You know, there is a very specific modern anxiety
that I don't think existed 20 years ago. It's
a very particular feeling. It happens when your
phone buzzes, you look down and you see a notification
from someone you haven't spoken to since like
10th grade biology class. Oh, I know this feeling.
The dreaded blast from the past notification.
Right. And for a split second, your brain goes
to a nice place. You think, oh, look at that.
Sarah from Homeroom is reaching out. She probably
wants to reconnect, maybe catch up on the last
15 years. Yeah. A genuine connection. And you
open the message. And it starts with, hey, girl,
I hope you're doing amazing. I was just looking
at your profile. And I thought you had such a
great vibe. And your stomach just drops. Because
you know. You know immediately that Sarah does
not care about your vibe. Sarah's not asking
about your kids. Nope. Sarah's about to pitch
you an opportunity. She wants you to be your
own boss. Yes. Or she wants to sell you leggings.
Or essential oils. Or a weight loss shake that
tastes like chalk and ambition. Exactly. Welcome
back to the Deep Dive. Today, we are tackling
that feeling. We are diving into the world behind
that Hey Hun message. We're talking about multi
-level marketing. MLM. And I have to say, looking
at the stack of research you've brought to the
table today, this goes a lot deeper and gets
a lot darker than just annoying Facebook messages.
It really does. It's a topic that sits right
at this weird, uncomfortable intersection of
business, psychology, and... the law. And honestly,
the hey -hen message is just the very tip of
the iceberg. The tip of the iceberg, how? When
you dig into the government investigations, the
lawsuits and the financial disclosures we have
here, you find a massive gap. A gap between what?
A gap between the promise, the financial freedom,
the yacht, the retiring your husband, the mathematical
reality of what actually happens to the money.
The promise versus the reality. That is really
the hook for today, isn't it? It has to be. Because
let's be honest, nobody signs up for these things
saying, I can't wait to annoy my friends and
lose $5 ,000. No, of course not. They sign up
because they are being sold a dream. The pitch
is almost never about the soap or the vitamins.
Really? Not at all? I mean, if you look at the
marketing materials we have from the Direct Selling
Association and these individual companies, the
product is often completely peripheral. So what's
the real product then? The real product on offer
is the lifestyle. It's... Fire your boss. It's
time freedom. It is the lifestyle you deserve.
Which is a powerful pitch. We all want that.
But today we are going to be the buzzkills. We're
going to look past the marketing pitch and look
at the mechanics. Right. We've got a stack of
sources here. We're talking FTC rulings, independent
studies, government inquiries from the UK and
industry data. And we are going to try to answer
a few. basic questions like how does this model
actually work yes and what are the real odds
not the instagram odds the real odds of making
money and the big one why if the numbers are
as bad as they look yeah is this industry still
legal exactly and i think we need a quick tone
check before we dive in we aren't here to mock
the people who join these things no absolutely
not that's not the point Many people view this
as legitimate entrepreneurship. They're trying
to better their lives, support their families,
maybe pay for dance lessons or a new car. They're
chasing a dream. They are. But the source material
we are working with today presents some very
heavy criticism and some truly stark statistical
data regarding financial losses. So we're going
to look at this trickly through the lens of the
available data. OK, so let's strip it down to
the studs. What exactly is multi -level marketing?
If I'm explaining this to my skeptical uncle
at Thanksgiving who thinks everything on the
internet is a scam, how do we define it? Okay,
so at its core, MLM is a marketing strategy.
But it's a specific kind. It's a system where
a company decides we aren't going to hire a sales
team and we aren't going to pay for TZ commercials
or put our stuff in Walmart. Okay, so how do
they move the product? No ads, no stores? These
are non -salaried workforce. These are independent
participants. Independent, so non -employees.
Right. They don't get benefits. They don't get
a guaranteed check. They have titles like associate,
independent business owner, or affiliate. Which
sounds very corporate and official. It's designed
to. But the key differentiator, the thing that
makes it MLM and not just, you know, selling
knives door to door, is how they get paid. The
compensation plan. Right. And this is where we
have to talk about shapes. Because the earnings
come from a pyramid -shaped or binary commission
system. You said the P word. Pyramid -shaped.
We are going to be using that word a lot today,
I have a feeling. We are. But, strictly speaking,
regarding the money. There are two streams. Okay,
two streams. Stream one is the traditional one,
direct sales. You have a bottle of vitamins.
You sell it to your neighbor, Bob. You earn a
commission. Simple. That sounds like normal retail.
That's like Avon lady from the 1950s, right?
Ding dong, here's your lipstick. Exactly. And
if it stayed there, we wouldn't be doing a deep
dive on it. That is just commerce. But there's
a second stream. But it is the second stream
that defines MLM. Participants also earn commissions
based on the wholesale purchases made by other
sellers they have recruited. This is the downline.
Correct. So you recruit Bob. Bob recruits Sarah.
Sarah recruits Mike. You are now earning a slice
of everything Bob, Sarah, and Mike buy from the
company. So their purchases generate a kickback
for me. Exactly. You are incentivized to build
this chain of distributors beneath you. So visually,
like... Take a picture for everyone. I at the
top, I'm the blue individual in the diagram they
always show. And I'm getting paid off the red
members below me and the people they bring in
and so on. That is the visual often used in the
explainer videos. And this is where the incentive
structure gets really interesting. Because if
you look at the compensation plans, and we have
looked at a few for this deep dive, the system
is designed to incentivize recruiting others
just as much, if not more, than selling the actual
product to a real customer. Why is that? Why
not just sell the soap? It seems simpler. Because
of leverage. Think about it. If I sell a bar
of soap, I make, say, a dollar. But if I recruit
10 people who each sell a bar of soap and I get
50 cents from each of them, I made $5 without
doing the selling myself. The system pushes you
to build the tree, not to move the inventory.
The focus shifts from sales to recruitment. Entirely.
And that leads to a really common point of confusion
that I want to clear up right now. Is MLM the
same thing as direct selling? Yes. The terminology
game. Because I hear these terms used interchangeably,
but I also hear people in the industry get very
defensive about the distinction. It is a murky
area. It's a bit of a squares and rectangles
situation. Some sources, like the author Dominique
Zardel, describe network marketing and multilevel
marketing as synonymous. Okay. They classify
them both as a type of direct selling. So all
MLM is direct selling, but not all direct selling
is MLM. But the industry itself tries to separate
them. Well, yes and no. Historically, it has
shifted dramatically. I found this data point
from the Direct Selling Association, the DSA,
absolutely fascinating. This is the lobbying
group for the industry, right? Their main trade
group. The big one. In 1990, only 25 % of DSA
members used the MLM business model. Only a quarter.
So the vast majority were just... Selling stuff.
The old -fashioned way. Right. Single -level
marketing. You sell a vacuum, you get paid. End
of transaction. It was companies like Kirby Vacuums
or the old -school encyclopedia sellers. I remember
those. But by 2009, get this, that number had
jumped to 94 .2%. Wow. So in 20 years, the entire
industry basically mutated. Effectively, yes.
Nearly the entire direct -selling industry became
MLM. You have companies like Avon, Tupperware
names that are synonymous with that traditional
door -to -door vibe. They eventually introduced
multi -level compensation plans. Why the shift?
Was it just more profitable? It's incredibly
profitable for the company. Think about it from
their perspective. Okay. If you are a corporation,
you don't have to pay for a sales force. You
don't have salaries, no health care, no 401k.
Right. They're independent. In fact, your sales
force pays you for the privilege of working.
They buy the starter kit. They buy the inventory
to meet their quotas. It shifts all the risk
from the corporation to the individual. All of
it. That is a brilliant business model for the
corporation. And the people at the very, very
top of the pyramid. Precisely. And the critics
argue that this shift in terminology using words
like interactive distribution or relationship
marketing is really just a way to distance the
model from the negative stigma of pyramid schemes.
Well, let's talk about that stigma. Because you
don't get a stigma like pyramid scheme without
some fire behind the smoke. We need to talk about
the economics of the opportunity. Yes. Let's
look at the numbers. Because this is where the
promise versus reality hook really comes into
play. The promise is financial freedom. The promise
is a Mercedes in the driveway. What do the stats
actually say? The stats are, honestly, they are
brutal. How brutal? According to a comprehensive
study of 350 MLM companies in the United States,
which was cited by the Consumer Awareness Institute.
At least 99 % of recruits lose money. I want
to stop you there. I want to make sure I heard
that right. Not 9%, not 19, 99. At least 99%.
One niner. So if I walk into a stadium with 100
,000 MLM participants, 99 ,000 of them are losing
money. They're in the red. Yes. And when we say
lose money, we don't just mean they didn't get
rich. We mean they have less money in their bank
account than when they started. After you factor
in their costs, they are at a net loss. That
is worse than gambling. It is. And we will get
to that comparison in a minute because it's a
really powerful one. But the key thing to understand
is that this isn't just bad luck. It's not just,
oh, most small businesses fail. No. This is a
structural necessity of the model. What do you
mean by structural necessity? Why can't everyone
just win? Think about the geometry. Think about
the money flow. For the person at the top, the
diamond, the double platinum, whatever silly
title they use, to make that million -dollar
check, that money has to come from somewhere.
It doesn't appear out of thin air. It flows up
from the bottom, from the thousands or tens of
thousands of people below them buying starter
kits and products. So for one person to win big,
a thousand people have to lose. Mathematically,
yes. The largest proportion of participants must
operate at a net loss to fund the commissions
of the tiny fraction at the top. It's not a bug.
It's a feature of the compensation plan. We have
some specific examples in the source material
that really illustrate this. I was reading through
the notes on the Amway case in the UK. This wasn't
just a blog post. This was a government investigation,
right? This was a major legal battle. The UK
government actually tried to shut them down.
In 2008, a high court judge... Justice Norris
issued a ruling that laid it all bare. And what
did he find? He found that out of an independent
business owner population of 33 ,000 people in
the UK. 33 ,000 people. A small city. Only about
90. That's 9 -0. 90 people made sufficient incomes
to cover the costs of actively building their
business. Wait. 90 people. Not 90%. Not 900.
90 humans. 90 humans. Out of 33 ,000. That translates
to a 99 .7 % loss rate. That is staggering. I
mean, I don't know what to say to that. It gets
worse. The investigation revealed that less than
1 in 10 agents, less than 10%, sold a single
item of the group's products to an actual retail
customer. So nobody is selling the soap. Nobody
is selling the soap. They're just recruiting
other people to buy the soap from the company.
And the company is the only one making money
on the product sales. That's scale, yes. And
it isn't just Amway. We have data on MonaVie
as well. That's the acai berry juice, right?
The miracle juice from the Amazon. Yes, the purple
juice that was everywhere in the late 2000s.
MonaVie's own 2007 income discanger statement,
so this is their own data they published, showed
that fewer than 1 % of participants... even qualified
for commissions. So 99 % didn't even get a check.
They paid to be in and got nothing back. Correct.
And of that tiny 1 % who did qualify, only 10
% of them made more than $100 a week. So let's
do that math. That's 10 % of 1%. So one out of
every 1 ,000 people made more than $100 a week
before costs. Before costs. Gas money, maybe?
And then look at Fortune high -tech marketing.
This is another one that got into hot water.
A big one. The FTC went after them. And their
documents revealed that 30 % of its representatives
made absolutely no money, and of the remaining
70%, 54 % made only $93 a month. Again, gross
income. And here is the kicker. That $93 a month,
that's gross income, right? That's before you
pay for anything. Exactly. And the costs are
a huge part of this that people don't see up
front. It's not just that you aren't making money.
You are actively spending money to be there.
This is the pay to play aspect. Walk me through
the costs because the pitch is usually low startup
cost, just $99 to start your business. The $99
is just the entry fee, the ticket to the game.
Okay. Then you have to buy the marketing kit.
Then you have to buy the samples. Then you often
have to pay for training seminars, conferences,
websites, back office software. And the big one
you mentioned, the monthly minimum. The monthly
minimums. Many of these compensation plans have
a rule. To stay active and be eligible to collect
your commission check, you personally have to
buy or sell a certain amount of product every
month. Let's say it's $200. Okay, so I need to
move $200 of vitamins. But what if you don't?
What if you only sell $50 worth to your neighbors?
Then I'm out of luck on my commissions for that
month. Unless you buy the other $150 worth yourself.
Oh. This is called garage qualifying. You buy
the product yourself. just to stay qualified
for a commission that might not even cover the
cost of the product you just bought. You end
up with a garage full of expiring vitamins. This
is the internal consumption issue mentioned in
the notes. Right. A major criticism of the model
is that the distributors themselves are the primary
customers. The money isn't coming from outside
the system. It's just churning inside, moving
from the lower levels up to the top. You mentioned
gambling earlier. There is a comparison in the
notes here that I think puts this into a really
sharp perspective. Yes, this comes from the skeptic
Brian Dunning. He crunched the numbers on Las
Vegas. I love a good Vegas analogy. So what's
the deal? So if you go to a casino and play the
slots or roulette. The house has an edge. We
all know that. The house always wins. Exactly.
Roughly 97 % of gamblers will lose money in the
long run. Okay, so a 97 % loss rate? That's bad.
It's bad. But in some MLMs, as we just saw with
Amway UK, the loss rate is 99 .7 % or even 99
.9%. So statistically speaking, I am safer putting
my life savings on Red 23 at a roulette table
than I am joining an MLM. In terms of simply
retaining your capital? The math suggests, yes,
the casino appears to be the safer bet. That's
incredible. And at least in a casino, you get
free drinks while you lose your money. In an
MLM, you alienate your friends and family while
you lose your money. That is a devastating way
to put it. But it brings us to the big legal
question. If the numbers are this bad, and if
the structure looks like a pyramid and acts like
a pyramid, is it a pyramid scheme? Why aren't
the police kicking down the doors? That is the
billion -dollar question. And the answer is...
Complicated. It's a very, very fine line. A legal
gray area. A huge one. The U .S. Federal Trade
Commission, the FTC, has a specific stance on
this. What is the official stance? How do they
define it? They say that if the money you make
is based primarily on the number of recruits
rather than sales to the public, it is an illegal
pyramid scheme. OK, so that seems clear. If you
are getting paid to recruit, it's illegal. But
we just established that the compensation plans
incentivize recruiting. So how do they get away
with it? Because they sell a product. This is
the legal shield. As long as there is a tube
of lipstick or a bottle of vitamins changing
hands, the companies argue that they aren't pyramid
schemes. They're just multilevel marketing. So
the product is like a get out of jail free card.
In many ways, yes. It provides the veneer of
a legitimate retail business. The key question
for regulators is, is this product being sold
to real customers or is it just being consumed
inside the distributor network? And that must
be incredibly hard to prove. Very. But the danger
of pyramiding, as the FTC calls it, is the burn
rate. The burn rate. Schemes collapse when no
new distributors can be recruited. It's called
market saturation. If I recruit five people and
they each recruit five people and they each recruit
five. The numbers get huge fast. Exponentially.
Yeah. By the time you get to the 13th or 14th
layer, you have exceeded the population of the
earth. So eventually you run out of humans. Exactly.
And when you run out of humans to recruit, the
bottom falls out. The new recruits can't find
anyone to sign up, so they quit and lose their
investment. And the people just above them stop
getting commissions, so they quit. It creates
a collapse from the bottom up. But these companies
operate openly. They're in all 50 states. They
have naming rights on stadiums. How do they survive
without collapsing? Well, many of them walk a
legal tightrope. And there's a constant churn
of new recruits replacing those who quit. But
to understand how they stay legal, we have to
look at the landmark cases. The biggest one.
is arguably Henry Amway Core from 1979. This
is the grandfather of all MLM cases. What happened
there? The FTC investigated Amway. And in a decision
that shaped the entire industry, they found that
Amway was not illegal per se. Not illegal? But.
And this is a big but. They were found guilty
of price fixing and making exaggerated income
claims. So false advertising about how much money
people could make. Exactly. But the ruling essentially
established that multilevel marketing could be
a legitimate business model if certain retail
sales rules were followed. Things like requiring
distributors to sell to actual retail customers.
So 1979 gave them the green light as long as
they followed a certain playbook. It gave them
a playbook. It created a legal path for MLM to
exist. But not every company follows the playbook.
Right. Let's talk about the ones that got caught.
Fortune high -tech marketing, for example. You
mentioned them earlier. Fortune high -tech is
a great example of what happens when you cross
the line. They were eventually declared a pyramid
scheme by the FTC and several states. What were
they doing wrong? The courts found that the vast
majority of the money was coming from signing
up new recruits, not from selling their products,
which were things like satellite TV services
and home security. So they failed the FTC's main
test. They failed it spectacularly. The FTC stepped
in, shut them down, and returned checks totaling
more than $3 .7 million to the victims. That's
a lot of money, but I bet it was a drop in the
bucket compared to what people lost. Oh, absolutely.
A tiny fraction. And then there is Vemma. The
energy drink company? I remember seeing those
cans everywhere on college campuses. Vemma Verve?
That was their target market. College students.
They pitched it as an alternative to a summer
job. Don't go to class. Start a business. That's
a tempting pitch for a 19 -year -old. Very. But
the FTC went after them hard. They filed a complaint
and got a temporary restraining order, essentially
freezing their assets. And what was the outcome?
They eventually settled, and the court order
required Vemma to restructure their business
completely. What did the order say? What did
they have to change? This is crucial. It required
that a majority of sales be made to the general
public, not to the distributors themselves. And
they were banned from making the kinds of income
claims that got them in trouble. So it's an enforcement
of that customer versus recruit distinction we
talked about. You have to prove people outside
your system are actually buying your stuff. That
is the heart of it. It's interesting to look
at how other countries handle this because the
U .S. seems to have a legal until proven otherwise
approach. It feels very libertarian. Let the
buyer beware. It is. But looking at the international
landscape, it is very different. Very different.
If you want to see the polar opposite of the
U .S. approach, look at China. What is the situation
in China? Multi -level marketing, as we know
it, is strictly banned there. A total ban, like
no Amway, no Herbalife. How does it work? Well,
it's complicated. The practice itself, the multilevel
payment structure, was prohibited in 1998. The
government cited social, economic, and taxation
issues. They essentially viewed it as disruptive
to the social order. Disruptive to the social
order. That sounds intense. They followed up
with further regulations in 2005. specifically
prohibiting the downline structure in chain recruitment.
So you can't have that tree of compensation.
Correct. Clause 3 of Chapter 2 of the regulation
explicitly states that having downlines and paying
based on recruitment is illegal. But I know for
a fact that big MLM companies operate in China.
I've seen the sales figures. It's a huge market
for them. How do they do that if it's illegal?
They adapt. Or they try to circumvent. Some companies
obtain direct sales licenses, which are permitted
but strictly regulated. How are those different?
These are only allowed for specific product categories
like cosmetics, health food, and kitchen utensils.
And crucially, they're supposed to operate on
a single -level commission structure. So they
have to strip out the MLM part to operate legally.
They have to act like normal retail companies.
Theoretically, yes. They're supposed to operate
as single -level direct sellers. But sources
suggest some sellers circumvent this by establishing
bank accounts in Hong Kong, where the practice
is legal, while recruiting on the mainland. It's
a constant cat and mouse game between the regulators
and the companies. It seems like governments
everywhere are struggling to pin this jelly to
the wall. They are. Bangladesh and Saudi Arabia
have also banned or declared MLM illegal. And
the Philippines has a system where they issue
a seal of legitimacy for companies they deem
are not pyramid schemes, though it's not mandatory.
Saudi Arabia is interesting because their legal
system is based on religious law. We should circle
back to that. Yes. And we will touch on the religious
reasoning there in a bit. But I want to pivot
to the psychological aspect of this. OK. Because
we've talked about the mass and the math says
don't do it. We're talking about the law and
the law says it's risky. But despite the bans,
despite the 99 percent loss rates, people still
join. Millions of people. Why? That is the million
dollar question. If I told you, hey, come play
this game, you have a 99 percent chance of losing
your money, you'd walk away. But people don't
walk away from MLMs. They run toward them. That
is where we get into the psychology of the pitch.
As we said at the start, the product is peripheral.
The true product is hope. False hope, as one
source put it. Yes. Roland Witzel, a former business
professor who studied the industry, noted that
the strongest motivational force today is false
hope. The pitch sells the dream. It hits on pain
points. Debt, dissatisfaction with work, the
desire to be present for your kids. It weaponizes
your insecurities. It finds what you're afraid
of and offers a solution. It does. But critics
and researchers have observed techniques that
go beyond just clever salesmanship. They often
describe them as cult -like. That is a strong
word. We usually associate cults with compounds
and charismatic leaders in robes. What kind of
techniques are we talking about here? It's about
control and belief. It starts with love bombing,
building intense enthusiasm and loyalty. You
walk into a seminar and everyone is cheering
for you, hugging you, telling you how amazing
you are. You feel like you belong. And we all
crave belonging. That's a fundamental human need.
Exactly. But then comes the flip side. They discourage
critical thinking. If you question the system,
If you ask about the average income, you are
told you have a poverty mindset. You are told
you are being negative. So if the business fails,
it's not because the business model is flawed.
It's because you are flawed. Precisely. It frames
success in the business as a moral virtue and
failure, as a personal lack of faith or effort.
If you fail, it's not the system's fault. It's
because you didn't want it enough. That is a
very powerful psychological trap. It's a way
of deflecting all criticism. Any negative outcome
is your fault. It is. There's also what some
researchers call the use of evangelical discourse.
Using language that sounds religious, talking
about blessings and manifesting success, it blurs
the line between business and faith. And perhaps
the most insidious part is how it exploits personal
relationships. Monetizing friendship. That's
the core of it. Yeah. We joked about the hey
hun message earlier, but it really is tragic.
You are encouraged to view every interaction
as a sales opportunity. Your friends, your family,
your neighbors, they all become prospects. They
call it your warm market. And think about what
that does to your social life. If every time
I see you, I try to sell you shampoo, eventually
you start inviting me to dinner. And then when
your outside friends pull away, who is left?
The people inside the MLM? You're upline and
you're downline. They become your new family.
They're the only ones who get it. So if you think
about leaving the business. You risk losing your
entire social network. It creates this intense
isolation that keeps people trapped, even when
they know they're losing money. Speaking of the
intersection of culture and MLM, we have to talk
about a specific geography. We have to talk about
Utah. The Utah phenomenon. It is fascinating.
I didn't realize this until I saw the data, but
Utah is basically the Silicon Valley of MLMs.
It is. It has been named the unofficial world
capital of multi -level marketing. Is that just
anecdotal or is there data there? It is backed
by numbers. Utah is home to at least 15 major
MLMs companies like Nu Skin, doTERRA, Young Living.
It has more MLMs per capita than any other state.
Why Utah? Is it the altitude, the mountains?
What's the connection? Scholars have linked this
directly to the demographics. specifically the
high population of members of the Church of Jesus
Christ of Latter -day Saints. Now, we need to
be careful here. We aren't saying the religion
causes the MLM, but there is a cultural overlap,
right? A sort of feral ground. Exactly. It's
about cultural fit. There are several factors
at play. First, think about the missionary experience.
Right. Many members go on missions when they
are young. For two years. They learn to knock
on doors, handle rejection, and present a message
with conviction. Those are straight -up sales
skills. That's sales training 101. They are transferable
skills. If you can sell a theology to a stranger
in a foreign country, you can definitely sell
a vitamin supplement to your neighbor. That makes
a lot of sense. What else? Then you have the
philosophy of self -reliance, which is a core
tenet. It aligns perfectly with be your own boss
pitch of MLM. And there is the factor of tight
knit trust networks within the community. A huge
factor. If Brother Jones from the war tells me
this is a good opportunity, I trust Brother Jones
more than I trust a TV commercial. Exactly. Affinity
fraud is the dark side of this. But even with
legitimate companies, that trust accelerates
the spread. If someone you know and trust from
church recommends something, you're more likely
to listen. And the sources mention traditional
gender roles as well as a contributing factor.
Yes. In communities where there is a strong cultural
preference for mothers to stay home with children,
MLM is often pitched as the perfect solution.
Make a full -time income on part -time hours
while the baby naps. Which brings us back to
that gap between promise and reality. Because
as we know, it's rarely part -time hours and
it's almost never a full -time income. And the
locals know this. The notes mentioned a pretty
biting acronym used by some people in Utah. Oh,
I saw this. It made me laugh, but it also made
me wince. Yes, the source notes that the initials
MLM have been sardonically reinterpreted by some
as Mormons losing money. Ouch, that's rough.
It is, but it highlights that even within the
community where these companies thrive, there
is a very real awareness of the financial pitfalls.
We touched briefly on Saudi Arabia banning MLM
earlier, but I want to go back to the religious
views, specifically in Islam, because while Utah
culture seems to, in some ways, embrace it, Islamic
finance has a very different take. A very different
take. This is a significant part of the global
picture. Many Islamic jurists and religious bodies
consider MLM to be haram or prohibited. And what
is the theological reasoning? Is it just because
people lose money? It's deeper than that. It
centers on a few core principles of Islamic finance.
First, deception. The pitch, the promise of easy
wealth, is viewed as misleading. Okay, so it's
dishonest. Yes. Second, it's considered to resemble
riba, which refers to interest or usury. And
third, and this is maybe the most important one,
garrar. Garrar. What does that mean? It means
excessive uncertainty or risk. In Islamic finance,
transactions need to be clear and transparent.
You pay for a product, you get a product. But
in MLM, the participant is paying money for a
venture where the outcome is not just uncertain,
but statistically highly unlikely. So because
the odds are so stacked against you, that 99
% loss rate, it's viewed as a form of gambling.
Exactly. It is viewed as a form of gambling or
speculation rather than legitimate trade. They
argue that the transaction is fundamentally flawed
because the participant is paying for the right
to sell and recruit rather than just trading
goods for a fair price. It is fascinating to
see how different legal and cultural systems
interpret the exact same business model. It really
is. In the U .S., it is legal until you cross
a specific line. In China, it is socially disruptive
and banned. In Islamic finance, it is religiously
prohibited deception. It really highlights that
while the mechanics, the blue person recruiting
the red person, are the same everywhere, the
interpretation of what that means for society
and for the individual varies wildly. So we have
covered the structure, the economics, the legal
battles, and the cultural impact. It is a massive
industry generating billions in revenue. Billions.
But as we have learned, that revenue is generated
on the backs of a workforce where 99 % are losing
money. And that is the central tension of this
whole deep dive, isn't it? It is a business model
that sells prosperity, but structurally relies
on the majority failing. And it has evolved.
Remember, this started with people selling perfume
and vacuum cleaners door to door. It was a simple
exchange of goods, but it has mutated into selling
the business of selling itself. And that evolution
is key. When the product becomes the opportunity,
the dynamics change completely. Which brings
us to our final thought for this deep dive. We
always like to leave you with something to chew
on, a little brain food for the road. So here
is the thought. If we accept the data and the
data from government sources and the companies
themselves, it's pretty clear that distributors
are often the primary purchasers of the product.
Buying starter kits, garage qualifying, monthly
minimums, all of that. If they are the ones buying
the stuff, we have to ask a fundamental question.
Who is the customer? Exactly. If the primary
customer of an MLM is the distributor and the
primary product being sold is the opportunity
rather than the shampoo or the juice, does the
business model actually rely on the physical
product at all? Or is the product just a legal
prop, a MacGuffin, if you will? Is it just there
to satisfy the FTC while the real business is
simply the transfer of money from the people
at the bottom to the people at the top? It changes
how you look at that next Hey Hunt message, doesn't
it? When you are offered an opportunity, maybe
the first question to ask yourself is, is the
revenue coming from a customer or is it coming
from a recruit? That is the question that defines
the line between a business and a scheme. That
is all for this deep dive. Thanks for listening.
And seriously, check out the show notes if you
want to see the graphs on that Amway data. It
will blow your mind. It really will. We will
catch you on the next one. Goodbye.