Like pyramid schemes, Multi-level marketing companies are dependent on heavy recruitment. It takes a lot of energy and charisma to succeed with a multi-level marketing company. Succeeding in MLM requires the ability to sell the dream of financial independence, although MLM is perhaps the least efficient way to achieve that goal. Here’s how a pyramid scheme and an MLM are similar and how they differ.
MLM and A Pure Pyramid Scheme.
Multi-Level Marketing companies are structured like pyramid schemes.
In a pure pyramid scheme, there is no product and nothing of value is created or exchanged. People simply pay to join and the entire organization exists because of aggressive recruitment.
Why Do People Join MLMs?
Why would people join if there is nothing of value? They join because they have been sold a dream of financial independence.
When you are sold a dream of financial independence, you respond emotionally. Your greed is triggered. Once you respond with greed, it’s like you had a lobotomy, you cannot think clearly.
That’s how MLM recruiters get you. They sell you a dream about financial independence and you hand them your money.
A charismatic personality selling the dream can practically vacuum money out of people’s pockets. I have known people to mortgage their home to join such schemes.
Because a pyramid scheme is so profitable, companies want to take advantage of it. The problem is it’s against the law.
The Difference Between an MLM & a pyramid scheme
The legal definition of a pyramid scheme is based on whether a business offers a legitimate product and to what degree the profit of a business is dependent on recruiting.
Although MLM companies are organized like pyramid schemes, MLM companies have products, so technically, they are legal. However, like pyramid schemes, most MLM companies are heavily dependent on recruiting.
Financially, there is often very little difference between a pyramid scheme and an MLM company.
For example, a pyramid scheme might charge a $100 a month for someone to be a member and there is no product. That’s illegal. On the other hand, an MLM charges someone $105 a month for $5 worth of vitamins and that’s legal.
In both cases, about the same amount of money flows from the bottom of the organization to the top.
Selling the Dream.
Typically, both pyramid schemes and MLM companies recruit people by selling the dream. They both pitch greed.
If you are considering a so-called MLM opportunity, ask yourself, is it only because you want to be financially independent?
The truth is, very few people achieve financial independence with MLM. Most people lose money with MLM and quit after a few weeks. MLM companies know this and will try to wring as much money out of you as they can before you quit.
John Oliver Demonstrates How MLM Works.
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