By Jon M. Taylor, MBA, Ph.D
The administrators of a boarding school decided to start a petting zoo to give the children direct experience with nature. They gathered a few animals in a trial run with the first group of youngsters. Everything went fine, until several of the children showed scratches on their arms. Upon investigating, they discovered that the culprit was a spotted cat.
After careful deliberation, it was decided not to allow any spotted animals in the petting zoo. Other animals were brought in – frisky dogs, big beautiful cats with stripes or furry manes, darting lizards and wonderful crocodiles with snouts as longas the children, birds that chirped and giant birds with hoont birds with hooked beaks, garden snakes and snakes that were as big around as a watermelon and as long as a cottage, and white bears with giant paws for walking on the snow. The children would be safe because none of the animals had spots on them. This wonderful collection of animals was sure to amuse these children and to be a big hit with their parents when they returned in the spring to pick them up.
The administrators felt comfortable leaving groups of children in the petting zoo for long periods of time because they had taken great care to exclude all spotted animals. However, when the parents returned to pick up their children, they were missing. What could have happened to them? The administrators knew the animals were not to blame because they had double-checked to make absolutely certain that none of them had spots. They assured the parents that wherever the children were, they must be all right.
What was the problem? No one knew. And no one did anything—because none of the children complained.
Interpretation of the Parable of the Missing Children
The administrators are legislators and those in law enforcement charged with protecting consumers from unfair and predatory business practices. The children are the victims of product-based pyramid schemes. The tell-tale spots of the supposed villains are the products and people connected with the MLM’s and the “rules” for legal compliance by participants.
MLM promoters have duped almost everyone into evaluating their programs by their “great products” (usually potions and lotions), by company “rules” requiring a minimum percentage of their purchases be sold at retail (“the Amway rules”), by seemingly liberal “buy back” policies, by the sterling credentials of their leaders, by their generous contributions to worthy causes, etc., etc. These are like selecting the animals for the petting zoo and judging how safe they are by whether or not they have spots. One should look instead at the compensation plan, especially rewards for the recruitment of participants into a chain of recruiters recruiting persons who are given incentives to buy products and recruit still more participants into the scheme. The villain – the chaining of participating buyers in the “plan” – is analogous to the animals that ate the children.
Conclusion – the Real Villain Is a Compensation Plan Built on an Endless Chain of Recruitment.
The real villains (the ones eating the children in the parable) are SCHEMES WHICH REWARD ENDLESS CHAIN RECRUITMENT OF BUYERS, that inherently constitute an unfair trade practice. Their compensation plans require people to pay money (mostly in the form of product purchases) in order to “play the game.” Though they can merely buy and sell products without recruiting, this is just a ruse, which becomes apparent in studying the compensation plan to see where the emphasis is – sales or recruiting. Recruits advance up the ladder of rewards in commissions, bonuses, and discounts by recruiting into an endless chain of recruiters recruiting recruiters, each of whom are likewise buying quantities of products to “play the game” – with exorbitant rewards going to those at the top of the pyramidal hierarchy of “distributors,” “associates,” etc. – all of whom got there by aggressive recruiting or by being one of the founding distributors.
So I would advise you to find out from the person who recruited you if you can likewise recruit others into “the plan,” and then if they can in turn recruit others, ad infinitum. Also. watch for inducements to buy products outright or by subscription without actual orders in hand. If so, you are looking at an endless chain marketing scheme, or what I would call a product-based pyramid scheme. Selling pencils on a street corner would be a more profitable business option than MLM for all but a tiny few at the top.
And remember, the best opportunities are not those seeking you out. The best income opportunities are those you diligently search out and discover yourself, based on your own talents, means, and resourcefulness.
Almost no one at the entry level of the chain in MLM earns enough to report a profit on their taxes from selling products direct to consumers. This has been confirmed by surveys of hundreds of tax professionals, who have prepared tax returns of thousands of MLM participants. And from research on available documents, we have learned that the percentage of people who lose money from participation in almost all MLM’s is even higher (approximately 99.9%) than for those who participate in classic illegal (no-product) pyramid schemes (about 90%). A person can expect much better odds of success at most of the gaming tables in Las Vegas.
When you understand it, MLM (or “network marketing”) is the perfect con game. The very people who are its victims are also out recruiting until they run out of money and drop out. But they seldom complain to authorities, believing “failure” to be their fault – or fearing consequences from or to their upline (which may be a close friend or relative). Few have the insight to see that the fault was primarily in a inherently FLAWED SYSTEM– an unfair trade practice.
In the regulatory field of consumer protection, the squeaky wheel gets the grease. Since few complain, little if any action is taken. So the game goes on, with no referees to cry “foul” – just a few whistleblowers like us.
MLM’s have virtually taken over the DSA (Direct Selling Association), which works to convince consumers and regulators that MLM’s are direct sales companies. However, when dealing with MLM’s, or product-based pyramid schemes, remember that a pig is still a pig, regardless of how much money, effort, and politicking go into making it appear to be a horse. The typical MLM is no more a direct sales company than a pig is a horse.
Challenge – Start an Endless Chain of Truth-telling.
I hope this information helps you in your decision about MLM participation. Please let us know – and pass on what you’ve learned to 5 people you know. Then please ask each of them to tell 5 people about what they learned. Ask each of them in turn to tell 5 more, and each of them 5 more, etc., etc. If you break the chain, terrible things could happen to you. Just jesting.
Or consider a more positive way of looking at it: Why not beat the MLM promoters at their own game? Use the handy Answer Cards or consider other Actions You Can Take provided on this site. You would be part of an endless chain of truth-telling – in which no one gets hurt.