Comparing MLM success rates with no-product pyramid schemes and gambling
IMPORTANT: The estimates in Table 1 below are based on our careful analysis of reports published by the MLM companies themselves. These extraordinary loss rates were derived by removing typical deceptions from the reporting of these recruitment-driven MLMs1. Before forming your own conclusions, you are urged to perform your own research and calculations based on actual company data, which all MLM companies should provide for prospects.
The odds of profiting by investing in a clearly illegal no-product pyramid scheme2 (with all winners re-investing) is approximately –
- 667 times as great as the odds of profiting after enrolling as an Amway/Quixtar “distributor”
- 111 times as great as the odds of profiting after enrolling as a Nu Skin “distributor”
- 69 times as great as the odds of profiting after enrolling as a Melaleuca “distributor”
The odds of winning from a single spin of the wheel in a game of roulette in Las Vegas*** is approximately –
- 286 times as great as the odds of profiting after enrolling as an Amway/Quixtar “distributor”
- 48 times as great as the odds of profiting after enrolling as a Nu Skin “distributor”
- 22 times as great as the odds of profiting after enrolling as a Melaleuca “distributor”
Similarly, the odds of winning with a single bet on snake eyes in a game of craps in Las Vegas are far greater than the odds of profiting from any of these MLM programs. In fact, the odds of earning a comfortable "residual income" from virtually any MLM is no greater than the odds of throwing three sets of dice and getting snake eyas all three times!
Contrary to popular belief, the worst pyramid schemes are product-based – or recruiting MLMs*, such as the ones listed above. One can do far better gambling in Las Vegas. We're not promoting gambling - just fair trade practices, as manifested in legitimate business opportunities (as opposed to phony MLM chain selling schemes, or product-based pyramid schemes). The US Cult Expert, Steve Hassan, has seen many MLM participants require professional intervention.
|MLM COMPANY3||Approximate percentage of MLM participants who
LOSE MONEY4 (spend more than they receive)
|Approx. percentage who realize a profit4 after all expenses|
|RENAISSANCE (RTTP) - defunct||99.98%||0.02%|
BIG PLANET/ ETC.
|TELCOM CO. - defunct||99.92%||0.08%|
1 A “recruitment-driven MLM” is a multi-level marketing (MLM) program that uses a compensation plan that allocates the majority of its payout to participants to those who recruit a large downline of participants, rather than to front-line sales persons for sales to persons not participating in the scheme. I have analyzed the compensation plans of over 400 MLM’s, all of which were found to be recruiting MLM’s, in which participants must aggressively recruit a large downline to profit significantly. Based on more recent data from the companies themselves, the loss rate for recruiting MLM’s is approximately 99.6%; i.e., 99.6% of ALL participants lose money after subtracting all expenses, including purchases from the company. Read about the “5 Red Flags” in the compensation plan that signal it is a recruitment-driven MLM – as are virtually all MLMs.
2 The odds of profiting from a classic 1-2-4-8 no-product pyramid scheme increases from 6.7% to 12.5% for those who drop out after completion of a pyramid cycle; i.e., without reinvesting in a new pyramid. For references and public records used as bases for these calculations, see the author’s research reports posted on this web site. 3 Gambling statistics were obtained from Caesar’s Palace in Las Vegas.
3 Last updated in approximately 2006, although the statistics tend to remain fairly constant over time becasue the compensation systems that produce these results rarely change.
4 The estimates are based on our careful analysis of reports published by the MLM companies themselves. These extraordinary loss rates were derived by removing three sources of deception from the reporting of these MLM’s:
(1) the practice of not counting ALL who signed on as distributors (agents, consultants, etc.) in the population of recruits who attempted to make the program work for them, but instead counting only those still “active;” i.e., deleting all dropouts in the calculation,
(2) not subtracting expenses, especially products and services purchased from the company to qualify for commissions, plus minimal operating expenses, and
(3) assuming legitimate sales of products (to customers not in the network) that did not occur.You may also want to read how Jon Taylor discovered the abysmal loss rate of MLM in chapter 1 of his new e-book titled The Case (for and) against Multi-level Marketing.