THE PERILS OF PYRAMIDS AND MULTILEVEL MARKETING (MLM)

Pyramids look wonderful … as you get to the top. But

• there’s not much room at the top
• the journey isn’t easy
• not everyone likes heights

The masses at the bottom do the work and hold up the structure. Why? Perhaps they’re drawn by the lure of riches. Perhaps they’re forced as in Orwell’s 1984.

If you’re a slave, you may wish to be the master. That won’t end slavery or the plight of the slaves. You might not enjoy the riches unless you ignore the source.

Something For Nothing

A high civilization is a pyramid: it can stand only on a broad base; its primary prerequisite is a strong and soundly consolidated mediocrity.
--- Friedrich Nietzsche

We know of people who are much more financially successful than we are. They seem to enjoy pleasant lives and probably do. Their rewards look outsized. Why can’t we make a fortune … without the risk and hard work?

CHAIN LETTERS

They say the Pharaohs built the pyramids. Do you think one Pharaoh dropped one bead of sweat? --- Anna Louise Strong (1885-1970)

Did you ever get caught up in a chain letter? You send a dollar to someone higher up, add your name to the letter and send copies to your connections immediately. Eventually your rank in the pyramid grows and you start receiving dollars too. At least that’s the promise. Those who don’t participate get bad, bad luck. The chain has both carrot and stick. Did you earn enough to cover the cost of postage?

Pyramids are based on false expectations of rewards. The risks get downplayed. The work looks trivial. Besides, you’ll get trained. Success seems guaranteed. We look like fools if we don’t participate (and perhaps like fools if we do). All we need is a credit card. We’ll earn the money back in no time.

Even big institutions get fooled. TD Bank has set aside $255 million for the pyramid-like Rothstein scam.

Multilevel Marketing

The current legal version of pyramid structures is often called multilevel marketing (or less descriptively as network marketing or referral marketing).

“MLM companies have been a frequent subject of criticism as well as the target of lawsuits. Criticism has focused on their similarity to illegal pyramid schemes, price fixing of products, high initial start-up costs, emphasis on recruitment of lower-tiered salespeople over actual sales, encouraging if not requiring salespeople to purchase and use the company's products, potential exploitation of personal relationships which are used as new sales and recruiting targets, complex and sometimes exaggerated compensation schemes, and cult-like techniques which some groups use to enhance their members' enthusiasm and devotion.” --- Wikipedia

Does any of that sound familiar?

The real rewards often come from recruiting. That takes real work and is difficult to sustain. Yet we want to believe we have a reserved spot on an express escalator to the top of the pyramid. That makes us vulnerable and later less trusting. And less trusted.

Links

• Wikipedia: pyramid scheme, multilevel marketing,
• 13 questions to evaluate an investment that’s “too good to be true”
• Donald Trump: Too good to be true
• Richard Branson: when your servant is your master
• Rich Dad, Poor Dad: Who can you trust?
• Observations fro the Toronto Franchise Show
• Three (boring) reasons the rich get richer
• TD Bank and the Rothstein Ponzi
• Secrets to billionaire success

Podcast 160

direct download | Internet Archive page | iTunes

PS You may have better luck with a franchise or lottery tickets.