are you ready multi-level marketing companies like Herbalife Avon lularoe and Amway are often
mischaracterized as pyramid schemes on a legal structure whereby people pay a fee and then try
to make their money back by taking a share of the fees that the new members pay to join the scheme
under them but I in good faith can no longer sit by and watch the good reputation of pyramid
schemes be ruined by comparisons to multi-level marketing companies mlms are not pyramid schemes
they are worse as an internal document Herbalife where they made the case for pursuing this Market
people who make two dollars a day five dollars a day and so you have a company based United
States that decided to Target this population with a business opportunity which itself is a fraud you
have probably all heard of mlms by now maybe you have been pitched the amazing business opportunity
by a friend or colleague or maybe you are part of the eight percent of Americans who have been part
of one of these schemes in their life I ended up being in Amway LTD for two and a half years and
in that time I only sponsored one person I lost about eighteen thousand dollars in the process of
the business structure of every multi-level marketing company is slightly different and
the same companies use different structures in different markets to skirt around local
regulations but the basic concept Remains the Same you signed up and joined the company as an
independent business owner you pay a fee which can range from twenty dollars to five thousand dollars
depending on the company for that money you get given a simple pack of the company's products you
are encouraged to sell these products at a markup like a traditional business but you are also told
to sign up friends and family under you to share a cut of their commission commission structures
are intentionally made confusing so that new recruits can't understand how badly they are
being screwed most of the money gets funneled to the very top of the program to people that
will flash a lot of money around us proof that the system is working if you think this sounds
like a pyramid scheme you're not alone even the Federal Trade Commission after it concluded a
year-long invest investigation into Herbalife the third largest MLM in the world concluded that the
company was not determined to be a pyramid scheme for embattled company Herbal Life the
Federal Trade Commission will not classify it as a pyramid scheme but in return Herbalife will pay
a settlement of 200 million dollars but really these companies are a lot worse for three reasons
the first reason all comes down to what actually legally separates them from a fraudulent pyramid
scheme their products one of the most powerful lobbying groups in America and around the world
is the MLM industry Herbalife just one of hundreds of MLM companies spent 810 000 on federal lobbying
in 2021 alone the legal argument is that money only changes hands when a product is sold so
they are no different from commission salesmen unfortunately it's exactly that product that
makes MLM so much worse than pyramid schemes the average return for a victim of a pyramid scheme is
a reduction in 10 of their invested capital or ninety percent of what they invested for every
one dollar a victim puts into the scheme they can expect a a turn of 90 cents a bad investment but
not financially crippling the returns remain surprisingly High because early investors get
paid out and when the whole thing falls apart the money really hadn't gone anywhere and a portion of
it could be recovered by authorities and return to victims Bernie Madoff ran the world's largest
Ponzi scheme and even most of his investors ended up getting most of their money back because after
Madoff used the money to buy a penthouse apartment a private jet and a house in the Hamptons he had
nothing left to do besides keeping it in the bank and paying it out to investors I thought I
would never see the money again pyramid schemes are different to Ponte schemes but the results
are the same however the average return of a multi-level marketing company is around 30 percent
of their invested Capital according to their own marketing materials promoting their bonus
structure that means that someone joining an MLM company would be three times more likely to make
money by sending up to a fraudulent pyramid scheme the actual returns for most people are far lower
than 30 percent and sometimes even the highest ranks of MLM members struggle financially but we
will get to that soon the reason the numbers are so bad is because of the product for the
people at the very top of the MLM to collect everybody's money legally they need to move a
lot of products but the product has overhead that siphons money out of the scheme somebody goes to
manufacture and ship the products and some money goes to the MLM company itself MLM products are
priced well above Market competitors even after the discount given to their members because the
companies need to add the overhead to pay out bonuses product quality from these companies is
also a common complaint amongst former members the companies themselves use their members to
promote their business the main way that members sell the business to other would-be members is by
promoting business opportunity as a way to make additional income or Achieve Financial Freedom
since the products are merely a side though to provide legal protection there is a little
pressure for the companies to make their products you know good somehow having returns three times
worse than the most infamous corporate fraud in history is only reason one so it's time to
learn how money Works to find out why multi-level marketing companies are actually much worse than
pyramid schemes this week's lesson was sponsored by curiositystream curiosity stream is a a home to
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and you will save 25 off the second reason why mlms are worse than people the second reason
why MLM are worse than pyramid schemes is because even the people at the very top of these companies
don't make their fortunes from the business itself the most effective marketing for these companies
is the lavish lifestyle of their high-ranking members that will be splashed all over social
media and shown off at the company-wide seminars to further sell this image of Financial Freedom
and a luxury Lifestyle the companies will award members with arbitrary ranks within the company
for Amway it works kaiwani and Asana these rings are named after precious gemstones Ruby Sapphire
emerald and diamond for Herbalife the ranks are ironically named after executive positions
in a normal company supervisor President Chief Executive and founder hiring game members will
be awarded with additional bonuses and perks like free cars expensive jewelry and luxury vacations
to Exotic locations they are obviously encouraged to show off these perks as further proof of their
financial success but even at the very top of a scheme a lot of members struggle financially all
MLM companies operating in America are required to provide income disclosure statements that display
the earnings of their members and wait the largest MLM company in the world reports set the top one
percent of their independent business owners make an average revenue of eighty seven thousand four
hundred and twenty two dollars in median revenue of fifty six thousand and ninety six dollars those
numbers are slightly above typical for an entry level professional but that is just Revenue in
an alarming amount of cases it's the people in the top one percent of these schemes that lose out the
most financially as part of running a multi-level marketing business independent business owners are
expected to spend a lot on the company's products for their own personal consumption Representatives
often espouse lines like becoming a product of a product monthly spending on these products can be
hundreds of dollars in addition to this expense high-ranking members are expected to spend money
on material displays of wealth to lure people into the lucrative business opportunity in order
to maintain their artificial rank members of mlms are also required to maintain a level of business
volume every month members are conditioned to cover these arbitrary ranks by the company and
other members in the scheme motivated by the fear of losing their rank members will make up the
difference by personally purchasing extra products that they convince themselves they can sell later
a markup you make a little not much not enough to pay the bills that are racking up you make money
from signing people this creates a problem so common that it has its own name garage qualified
where high level members qualify for the rank because of the boxes of product piling up in
their garage so people buy product more than they can then they can sell it sits in a garage
what happens there's got to be an end point here at some point when they run out of money
the financial figures seen on the FDC disclosure statements are top-line Revenue figures and do not
account for all additional expenses which means even Top members end up struggling financially
back when Vice was good they conducted a series of interviews with former top representatives
from Lulu Rowe a multi-level marketing company that sold clothing and accessories the women
who were all at one point in the top one percent of the company were financially destitute after
running up credit card debt to keep up appearances for people beneath them in the business they like
lularoe and vice media for that matter are all now bankrupt but maybe I'm not being totally fair
here there are a few people in these schemes that do make millions of dollars every year not just
in Revenue but in bottom line profit the only problem for everybody else is that they don't
make it by working the business roughly the top 50 members from every company have all figured
out one way to reliably make money in an MLM and it is obviously at the expense of everyone else
you are not selling clothes you are giving people Freedom you are giving people life you are giving
people hope you were giving people confidence I wasn't alone in in receiving merchandise that
I just was not able to sell to anyone because it was crap a business that is full of people
that want to get rich quick and look up to high ranking members as role models and mentors is
the perfect opportunity to sell overpriced books seminars and courses Top members and mlms will
host conferences where aspiring members can pay hundreds or even thousands of dollars to attend
weekend events to listen to Live speeches by top-ranking members in addition to these
events members will be encouraged to buy books and CDs to share with other people they try to
recruit for the people at the top it's a win-win only it's them that's winning twice they generate
additional Revenue with much higher margins by selling tickets to these events and the whole
thing is set up to make people more invested in the business opportunity that they sit at
the top of unfortunately for everybody else in the scheme the seminars books courses CDs and training
sessions become yet another expense that reduces their already modest income the third reason that
multi-level marketing companies are worse than pyramid schemes is because they intentionally do
much more than just Financial damage new recruits and multi-level marketing companies are told to
leverage their existing contact Network of friends and family members to find customers to sell
product to or to sign up as members themselves underneath them unless you have been living under
a rock you have probably already heard about multi-level marketing companies and they're
damaging business practices and so is everybody else so finding people willing to support the
scheme is harder than most new recruits expect the group's most open to multi-level marketing
companies are therefore isolated cultural groups that are less aware of this industry's reputation
or are inherently more trusting of their own Community the business structure of multi-level
marketing companies doesn't form the shape of a pyramid they actually form the shape of multiple
pyramids each with a charismatic leader at the top these groups or networks as they are called
are heavily segregated by race and religion companies will develop Mormon teams Latin
American teams African-American teams and Asian American teams as the dream of the business can
be sold by using customs and pressures unique to each culture opportunity for anybody everybody and
Latinos grabbed it a little stronger and all of a sudden all the you know non-latinos are seeing
these guys rise up you know making money getting getting recognition and going well what are they
doing Mormons are overrepresented in MLM companies because the culture values women staying home to
raise children this gives them few opportunities to earn an income for themselves making the MLM
pitch of making money from home more enticing Mormons also have a strong social network of
other Mormons who inherently trust one another so these schemes do very well in this community there
are over 70 MLM companies located in Utah alone multi-level marketing companies are also over
represented in migrant communities when moving to a new country most migrants want to find
people they can socialize with and ways to make additional income and malamps pretend to offer
both since the whole system is built around social relationships it can be very hard for people to
leave the scheme after they figure out that they will never make money members are told to cut off
Communications with friends or family who don't join the business or buy their products because
they are a negative influence on their journey to become a successful entrepreneur the actual reason
high ranking members encourage their new recruits to do this is because they know friends and family
are the people most likely to talk them out of the business and if they can cut them off from
their normal Social Circles they will become dependent on the business for something more
important than even money human connection people heavily involved in these businesses struggle to
maintain any friendships outside of their Network combined with the social pressures from letting
down members of the community it makes leaving the business extremely difficult pyramid schemes
do ruin people financially but they don't ruin them as badly and they don't ruin their
relationships at the same time the bonus fourth reason why mlms are worse than pyramid schemes is
because pyramid schemes have never worked in the shadows to subvert democracy or run the world's
largest mercenary organization the two families that founded Amway have done a lot with their
multi-billion dollar fortunes and not much of it is good so go and watch my other video over
on how history Works to find out how two school friends started the world's largest MLM company
made friends with the presidents to keep it legal and use their fortunes to fund some side projects
somehow even more damaging than Amway itself and if you want to watch these videos a day
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