme.

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