WEBVTT 00:00:00.000 --> 00:00:01.700 You know how it starts. It's almost always the 00:00:01.700 --> 00:00:03.180 same. You're just, I don't know, scrolling through 00:00:03.180 --> 00:00:04.719 your phone looking at Instagram or something 00:00:04.719 --> 00:00:07.599 and a message pops up. Uh -huh. And it's a name 00:00:07.599 --> 00:00:09.910 you haven't seen in a while. Exactly. It's a 00:00:09.910 --> 00:00:12.529 name you recognize, but not, you know, from your 00:00:12.529 --> 00:00:15.070 day to day life. Maybe it's someone from high 00:00:15.070 --> 00:00:17.829 school biology class 10 years ago or a distant 00:00:17.829 --> 00:00:19.789 cousin you only see at weddings. The classic 00:00:19.789 --> 00:00:22.030 blast from the past. Right. And the message, 00:00:22.070 --> 00:00:25.609 it's so friendly. It's it's really enthusiastic. 00:00:25.649 --> 00:00:29.589 There are always a ton of emojis, sparkles, rocket 00:00:29.589 --> 00:00:31.710 ships, you know, the ones it starts with something 00:00:31.710 --> 00:00:35.469 like. Hey, hon, or long time no see. And you 00:00:35.469 --> 00:00:37.210 think, oh, that's nice of them to reach out. 00:00:37.329 --> 00:00:39.350 Yeah, you think they want to catch up. But then 00:00:39.350 --> 00:00:41.890 the pivot. There's always a pivot. There's always 00:00:41.890 --> 00:00:44.270 a pivot. Yeah. The small talk is just the runway 00:00:44.270 --> 00:00:46.850 for the actual pitch. And suddenly it's not about 00:00:46.850 --> 00:00:49.350 your job or your family anymore. It's about a 00:00:49.350 --> 00:00:52.270 business opportunity. They found this amazing 00:00:52.270 --> 00:00:56.390 way to achieve financial independence. And they 00:00:56.390 --> 00:00:57.829 want to share it with you. They want to help 00:00:57.829 --> 00:01:01.719 you live the lifestyle you deserve. Yes, you 00:01:01.719 --> 00:01:04.219 can be your own boss. You can retire in your 00:01:04.219 --> 00:01:07.140 30s. It's this incredible script. It is a script. 00:01:07.219 --> 00:01:10.239 And it's one that has been rehearsed and repeated 00:01:10.239 --> 00:01:12.659 millions and millions of times all over the world. 00:01:12.900 --> 00:01:18.099 It plays on these very deep, very universal desires. 00:01:18.659 --> 00:01:21.079 I mean, who doesn't want financial freedom? Of 00:01:21.079 --> 00:01:23.120 course. Who doesn't want to be their own boss? 00:01:23.579 --> 00:01:27.060 Exactly. But what they're pitching, it's almost 00:01:27.060 --> 00:01:30.379 never just the product. They are pitching a dream. 00:01:30.680 --> 00:01:34.120 And so today we are going to look past that pitch. 00:01:34.319 --> 00:01:36.200 We're going to look past the shiny Instagram 00:01:36.200 --> 00:01:39.200 posts, the cars they supposedly bought, the motivational 00:01:39.200 --> 00:01:42.260 quotes. We are doing a deep dive into the world 00:01:42.260 --> 00:01:44.079 of multilevel marketing. You probably know it 00:01:44.079 --> 00:01:46.760 as MLM. Right. MLM. Or maybe you've heard it 00:01:46.760 --> 00:01:49.000 called network marketing or interactive distribution 00:01:49.000 --> 00:01:51.439 or even referral marketing. They have a lot of 00:01:51.439 --> 00:01:53.799 names. They do. And if you talk to the critics 00:01:53.799 --> 00:01:56.650 and believe me, there is a very loud, very. data 00:01:56.650 --> 00:01:59.189 driven community of critics, you'll hear it called 00:01:59.189 --> 00:02:01.930 something else entirely, which is pyramid selling. 00:02:02.150 --> 00:02:04.370 And that's really the big question we're trying 00:02:04.370 --> 00:02:06.909 to tackle today, isn't it? Is this a legitimate 00:02:06.909 --> 00:02:09.990 path to being an entrepreneur? Is it a misunderstood 00:02:09.990 --> 00:02:12.889 business model that actually empowers people? 00:02:13.030 --> 00:02:15.669 Or is it just a pyramid scheme with a much better 00:02:15.669 --> 00:02:18.569 PR department? It feels like a complicated question, 00:02:18.689 --> 00:02:20.349 but I think you're right. The answer has to be 00:02:20.349 --> 00:02:23.180 in the data. It is. It's all in the data. We 00:02:23.180 --> 00:02:25.979 have a huge stack of sources for this one. We're 00:02:25.979 --> 00:02:27.819 going to be looking at rulings from the Federal 00:02:27.819 --> 00:02:29.979 Trade Commission, the FTC, right here in the 00:02:29.979 --> 00:02:32.099 U .S. We're going to look at some statistical 00:02:32.099 --> 00:02:35.639 studies on income that are, frankly, shocking. 00:02:35.939 --> 00:02:38.080 And we're going global, too. We're looking at 00:02:38.080 --> 00:02:42.319 outright bans in China and even religious decrees 00:02:42.319 --> 00:02:44.699 about it in Saudi Arabia. We are. We're covering 00:02:44.699 --> 00:02:47.419 the mechanics, the math, the law, and the culture 00:02:47.419 --> 00:02:49.819 that surrounds this entire industry. Okay, so. 00:02:50.360 --> 00:02:52.000 Let's start at the beginning. Let's unpack this. 00:02:52.080 --> 00:02:54.340 What exactly is multi -level marketing? How is 00:02:54.340 --> 00:02:56.080 it different from just, you know, getting a normal 00:02:56.080 --> 00:02:58.340 sales job? That's the perfect place to start. 00:02:58.400 --> 00:03:00.759 To really get the controversy, you have to understand 00:03:00.759 --> 00:03:04.879 the structure. At its very core, an MLM is a 00:03:04.879 --> 00:03:07.659 strategy where a company uses a non -salaried 00:03:07.659 --> 00:03:11.139 workforce to sell its products or services. Okay, 00:03:11.199 --> 00:03:13.979 non -salaried workforce. That's a very polite 00:03:13.979 --> 00:03:15.960 way of saying they don't get a regular paycheck. 00:03:16.300 --> 00:03:19.370 They do not. They are not employees. That is 00:03:19.370 --> 00:03:21.710 a critical point. They are independent contractors. 00:03:22.129 --> 00:03:23.870 You'll hear them called all sorts of things. 00:03:24.530 --> 00:03:27.090 Distributors, associates, independent business 00:03:27.090 --> 00:03:29.490 owners, affiliates. But at the end of the day, 00:03:29.490 --> 00:03:32.430 it means no guaranteed hourly wage, no benefits. 00:03:32.689 --> 00:03:35.569 No benefits. You eat what you kill, so to speak. 00:03:35.729 --> 00:03:37.789 Your income is entirely based on performance. 00:03:38.129 --> 00:03:40.490 Which, to be fair, isn't that unusual for some 00:03:40.490 --> 00:03:42.669 sales jobs, right? I mean, real estate agents 00:03:42.669 --> 00:03:44.650 worked on commission. Car salespeople often work 00:03:44.650 --> 00:03:47.370 on commission. That's absolutely true. But here 00:03:47.370 --> 00:03:50.289 is the critical. fundamental distinction. In 00:03:50.289 --> 00:03:53.030 a typical MLM, there are two separate ways to 00:03:53.030 --> 00:03:56.449 make money, two revenue streams. And the way 00:03:56.449 --> 00:03:59.389 these two streams interact, that's what makes 00:03:59.389 --> 00:04:01.530 it multi -level. Okay, so what's the first stream? 00:04:01.729 --> 00:04:03.849 The first stream is simple sales commissions. 00:04:04.050 --> 00:04:06.659 This is the part everyone understands. So the 00:04:06.659 --> 00:04:09.879 company makes, say, vitamins. I buy a box of 00:04:09.879 --> 00:04:12.639 vitamins from them at a wholesale price. I turn 00:04:12.639 --> 00:04:14.180 around and sell it to my neighbor for the retail 00:04:14.180 --> 00:04:16.540 price. I keep the difference. Exactly. That's 00:04:16.540 --> 00:04:18.579 the direct selling part of it. It's the, you 00:04:18.579 --> 00:04:20.699 know, the classic Avon lady model from back in 00:04:20.699 --> 00:04:23.199 the day. It's the Tupperware party from the 1950s. 00:04:24.040 --> 00:04:27.199 If the business stopped right there, we wouldn't 00:04:27.199 --> 00:04:29.180 be having this conversation. But it doesn't stop 00:04:29.180 --> 00:04:31.459 there. It does not. Because then you have the 00:04:31.459 --> 00:04:34.339 second revenue stream, recruitment. commissions 00:04:34.339 --> 00:04:37.019 ah this is where the downline comes into play 00:04:37.019 --> 00:04:39.180 this is where the downline comes in you are not 00:04:39.180 --> 00:04:41.879 just incentivized to sell the product you are 00:04:41.879 --> 00:04:45.240 incentivized and often heavily incentivized to 00:04:45.240 --> 00:04:48.519 recruit other people to join the company as distributors 00:04:48.519 --> 00:04:52.060 under you so i sign up my friend jane and when 00:04:52.060 --> 00:04:55.259 you recruit jane she becomes part of your downline 00:04:55.259 --> 00:04:58.339 now you earn a percentage of all of jane's sales 00:04:58.339 --> 00:05:02.300 but it goes deeper when jane recruits her friend 00:05:02.300 --> 00:05:05.779 bob Bob is now in your downline, too. Even though 00:05:05.779 --> 00:05:08.100 I've never met Bob. You've never met him. But 00:05:08.100 --> 00:05:10.879 you get a piece of his sales. And when Bob recruits 00:05:10.879 --> 00:05:13.699 Steve and Steve recruits Mary, you get a small 00:05:13.699 --> 00:05:17.379 piece of all of it. So you end up with this expanding 00:05:17.379 --> 00:05:20.720 triangle of people underneath you. You end up 00:05:20.720 --> 00:05:23.579 with a pyramid -shaped structure. Yes. The compensation 00:05:23.579 --> 00:05:27.019 flows up. The person at the top earns a small 00:05:27.019 --> 00:05:30.279 percentage of the total sales volume generated 00:05:30.279 --> 00:05:33.680 by the entire organization below them. And this 00:05:33.680 --> 00:05:36.139 creates something that researchers call an incentive 00:05:36.139 --> 00:05:38.519 shift. An incentive shift. Okay, break that down 00:05:38.519 --> 00:05:40.220 for me. What's shifting? Well, just think about 00:05:40.220 --> 00:05:42.439 it logically. You only have so many hours in 00:05:42.439 --> 00:05:44.839 a day, right? There are only so many boxes of 00:05:44.839 --> 00:05:46.839 vitamins you can personally sell to your friends 00:05:46.839 --> 00:05:49.259 and your family and your neighbors. Your personal 00:05:49.259 --> 00:05:51.480 sales are finite. They're limited by your own 00:05:51.480 --> 00:05:53.519 time and energy. Sure. I can only knock on so 00:05:53.519 --> 00:05:56.800 many doors. But your recruitment potential, in 00:05:56.800 --> 00:05:58.920 theory, that's exponential. If you can build 00:05:58.920 --> 00:06:01.560 a massive team of hundreds or even thousands 00:06:01.560 --> 00:06:04.870 of people, Well, then you can earn money while 00:06:04.870 --> 00:06:07.050 you sleep. That's the passive income dream they're 00:06:07.050 --> 00:06:08.949 always selling. Make money while you're on the 00:06:08.949 --> 00:06:13.670 beach. That's the pitch, 100%. So while the company's 00:06:13.670 --> 00:06:16.629 official line is that the business is about selling 00:06:16.629 --> 00:06:20.449 great products, the compensation plan, the math 00:06:20.449 --> 00:06:22.569 that actually determines how big your check is, 00:06:22.670 --> 00:06:24.990 is telling you something different. It's telling 00:06:24.990 --> 00:06:27.329 you to focus on recruiting. So you stop trying 00:06:27.329 --> 00:06:29.550 to find customers for the shampoo. And you start 00:06:29.550 --> 00:06:31.579 trying to find... Other sellers of the shampoo. 00:06:31.699 --> 00:06:34.579 The incentive literally shifts from selling a 00:06:34.579 --> 00:06:36.839 product to selling the business of selling a 00:06:36.839 --> 00:06:39.899 product. Precisely. And that creates a really 00:06:39.899 --> 00:06:42.980 fundamental and I think bizarre conflict of interest. 00:06:43.180 --> 00:06:45.560 Think about it. If you own a successful coffee 00:06:45.560 --> 00:06:48.759 shop on a street corner, the last thing you want 00:06:48.759 --> 00:06:50.680 to do is open another coffee shop right next 00:06:50.680 --> 00:06:53.759 door and teach the new owner your secret recipe. 00:06:53.959 --> 00:06:55.620 You'd be creating your own direct competition. 00:06:55.920 --> 00:06:59.509 Of course. But in an MLM. That is exactly what 00:06:59.509 --> 00:07:02.290 you are incentivized to do. You are constantly 00:07:02.290 --> 00:07:05.209 turning your potential customers into your direct 00:07:05.209 --> 00:07:07.189 competitors. Wow, I never thought of it that 00:07:07.189 --> 00:07:09.709 way. You are actively cannibalizing your own 00:07:09.709 --> 00:07:12.550 local market. You are. And you're doing it in 00:07:12.550 --> 00:07:14.410 the hopes that the small percentage you earn 00:07:14.410 --> 00:07:17.089 from their sales volume will outweigh the sales 00:07:17.089 --> 00:07:19.750 you've lost by turning them into a competitor. 00:07:20.029 --> 00:07:22.670 That feels like a very risky bet. It's a huge 00:07:22.670 --> 00:07:25.089 bet. And that brings us right to the next big 00:07:25.089 --> 00:07:28.699 topic. The opportunity versus the cold, hard 00:07:28.699 --> 00:07:31.279 math. Because when you get that hey hun message, 00:07:31.699 --> 00:07:34.420 they almost never lead with the product. No, 00:07:34.500 --> 00:07:35.939 you're right. They don't send you a brochure 00:07:35.939 --> 00:07:38.160 about the ingredients in the protein shake. Not 00:07:38.160 --> 00:07:40.180 at all. They lead with the opportunity. It's 00:07:40.180 --> 00:07:41.779 always about the lifestyle. Financial freedom. 00:07:41.939 --> 00:07:45.079 Time freedom. Retire your husband. There was 00:07:45.079 --> 00:07:46.959 a former business professor, a guy named Roland 00:07:46.959 --> 00:07:49.579 Witzel, who spent something like 40 years researching 00:07:49.579 --> 00:07:52.220 this industry. He did. And he had a really powerful 00:07:52.220 --> 00:07:55.939 insight. He said that in most MLMs, the products 00:07:55.939 --> 00:07:59.360 themselves are often, and this is his word, peripheral. 00:08:00.060 --> 00:08:02.839 They're just the vehicle. They're almost an afterthought. 00:08:02.939 --> 00:08:05.500 An afterthought. The real product being sold 00:08:05.500 --> 00:08:08.540 is the opportunity itself. And he argued that 00:08:08.540 --> 00:08:10.720 the motivational force that drives this entire 00:08:10.720 --> 00:08:14.279 multibillion -dollar industry is false hope. 00:08:14.740 --> 00:08:17.500 False hope. That's a pretty damning phrase. It 00:08:17.500 --> 00:08:20.420 is. But we have some numbers here that, well... 00:08:20.730 --> 00:08:23.050 They seem to back it up. We have access to a 00:08:23.050 --> 00:08:25.670 huge study that looked at over 350 different 00:08:25.670 --> 00:08:28.410 MLM companies, mostly here in the United States. 00:08:28.509 --> 00:08:31.069 And what did that study find? It's a stark finding. 00:08:31.490 --> 00:08:34.389 The study concluded that at least 99 % of all 00:08:34.389 --> 00:08:37.090 recruits lose money. I want to pause on that 00:08:37.090 --> 00:08:40.200 for a second because that number is just... It's 00:08:40.200 --> 00:08:42.860 hard to process. We're not saying 99 % don't 00:08:42.860 --> 00:08:45.220 get rich. We're not saying 99 % just make minimum 00:08:45.220 --> 00:08:47.860 wage. You're saying 99 % lose money. They end 00:08:47.860 --> 00:08:49.820 up with less money in their bank account than 00:08:49.820 --> 00:08:52.220 when they started. They operate at a net loss. 00:08:52.559 --> 00:08:55.000 How is that even possible? How can a business 00:08:55.000 --> 00:08:58.200 model survive if 99 % of its participants are 00:08:58.200 --> 00:09:01.440 failing? That's the paradox, isn't it? The model 00:09:01.440 --> 00:09:03.840 survives because they're failing. The failure 00:09:03.840 --> 00:09:06.519 of the 99 % at the bottom is what funds the massive 00:09:06.519 --> 00:09:08.960 success of the 1 % at the top. So it's a transfer 00:09:08.960 --> 00:09:12.049 of wealth. It is a massive upward transfer of 00:09:12.049 --> 00:09:15.190 wealth. In a pyramid -shaped compensation plan, 00:09:15.370 --> 00:09:18.409 money has to flow up. For that person at the 00:09:18.409 --> 00:09:21.230 very top to be posing with that giant oversized 00:09:21.230 --> 00:09:24.460 check on Instagram Thousands and thousands of 00:09:24.460 --> 00:09:26.159 people at the bottom have to be buying those 00:09:26.159 --> 00:09:28.539 starter kits, paying for the training seminars, 00:09:28.799 --> 00:09:31.159 and purchasing their monthly inventory quota. 00:09:31.340 --> 00:09:34.179 The bottom of the pyramid is literally subsidizing 00:09:34.179 --> 00:09:36.779 the top. That's a perfect way to put it. And 00:09:36.779 --> 00:09:38.740 if we drill down into some of the specific studies, 00:09:38.960 --> 00:09:42.620 the numbers get even more, well, more grim. There's 00:09:42.620 --> 00:09:44.379 a very famous analysis by a researcher named 00:09:44.379 --> 00:09:46.980 John Taylor. He's a huge figure in this field. 00:09:47.019 --> 00:09:50.399 He spent years analyzing the compensation plans 00:09:50.399 --> 00:09:52.240 and the official income disclosure statements 00:09:52.240 --> 00:09:54.539 of hundreds of these companies. His calculation 00:09:54.539 --> 00:09:57.000 was that the loss rate for people who invest 00:09:57.000 --> 00:10:01.399 in these companies is 99 .7%. 99 .7%. I mean, 00:10:01.419 --> 00:10:03.659 that's statistically everyone. If you just round 00:10:03.659 --> 00:10:05.779 to the nearest whole number, you get a 100 % 00:10:05.779 --> 00:10:08.700 failure rate. It is a shocking, shocking number. 00:10:09.539 --> 00:10:12.659 And to try to put it in perspective, the skeptic 00:10:12.659 --> 00:10:14.480 Brian Dunning made a comparison that I think 00:10:14.480 --> 00:10:17.360 really helps it land. He compared joining an 00:10:17.360 --> 00:10:20.019 MLM to gambling in Las Vegas. OK, I like a good 00:10:20.019 --> 00:10:22.299 Vegas analogy. Well, we all know the casino has 00:10:22.299 --> 00:10:24.700 an edge, right? The house always wins in the 00:10:24.700 --> 00:10:26.620 long run. Sure. But if you go to Vegas and you 00:10:26.620 --> 00:10:29.700 play slots or you play roulette, something like 00:10:29.700 --> 00:10:33.360 97 percent of people lose money over time, which 00:10:33.360 --> 00:10:35.519 means. You know, you have about a 3 % chance 00:10:35.519 --> 00:10:37.779 of walking away a winner. Not great odds, but 00:10:37.779 --> 00:10:39.580 it happens. You hear stories of people hitting 00:10:39.580 --> 00:10:43.500 jackpots. It happens. But in MLM, based on Taylor's 00:10:43.500 --> 00:10:47.820 data, it's a 99 .9 % loss rate. Which means, 00:10:48.059 --> 00:10:50.679 statistically speaking, you have a significantly 00:10:50.679 --> 00:10:53.019 better chance of financial success by taking 00:10:53.019 --> 00:10:55.320 your life savings to Vegas, walking up to a roulette 00:10:55.320 --> 00:10:56.740 table, and putting it all on a single number. 00:10:56.899 --> 00:10:59.399 That is insane. Because when I go to Vegas, at 00:10:59.399 --> 00:11:01.549 least I know I'm gambling. You know, I get a 00:11:01.549 --> 00:11:03.289 free drink. I see a show. It's entertainment. 00:11:03.590 --> 00:11:05.710 I don't take out a second mortgage on my house 00:11:05.710 --> 00:11:07.570 because I think I'm investing in a business. 00:11:08.029 --> 00:11:10.110 Exactly. The deception is the key difference. 00:11:10.669 --> 00:11:13.090 A casino doesn't tell you that pulling the handle 00:11:13.090 --> 00:11:16.309 on a slot machine is a legitimate career path 00:11:16.309 --> 00:11:18.889 that's going to allow you to retire early. And 00:11:18.889 --> 00:11:21.759 MLM does. Let's look at some of the specific 00:11:21.759 --> 00:11:23.759 company data, because I don't want anyone to 00:11:23.759 --> 00:11:25.639 think this is just theoretical. We've got some 00:11:25.639 --> 00:11:28.080 numbers here from Amway over in the UK. We do. 00:11:28.259 --> 00:11:30.580 And this is powerful because it wasn't an independent 00:11:30.580 --> 00:11:33.580 researcher. The UK government itself investigated 00:11:33.580 --> 00:11:37.559 Amway, and they found that only 10 percent, just 00:11:37.559 --> 00:11:40.460 one in 10 of Amway's agents in Britain, made 00:11:40.460 --> 00:11:43.240 any profit whatsoever. Any profit at all. Any 00:11:43.240 --> 00:11:45.480 profit at all. But here's the statistic from 00:11:45.480 --> 00:11:48.240 that report that really blew my mind. Less than 00:11:48.240 --> 00:11:51.039 1 in 10 Asians had ever sold a single item to 00:11:51.039 --> 00:11:53.139 an actual retail customer. Wait, hold on. Say 00:11:53.139 --> 00:11:55.759 that again. If 90 % of the salespeople aren't 00:11:55.759 --> 00:11:58.080 selling any products to customers, then who is 00:11:58.080 --> 00:12:00.039 buying all the products? The salespeople are. 00:12:00.120 --> 00:12:01.919 The distributors themselves. They are buying 00:12:01.919 --> 00:12:03.679 the products to qualify for their commission 00:12:03.679 --> 00:12:06.139 checks or because they're told they need to be 00:12:06.139 --> 00:12:08.820 a product of the product. This just reinforces 00:12:08.820 --> 00:12:12.240 that core idea. In an MLM, the distributor is 00:12:12.240 --> 00:12:14.620 the real customer. So you're the end user. You 00:12:14.620 --> 00:12:16.279 just don't realize it because they've sold you 00:12:16.279 --> 00:12:18.080 on the idea that you're a business owner. Correct. 00:12:18.480 --> 00:12:20.980 We also have some leaked data from a company 00:12:20.980 --> 00:12:24.039 called Fortune High Tech Marketing. Now, this 00:12:24.039 --> 00:12:26.059 one is interesting because they were eventually 00:12:26.059 --> 00:12:28.460 shut down by regulators, which means we got a 00:12:28.460 --> 00:12:31.039 real look at their internal books. The real numbers. 00:12:31.159 --> 00:12:33.899 Real numbers. And they showed that 30 % of their 00:12:33.899 --> 00:12:38.169 representatives made $0, nothing. And of the 00:12:38.169 --> 00:12:42.070 70 % who made something, the majority, 54 % of 00:12:42.070 --> 00:12:46.210 them, made an average of just $93 a month. $93 00:12:46.210 --> 00:12:48.309 a month. And that's gross, right? That's before 00:12:48.309 --> 00:12:51.149 you subtract any expenses. That is gross income. 00:12:51.529 --> 00:12:54.230 Before you subtract the cost of the starter kit, 00:12:54.389 --> 00:12:56.830 the marketing materials, the gas money to drive 00:12:56.830 --> 00:12:59.230 to meetings, the fees for your personal sales 00:12:59.230 --> 00:13:02.350 website, all of it. So if you're making $93 a 00:13:02.350 --> 00:13:05.210 month but you're spending $100 a month on business 00:13:05.210 --> 00:13:08.250 expenses, you are literally paying for the privilege 00:13:08.250 --> 00:13:11.649 of working for them. A 2018 poll of over 1 ,000 00:13:11.649 --> 00:13:14.570 MLM sellers confirmed this exact thing. It found 00:13:14.570 --> 00:13:16.610 that the majority of them made less than $0 .70 00:13:16.610 --> 00:13:20.090 per hour. $0 .70 an hour? You could make more 00:13:20.090 --> 00:13:22.190 money looking for loose change in your couch 00:13:22.190 --> 00:13:24.409 cushions. You absolutely could. And looking for 00:13:24.409 --> 00:13:26.029 change in the couch cushions doesn't require 00:13:26.029 --> 00:13:28.169 you to alienate all of your friends and family 00:13:28.169 --> 00:13:30.190 in the process. So this is the question that 00:13:30.190 --> 00:13:32.490 just keeps coming back to me. If the math is 00:13:32.490 --> 00:13:35.389 so, so terrible, if the odds are literally worse 00:13:35.389 --> 00:13:39.549 than a Vegas casino, how did this industry grow 00:13:39.549 --> 00:13:43.690 into a multibillion dollar global juggernaut? 00:13:43.980 --> 00:13:46.279 I mean, where did it even come from? It's a great 00:13:46.279 --> 00:13:49.159 question. And to understand the present, we really 00:13:49.159 --> 00:13:52.059 have to look back at the history. The roots of 00:13:52.059 --> 00:13:55.240 this industry go way back to the 1920s and 30s. 00:13:55.379 --> 00:13:58.080 You had these pioneering companies like the California 00:13:58.080 --> 00:14:00.120 Vitamin Company. Which became Neutralite, right. 00:14:00.240 --> 00:14:01.919 It later became Neutralite, which was eventually 00:14:01.919 --> 00:14:03.980 bought by Amway. And you also had the California 00:14:03.980 --> 00:14:06.159 Perfume Company, which everyone now knows as 00:14:06.159 --> 00:14:09.139 Avon. Avon is such a classic brand. My grandmother 00:14:09.139 --> 00:14:11.659 sold Avon. It always seems so, I don't know, 00:14:11.740 --> 00:14:14.830 normal. Harmless. And for a very long time it 00:14:14.830 --> 00:14:17.789 was. Companies like Avon and also Tupperware, 00:14:17.909 --> 00:14:20.230 they were primarily what we would call direct 00:14:20.230 --> 00:14:23.129 selling companies. And this is a really important 00:14:23.129 --> 00:14:25.250 distinction to make. Why? In traditional direct 00:14:25.250 --> 00:14:27.830 selling, the focus is almost entirely on the 00:14:27.830 --> 00:14:30.370 product. I buy a lipstick at wholesale. I sell 00:14:30.370 --> 00:14:32.169 it to my neighbor at retail. I keep the profit. 00:14:32.370 --> 00:14:34.629 It's a single level transaction. Right. There's 00:14:34.629 --> 00:14:36.909 no pyramid. There's no downline. It's just a 00:14:36.909 --> 00:14:39.929 salesperson selling a thing. Exactly. But over 00:14:39.929 --> 00:14:42.330 the last few decades, that model has shifted 00:14:42.330 --> 00:14:44.470 dramatically. The Direct Selling Association, 00:14:44.909 --> 00:14:47.769 or DSA, is the main trade group that represents 00:14:47.769 --> 00:14:51.549 all these companies. In 1990, only about 25 % 00:14:51.549 --> 00:14:54.450 of the DSA's member companies used a multi -level 00:14:54.450 --> 00:14:57.610 compensation plan. Most were still just single 00:14:57.610 --> 00:14:59.950 -level direct sellers. Okay, so as recently as 00:14:59.950 --> 00:15:02.509 1990, the pyramid structure was still the minority 00:15:02.509 --> 00:15:05.350 model. A small minority. But fast forward to 00:15:05.350 --> 00:15:08.110 2009. By then, that number had completely flipped. 00:15:08.559 --> 00:15:12.080 99 .6 % of all sellers represented by the DSA 00:15:12.080 --> 00:15:14.700 were participating in a multi -level model. Wow. 00:15:14.840 --> 00:15:18.139 So the entire industry transformed. It did. Even 00:15:18.139 --> 00:15:19.820 the legacy companies, the ones you mentioned 00:15:19.820 --> 00:15:22.360 like Avon and Tupperware, they eventually introduced 00:15:22.360 --> 00:15:24.720 their own multi -level compensation plans to 00:15:24.720 --> 00:15:27.259 compete. Why though? Was it just pure greed? 00:15:27.639 --> 00:15:31.080 I'd say it was efficiency. From the corporation's 00:15:31.080 --> 00:15:33.740 perspective, the recruitment model is incredibly 00:15:33.740 --> 00:15:36.960 efficient and lucrative. In a normal business, 00:15:37.120 --> 00:15:39.960 if I want to expand my sales force, I have to 00:15:39.960 --> 00:15:42.639 go out and hire people. I have to interview them, 00:15:42.720 --> 00:15:44.639 train them, pay them a salary, pay for their 00:15:44.639 --> 00:15:48.460 benefits. It's really expensive. In an MLM, the 00:15:48.460 --> 00:15:51.559 sales force recruits itself. It grows virally, 00:15:51.580 --> 00:15:54.620 exponentially. And not only do I not have to 00:15:54.620 --> 00:15:56.840 pay them a salary, they actually pay me for a 00:15:56.840 --> 00:15:59.059 starter kit just for the right to start working. 00:15:59.710 --> 00:16:02.450 It's genius in a really dark way. You're crowdsourcing 00:16:02.450 --> 00:16:05.210 your labor costs and you're turning your entire 00:16:05.210 --> 00:16:07.730 workforce into your biggest customer base. And 00:16:07.730 --> 00:16:10.230 as this model took over, the industry realized 00:16:10.230 --> 00:16:12.690 it had a branding problem. You know, people started 00:16:12.690 --> 00:16:14.309 to catch on to the pyramid shape. They started 00:16:14.309 --> 00:16:16.750 getting suspicious. So you see the rise of what 00:16:16.750 --> 00:16:18.970 I call semantic games. Oh, right. They're constantly 00:16:18.970 --> 00:16:22.330 changing the terminology. Constantly. To distance 00:16:22.330 --> 00:16:25.330 themselves from the fraud accusations. So it's 00:16:25.330 --> 00:16:27.889 not a pyramid scheme. No, it's interactive distribution. 00:16:28.570 --> 00:16:30.490 Or relationship marketing. I've heard that one. 00:16:30.590 --> 00:16:32.830 Social retail. Yeah. But it doesn't matter what 00:16:32.830 --> 00:16:35.490 you call it. If the compensation plan pays you 00:16:35.490 --> 00:16:38.009 more for recruiting people than it does for selling 00:16:38.009 --> 00:16:40.610 a product to the public, the underlying mechanics 00:16:40.610 --> 00:16:42.649 are still the same. Which brings us right to 00:16:42.649 --> 00:16:44.590 the elephant in the room, the legal question. 00:16:44.830 --> 00:16:46.710 I think a lot of our listeners are probably sitting 00:16:46.710 --> 00:16:49.320 there thinking, OK, if this is such a scam. Why 00:16:49.320 --> 00:16:51.220 is it legal? Why are these companies publicly 00:16:51.220 --> 00:16:53.779 traded on the stock market? Why do they sponsor 00:16:53.779 --> 00:16:57.600 sports stadiums? That is the billion dollar question. 00:16:57.879 --> 00:17:01.159 And the answer is found in a very specific and 00:17:01.159 --> 00:17:04.039 I would argue very, very gray area of the law. 00:17:04.200 --> 00:17:06.440 Here in the United States, the Federal Trade 00:17:06.440 --> 00:17:09.579 Commission, the FTC, is the main regulator. And 00:17:09.579 --> 00:17:12.940 their official stance is, well. It's nuanced. 00:17:13.299 --> 00:17:15.299 Nuanced is a very polite word for confusing. 00:17:15.700 --> 00:17:18.819 It is confusing. But the core legal distinction 00:17:18.819 --> 00:17:21.240 boils down to this. What is the primary source 00:17:21.240 --> 00:17:23.759 of the company's revenue? If the money is made 00:17:23.759 --> 00:17:26.779 primarily from recruiting new distributors, from 00:17:26.779 --> 00:17:28.559 selling starter kits and training materials, 00:17:28.779 --> 00:17:31.859 then it is likely an illegal pyramid scheme. 00:17:32.900 --> 00:17:35.200 But if the money is made primarily from sales 00:17:35.200 --> 00:17:38.619 to the public, to actual end users of the product, 00:17:39.339 --> 00:17:41.740 then it's considered a legitimate multi -level 00:17:41.740 --> 00:17:43.920 marketing business. OK, on the surface, that 00:17:43.920 --> 00:17:46.279 seems pretty straightforward. Are you selling 00:17:46.279 --> 00:17:49.420 products to real people or are you just shuffling 00:17:49.420 --> 00:17:52.180 money around inside a closed loop of recruits? 00:17:52.279 --> 00:17:55.240 Right. But here is the loophole. It's a massive 00:17:55.240 --> 00:17:57.079 loophole and it's called internal consumption. 00:17:57.380 --> 00:17:59.680 Internal consumption. OK, let's unpack that term. 00:17:59.839 --> 00:18:02.420 The MLM companies make a very clever argument. 00:18:02.500 --> 00:18:04.700 They say, hey, our distributors are the public. 00:18:04.990 --> 00:18:07.009 They are our most passionate customers. They 00:18:07.009 --> 00:18:08.829 love the product so much they buy it for themselves 00:18:08.829 --> 00:18:11.150 and their families every single month. So when 00:18:11.150 --> 00:18:14.769 a distributor is forced to buy, say, $500 worth 00:18:14.769 --> 00:18:17.470 of vitamins just to qualify for their commission 00:18:17.470 --> 00:18:19.529 check. The company counts that as a legitimate 00:18:19.529 --> 00:18:22.029 retail sale. Even if they don't actually need 00:18:22.029 --> 00:18:24.869 $500 worth of vitamins. Even if those bottles 00:18:24.869 --> 00:18:28.049 just pile up in their garage. Exactly. This is 00:18:28.049 --> 00:18:30.950 what creates the garage qualified phenomenon. 00:18:31.740 --> 00:18:34.259 People buying huge amounts of inventory, they 00:18:34.259 --> 00:18:36.920 have no hope of selling, just to maintain their 00:18:36.920 --> 00:18:39.819 rank in the pyramid. The FTC actually issued 00:18:39.819 --> 00:18:42.460 an advisory on this back in 2004. And what did 00:18:42.460 --> 00:18:44.660 they say? They said that internal consumption 00:18:44.660 --> 00:18:48.119 doesn't automatically make a plan illegal. However, 00:18:48.319 --> 00:18:51.259 the revenue generated from it can't be incidental 00:18:51.259 --> 00:18:53.619 to the right to participate in the business opportunity. 00:18:54.269 --> 00:18:56.450 Meaning you have to be buying the product because 00:18:56.450 --> 00:18:58.869 you genuinely want the product, not because you're 00:18:58.869 --> 00:19:00.890 essentially buying your way up the pyramid. That's 00:19:00.890 --> 00:19:03.670 the idea. But proving that intent in a court 00:19:03.670 --> 00:19:06.690 of law, proving why someone bought a box of Shake 00:19:06.690 --> 00:19:09.250 Mix, is incredibly difficult for prosecutors. 00:19:09.569 --> 00:19:12.630 It's a very, very high legal bar to clear. But 00:19:12.630 --> 00:19:14.049 they have cleared it sometimes, right? There 00:19:14.049 --> 00:19:16.690 have been major cases. There have. The most pivotal 00:19:16.690 --> 00:19:18.609 case in the history of this industry was the 00:19:18.609 --> 00:19:22.069 FTC versus Amway back in 1979. It was a massive 00:19:22.069 --> 00:19:25.000 legal battle. The FTC went after Amway, accusing 00:19:25.000 --> 00:19:27.039 them of being an illegal pyramid scheme. And 00:19:27.039 --> 00:19:29.220 what was the outcome? Who won? Well, it was a 00:19:29.220 --> 00:19:31.740 mixed verdict, but ultimately it was a huge victory 00:19:31.740 --> 00:19:35.059 for the MLM industry. The judge ruled that Amway 00:19:35.059 --> 00:19:37.640 was not per se in the illegal pyramid scheme. 00:19:37.920 --> 00:19:40.519 Wow. But they were found guilty of other things 00:19:40.519 --> 00:19:44.380 like price fixing and, importantly, making exaggerated 00:19:44.380 --> 00:19:48.039 and misleading income claims. The core business 00:19:48.039 --> 00:19:51.119 model itself, though, survived that legal challenge. 00:19:51.549 --> 00:19:54.769 So that 1979 ruling basically gave the entire 00:19:54.769 --> 00:19:57.690 industry the green light. It gave them the blueprint 00:19:57.690 --> 00:20:00.630 for how to operate legally. The judge pointed 00:20:00.630 --> 00:20:03.490 to certain safeguards that Amway had its policies. 00:20:03.710 --> 00:20:06.690 For example, the 70 percent rule, which theoretically 00:20:06.690 --> 00:20:08.990 required distributors to sell 70 percent of their 00:20:08.990 --> 00:20:11.890 inventory each month before ordering more. OK. 00:20:11.950 --> 00:20:13.789 So the industry lawyers all said, OK, great. 00:20:13.869 --> 00:20:15.930 If we just write these rules into our handbooks, 00:20:16.049 --> 00:20:18.549 then we're legal. Even if nobody actually follows 00:20:18.549 --> 00:20:21.269 or enforces the rules in practice. That is the 00:20:21.269 --> 00:20:23.650 catch. The enforcement of these internal rules 00:20:23.650 --> 00:20:26.410 is virtually non -existent. But the FTC does 00:20:26.410 --> 00:20:28.329 still go after companies that they feel cross 00:20:28.329 --> 00:20:30.529 the line too far. You had a company called Vemma. 00:20:30.589 --> 00:20:32.730 Oh, the energy drink one. They were huge on college 00:20:32.730 --> 00:20:35.470 campuses for a while. They were. And the FTC 00:20:35.470 --> 00:20:38.230 shut them down precisely because their focus 00:20:38.230 --> 00:20:41.970 was so clearly on recruiting broke college students, 00:20:42.089 --> 00:20:45.990 not on selling energy drinks to the public. And 00:20:45.990 --> 00:20:48.089 Fortune High Tech Marketing, the company with 00:20:48.089 --> 00:20:49.690 those terrible numbers we mentioned earlier, 00:20:49.890 --> 00:20:52.410 they were officially ruled to be a pyramid scheme. 00:20:52.589 --> 00:20:55.829 The FTC shut them down, liquidated their assets, 00:20:56.009 --> 00:20:59.549 and ended up mailing checks totaling $3 .7 million 00:20:59.549 --> 00:21:03.109 to the victims of the scheme. So justice is possible. 00:21:03.190 --> 00:21:04.730 It just seems like you have to be incredibly 00:21:04.730 --> 00:21:07.690 blatant about it to finally get caught. You do. 00:21:07.869 --> 00:21:09.910 And usually by the time the regulators catch 00:21:09.910 --> 00:21:12.490 up, the damage has been done. The money has already 00:21:12.490 --> 00:21:14.529 been transferred up the pyramid and the people 00:21:14.529 --> 00:21:16.569 at the bottom are just left with debt and a garage 00:21:16.569 --> 00:21:18.329 full of products. And it's not just financial 00:21:18.329 --> 00:21:20.609 debt, is it? This brings us to the whole cultural 00:21:20.609 --> 00:21:23.529 side of things. When you read accounts from people 00:21:23.529 --> 00:21:25.549 who've left these organizations, you see the 00:21:25.549 --> 00:21:28.450 word cult come up over and over again. You see 00:21:28.450 --> 00:21:31.170 it a lot. And it's not just angry ex -members 00:21:31.170 --> 00:21:33.829 using that word. Serious academic researchers 00:21:33.829 --> 00:21:36.819 use it as well. There was a fascinating article 00:21:36.819 --> 00:21:39.480 by a scholar named Walter J. Carl in the Western 00:21:39.480 --> 00:21:42.460 Journal of Communication. He specifically discussed 00:21:42.460 --> 00:21:45.000 how MLM organizations are often described as 00:21:45.000 --> 00:21:47.619 cults. And what were his reasons? He pointed 00:21:47.619 --> 00:21:51.019 to a pattern of deceptive behavior, the use of 00:21:51.019 --> 00:21:53.660 what he called evangelical discourse, and the 00:21:53.660 --> 00:21:56.599 exploitation of personal relationships for financial 00:21:56.599 --> 00:21:59.579 gain evangelical discourse like they're preaching 00:21:59.579 --> 00:22:01.839 a gospel of wealth that's a perfect way to put 00:22:01.839 --> 00:22:04.900 it there's a very strong us versus them mentality 00:22:04.900 --> 00:22:07.279 that's fostered if you're the group you're positive 00:22:07.279 --> 00:22:09.519 you're a winner you're an entrepreneur if you 00:22:09.519 --> 00:22:11.660 criticize the group or if you decide to quit 00:22:11.660 --> 00:22:15.200 then you're a loser a quitter a quitter or And 00:22:15.200 --> 00:22:17.240 this is my favorite term they use. You're a dream 00:22:17.240 --> 00:22:20.319 stealer. A dream stealer. Wow. So if your spouse 00:22:20.319 --> 00:22:22.400 comes to you and says, hey, honey, we've lost 00:22:22.400 --> 00:22:24.400 $2 ,000 on this so far. Maybe we should stop. 00:22:24.660 --> 00:22:27.160 The MLM training tells you that your own spouse 00:22:27.160 --> 00:22:30.299 is stealing your dreams. Exactly. They instruct 00:22:30.299 --> 00:22:33.019 you to distance yourself from negativity and 00:22:33.019 --> 00:22:35.019 from anyone who doesn't support your journey. 00:22:35.099 --> 00:22:38.700 It creates this intense social isolation. It 00:22:38.700 --> 00:22:41.339 insulates the member from the very people, friends, 00:22:41.380 --> 00:22:43.619 family who might be able to help them see the 00:22:43.619 --> 00:22:46.119 reality of the. financial situation. It weaponizes 00:22:46.119 --> 00:22:48.599 your most personal relationships. Which, I mean, 00:22:48.619 --> 00:22:50.359 it brings us right back to that very first text 00:22:50.359 --> 00:22:52.500 message we talked about. The entire business 00:22:52.500 --> 00:22:54.980 model requires you to monetize your friends. 00:22:55.140 --> 00:22:57.400 It absolutely does. You are taught to view every 00:22:57.400 --> 00:23:00.000 single person you know, your mother, your best 00:23:00.000 --> 00:23:02.759 friend from college, your dentist, as a potential 00:23:02.759 --> 00:23:06.500 lead, a potential recruit. It fundamentally commodifies 00:23:06.500 --> 00:23:09.559 human connection. And speaking of culture, we 00:23:09.559 --> 00:23:11.940 have to talk about geography because there is 00:23:11.940 --> 00:23:14.339 one specific place in the United States that 00:23:14.339 --> 00:23:17.140 is widely known as the unofficial world capital 00:23:17.140 --> 00:23:19.940 of MLMs. Utah. Utah. I've heard this over and 00:23:19.940 --> 00:23:21.960 over. Why Utah? What is it about that state? 00:23:22.160 --> 00:23:26.359 It's a true statistical anomaly. Utah has more 00:23:26.359 --> 00:23:29.700 multilevel marketing companies per capita than 00:23:29.700 --> 00:23:32.480 any other state in the country. It is home to 00:23:32.480 --> 00:23:34.839 some of the absolute giants of the industry. 00:23:35.480 --> 00:23:39.700 New skin, doTERRA, unique, young living. The 00:23:39.700 --> 00:23:42.099 list goes on and on. But is there a reason for 00:23:42.099 --> 00:23:45.240 it, a specific cultural driver? Researchers point 00:23:45.240 --> 00:23:47.279 to the very high population of members of the 00:23:47.279 --> 00:23:48.960 Church of Jesus Christ of Latter -day Saints. 00:23:49.480 --> 00:23:51.599 There are several cultural factors there that 00:23:51.599 --> 00:23:54.579 seem to create a sort of perfect storm for MLM 00:23:54.579 --> 00:23:56.559 businesses to drive. Okay, let's break those 00:23:56.559 --> 00:23:58.339 down. What are they? Well, first you have the 00:23:58.339 --> 00:24:00.980 return missionary demographic. You have thousands 00:24:00.980 --> 00:24:02.859 of young men and women who have spent two years 00:24:02.859 --> 00:24:05.440 of their lives knocking on doors, dealing with 00:24:05.440 --> 00:24:07.559 constant rejection, and learning how to sell 00:24:07.559 --> 00:24:10.119 a message, often in a foreign language. That 00:24:10.119 --> 00:24:12.359 makes so much sense. They are quite literally 00:24:12.359 --> 00:24:15.180 the most well -trained, resilient, cold -calling 00:24:15.180 --> 00:24:17.359 sales force you could ever ask for. They don't 00:24:17.359 --> 00:24:19.420 hear the word no in the same way that most people 00:24:19.420 --> 00:24:22.140 do. Yeah. Second, there's a very strong cultural 00:24:22.140 --> 00:24:24.640 philosophy of self -reliance and being industrious. 00:24:24.970 --> 00:24:27.109 And third, you have more traditional gender roles. 00:24:27.190 --> 00:24:29.809 So you have a large population of highly educated, 00:24:30.130 --> 00:24:33.069 very capable mothers who want to stay at home 00:24:33.069 --> 00:24:34.869 with their children but also want to contribute 00:24:34.869 --> 00:24:38.210 to the family income. The MLM pitch of work from 00:24:38.210 --> 00:24:40.950 your phone, part -time hours, and be your own 00:24:40.950 --> 00:24:43.730 boss is just perfectly tailored to that demographic. 00:24:44.089 --> 00:24:46.170 I have heard the satirical nickname they have 00:24:46.170 --> 00:24:50.509 for it, Mormons losing money. Yes, that is the 00:24:50.509 --> 00:24:53.250 joke, unfortunately. But it really highlights 00:24:53.250 --> 00:24:56.109 how deeply ingrained this business model has 00:24:56.109 --> 00:24:59.289 become in that specific community. It's a form 00:24:59.289 --> 00:25:01.470 of affinity fraud where you're more likely to 00:25:01.470 --> 00:25:04.009 trust someone and their business pitch simply 00:25:04.009 --> 00:25:06.210 because they're part of your social or religious 00:25:06.210 --> 00:25:08.650 group. So that's the U .S. perspective. But this 00:25:08.650 --> 00:25:10.630 is a global industry. And when you look outside 00:25:10.630 --> 00:25:12.930 of the U .S., the official reaction to MLMs can 00:25:12.930 --> 00:25:15.329 be very, very different. Drastically different. 00:25:15.470 --> 00:25:17.329 Let's start with China. China is not exactly 00:25:17.329 --> 00:25:19.470 known for its light -touch approach to regulation. 00:25:19.769 --> 00:25:23.089 Not at all. And back in 1998, China banned multi 00:25:23.089 --> 00:25:25.890 -level marketing entirely. Outright ban. They 00:25:25.890 --> 00:25:28.170 cited concerns about social and economic disruption. 00:25:28.269 --> 00:25:30.650 They created a specific regulation called the 00:25:30.650 --> 00:25:33.630 prohibition of twangxiao. Twangxiao. What does 00:25:33.630 --> 00:25:36.150 that translate to? It basically means pyramid 00:25:36.150 --> 00:25:39.630 selling. Under current Chinese law, direct sales 00:25:39.630 --> 00:25:42.509 are still permitted. You can sell lipstick door 00:25:42.509 --> 00:25:45.829 to door. But having downlines is completely illegal. 00:25:46.130 --> 00:25:48.230 If you are earning money from the recruitment 00:25:48.230 --> 00:25:51.369 of others, you are breaking the law. So they 00:25:51.369 --> 00:25:53.769 surgically separated the legitimate selling from 00:25:53.769 --> 00:25:56.559 the scheme part of the business? They did. The 00:25:56.559 --> 00:25:58.460 Chinese government viewed these pyramid structures 00:25:58.460 --> 00:26:01.859 as a serious threat to social order. And they 00:26:01.859 --> 00:26:04.480 weren't wrong about the potential for real harm. 00:26:04.680 --> 00:26:07.059 There have been numerous reports of physical 00:26:07.059 --> 00:26:09.940 danger. Volunteers in China who try to rescue 00:26:09.940 --> 00:26:12.400 people from these illegal schemes have actually 00:26:12.400 --> 00:26:14.819 been physically attacked. Wow. That's a level 00:26:14.819 --> 00:26:16.799 of intensity you don't really associate with, 00:26:16.859 --> 00:26:19.140 you know, selling essential oils. It just shows 00:26:19.140 --> 00:26:22.339 how desperate and trapped people can become when 00:26:22.339 --> 00:26:24.400 they're caught in these high -pressure financial 00:26:24.400 --> 00:26:26.680 groups that have all... the hallmarks of a cult. 00:26:26.859 --> 00:26:29.200 What about other parts of the world? We've got 00:26:29.200 --> 00:26:31.940 a note here about Saudi Arabia and Islamic law. 00:26:32.119 --> 00:26:34.619 Yes, and this is fascinating. Many prominent 00:26:34.619 --> 00:26:38.099 Islamic jurists have issued fatwas, which are 00:26:38.099 --> 00:26:41.200 formal religious rulings, declaring that MLM 00:26:41.200 --> 00:26:44.640 trade is haram. It's prohibited. And what are 00:26:44.640 --> 00:26:46.740 the grounds for that ruling? There are two main 00:26:46.740 --> 00:26:49.359 reasons. The first is a concept called gharar, 00:26:49.539 --> 00:26:53.009 which means deception or uncertainty. The jurists 00:26:53.009 --> 00:26:55.470 argue that the promise of easy wealth is fundamentally 00:26:55.470 --> 00:26:58.150 deceptive because, as we've seen from the statistics, 00:26:58.509 --> 00:27:01.069 almost no one actually achieves it. OK, that 00:27:01.069 --> 00:27:02.930 tracks one to one with the data we looked at 00:27:02.930 --> 00:27:05.190 earlier. And the second reason is a concept called 00:27:05.190 --> 00:27:08.089 REBA, which is the prohibition of usury or interest. 00:27:08.569 --> 00:27:11.130 They argue that the structure where you pay an 00:27:11.130 --> 00:27:12.930 entry fee in the hopes of getting more money 00:27:12.930 --> 00:27:16.930 back without engaging in real trade, it too closely 00:27:16.930 --> 00:27:19.190 resembles gambling and interest. It violates 00:27:19.190 --> 00:27:22.400 the core principles of fair exchange. That's 00:27:22.400 --> 00:27:24.039 really interesting. So it's a moral and ethical 00:27:24.039 --> 00:27:26.599 objection as much as it is a financial one. It 00:27:26.599 --> 00:27:28.359 is. And then you have a country like Bangladesh, 00:27:28.460 --> 00:27:31.339 which just banned all domestic and foreign MLM 00:27:31.339 --> 00:27:35.140 trade, period, in 2015. So while the U .S. has 00:27:35.140 --> 00:27:37.720 taken this regulate and monitor approach, many 00:27:37.720 --> 00:27:39.859 other countries look at this model and just say, 00:27:39.900 --> 00:27:42.720 no, this is fundamentally predatory and we're 00:27:42.720 --> 00:27:44.900 not allowing it in our country. It really highlights 00:27:44.900 --> 00:27:46.960 how the American approach seems to prioritize 00:27:46.960 --> 00:27:49.880 the freedom to do business, even if that business 00:27:49.880 --> 00:27:53.650 is... Well, extremely questionable. The philosophy 00:27:53.650 --> 00:27:57.190 is caveat emptor. Let the buyer beware. So if 00:27:57.190 --> 00:27:59.150 we zoom out here, we've looked at the mechanics, 00:27:59.369 --> 00:28:02.630 the math, the law, the global reaction. It feels 00:28:02.630 --> 00:28:04.950 like the central tension, the core conflict is 00:28:04.950 --> 00:28:07.049 between what the business says it is and what 00:28:07.049 --> 00:28:09.349 the business actually is. That is the heart of 00:28:09.349 --> 00:28:12.089 the paradox. The business says it's about selling 00:28:12.089 --> 00:28:14.900 amazing products. But the math of the compensation 00:28:14.900 --> 00:28:17.400 plan says it's about recruiting investors into 00:28:17.400 --> 00:28:19.279 a pyramid. The business says it's about achieving 00:28:19.279 --> 00:28:21.500 financial freedom. But the statistics say it's 00:28:21.500 --> 00:28:23.559 a near -certain guarantee of financial loss. 00:28:23.839 --> 00:28:26.579 And the business says it's about building a supportive 00:28:26.579 --> 00:28:29.140 community. But the stories from people who've 00:28:29.140 --> 00:28:31.579 left say it's about commodifying your friends 00:28:31.579 --> 00:28:34.039 and isolating you from your family. I honestly 00:28:34.039 --> 00:28:36.599 think that's the most damaging part. We could 00:28:36.599 --> 00:28:39.140 talk about someone losing $500 on a starter kit, 00:28:39.240 --> 00:28:41.670 and that hurts. That's real money. But losing 00:28:41.670 --> 00:28:43.970 the trust of your entire community, that's a 00:28:43.970 --> 00:28:46.369 much, much higher cost. When you start to look 00:28:46.369 --> 00:28:48.390 at your best friend and all you can see is a 00:28:48.390 --> 00:28:50.890 dollar sign, something is fundamentally broken. 00:28:51.170 --> 00:28:54.130 As we wrap this up, what's the one final thought 00:28:54.130 --> 00:28:56.450 we should leave people with? We've seen the damage 00:28:56.450 --> 00:28:58.930 these structures can do. I think the most important 00:28:58.930 --> 00:29:01.170 question you can ask yourself, or you can ask 00:29:01.170 --> 00:29:03.170 anyone who approaches you with one of these opportunities, 00:29:03.430 --> 00:29:07.490 is this. If a business model requires you to 00:29:07.490 --> 00:29:09.779 turn your friends into your customers, and then 00:29:09.779 --> 00:29:11.960 immediately turn those customers into your direct 00:29:11.960 --> 00:29:14.599 competitors by recruiting them, what is that 00:29:14.599 --> 00:29:16.960 business actually selling? Is it selling a product 00:29:16.960 --> 00:29:20.420 or is it selling you? That is a heavy question. 00:29:20.579 --> 00:29:22.839 If you are the one funding the commission checks 00:29:22.839 --> 00:29:24.740 of all the people above you through your own 00:29:24.740 --> 00:29:27.839 purchases, then you are the product. Exactly. 00:29:27.920 --> 00:29:30.099 The money isn't coming from the magic of the 00:29:30.099 --> 00:29:32.079 free market. It's coming from your bank account 00:29:32.079 --> 00:29:34.119 and the bank accounts of all the other hopeful 00:29:34.119 --> 00:29:37.029 recruits at the bottom. Well, that is a sobering 00:29:37.029 --> 00:29:39.250 thought, but a really important one. We hope 00:29:39.250 --> 00:29:41.529 this deep dive has given all of you the tools 00:29:41.529 --> 00:29:44.910 to look at these opportunities with a much clearer, 00:29:45.069 --> 00:29:47.730 more critical eye. Remember, knowledge really 00:29:47.730 --> 00:29:50.650 is your best defense against a slick sales pitch. 00:29:50.990 --> 00:29:53.750 Absolutely. And if it sounds too good to be true, 00:29:53.930 --> 00:29:56.430 ask to see the official income disclosure statement. 00:29:56.690 --> 00:29:58.890 And maybe, you know. Keep your day job. Relax. 00:29:59.289 --> 00:30:02.589 Yes, definitely keep your day job. Thanks for 00:30:02.589 --> 00:30:05.230 joining us on this deep dive. Stay curious and 00:30:05.230 --> 00:30:05.809 stay skeptical.