Financial Education

MLMs Are Cults And Other Things MLMs Do Not Want You To Know

If you think about joining an MLM (multi-level marketing) “business”, just don’t. They will lie to you and make you think you own a business. You do not. And this is just the first thing that MLM companies do not want you to know.

The truth is MLM is all about making a few people a lot of money by taking advantage of those that really need money, just like with any pyramid scheme out there. If you are not among the first that join the company, you literally have no chance.

Please do not join any MLM!

Let’s take a look at some statistics that we know about famous MLMs:

  • Study shows 99% of MLM participants make under $10 a week – Source
  • Under 1% of MLM participants make a profit – Source
  • 99.997% of people involved in Nu Skin made a loss or zero profit – Source
  • Over 95% of Forever Living representatives make less than the required monthly investment – Source
  • Even if you make it in the top 2% of Mary Kay reps, you might still face bankruptcy – Source
  • People at the top of the Amway pyramid earn just $128,000 per year – Source

But hey do not take my word for it. Do your research and you will figure out the scam for yourself. To get you started, here are some things most MLM companies do not want you to know.

MLM Is All About Recruiting

MLMs do all they can to convince you that the business is all about its products. This is simply fake. Most representatives make close to nothing through direct selling. It is the recruiting that brings in the most cash.

Herbalife, one of the biggest and most popular MLMs in the world god fined by the FTC (Federal Trade Commission) a pretty large amount, $200 million, because of the compensation structure it used. Basically, the FTC said Herbalife rewards the distributors when they recruit others instead of rewarding sales.

With doTERRA, another horrible MLM you are better off not even hearing about, you sell essential oils. The problem is that these oils are around 6 times more expensive than they should be. This means it will be really difficult to actually make sales. Such a structure forces you to rely on recruiting others to make profits.

Most MLM Products Are Generic

Did you ever go to a supermarket and you bought some products from their brands? Did you notice that there are hundreds of different types of products under the same brand? These are basically generic brands and they are usually medium-quality products that are pretty good for most people.

With MLMs, you basically sell generic products.

There is NOTHING SPECIAL with MLM products.

MLMs try to make claims that they offer superior products. They sometimes say there is a secret ingredient that makes them special or who knows what exaggerated claim.

The reason why these claims are used is simple: the company does not want you to compare its products with generic products. If you do, you quickly notice that they are simply the same but the MLM ones are much more expensive.

MLMs Are Built In A Way That Stops Most People From Earning Money

Out of all the things MLM companies do not want you to know, this is definitely the vital one you have to remember.

Analyze the structure these “businesses” use. You will quickly notice it is IMPOSSIBLE for most people to actually make money.

MLMs simply rely on recruiting new people that are placed at the very bottom of the pyramid scheme. This sends money towards the top of the pyramid.

MLM reps will tell you that you can make millions. They will tell you that what they present is a limitless earning opportunity. All you need to do is work for your money. This is simply false.

There are two truths you have to understand:

  • As the number of participants increases in an MLM, there is a lower possibility to recruit new people if you are at the bottom of the pyramid.
  • You need to recruit a number of people until you can actually make a profit.

Simply put, when you need to recruit 25 people in order to be profitable, just one in 25 people will actually be profitable with the MLM. There is no real income opportunity. Just 4% of people could actually make money, which is a lot less than what reps label as being “limitless”.

As A Rep, You Are Incentivized Or Forced To Buy Products

MLMs tell you many lies but these two are the most disgusting of them all. You are often told that you do not have to buy anything to make a profit when the truth is that if you do not buy from the company, you might not even be eligible for the commissions you generate.

Then, we have the bonuses that are not actually bonuses.

MLMs basically dangle carrots in front of their reps, like free cars, parties, a holiday, or some sort of extra earning opportunity usually presented as a membership level. What they do not really mention a lot is that you lose rewards when you do not maintain very strict numbers. To make it even worse, when a free car is offered, you might still end up having to pay monthly lease payments.

What do you do when you still need a few sales to meet that monthly quota? You have to buy yourself.

As an example, you should know that 70% of all Herbalife sales in Mexico come from the top distributors. They buy in bulk to then sell to some other distributors.

I once knew someone whose parents were Amway representatives. It was impossible to walk through their house without seeing Amway products all over the place.

MLMs Have To Keep Recruiting Because Most Reps Quit

A lot of money is put into making you think that there are many reps for these MLMs. These complex scammers basically want you to think that thousands of people are successful with their business. In reality, things are quite different.

The best example of this is Herbalife. The company actually loses 60% of their supervisors and 90% of their distributors who did not reach supervisor level EVERY SINGLE YEAR.

Obviously, the big problem here is that these reps do not actually talk much about the fact they quit. They just make a huge noise when they are a part of the scheme. After they figure out they cannot make money or that they were scammed, they just do not say anything, often due to the shame of being taken advantage of.

We also often see those that remain in the MLM bullying those that quit. This is because when you are in a shady MLM, you still need the image to be preserved. When your friends talk about the reality of the business, you are affected. So, discrediting and bullying start to appear.

Basically, MLMs have to aggressively recruit new people since they have to replace those that they leave. And they have to do it so much more often than you are led to believe.

MLM Reps Are NOT Business Owners

So many MLMs teach their reps to say this and even brainwash them into thinking they are actual business owners. As a result, it is very easy to see reps blackmail friends and family members into basically supporting them since they are a small business.

In reality, MLM reps are just sales reps. And they are unpaid!

A business owner gets to do some really important things, like:

  • Choosing the product range
  • Choosing profit margins
  • Choosing prices
  • Choosing investments

With MLMs, it is the company that decides everything for you from how you are allowed to promote products to what commissions you will receive. You have zero say on ANY business decision.

I personally cannot understand how anyone would think they own a small business when they are a sales rep for another business. Let this sink in:

You need to legally open a business to be a business owner! Period.

MLMs Are Not Regulated By The Authorities

This is why it is very, very hard to figure out if a specific MLM is a fraud or not. The structures used by these companies are very complex. They are built so that they are tough to unravel.

To make matters even worse, the laws that cover MLMs are very badly defined or incredibly vague. For instance, an MLM is not even required to publish an income disclosure statement. This means they do not have to show anyone how they pay commissions or how much money the reps lose.

Since the law is a complete failure, the authorities cannot do much. This is why we see so many outrageous false claims.

For instance, doTERRA actually claims that one (or more I do not remember) of their products can treat cancer, ebola, or Alzheimer’s. There is not much difference between MLM reps for these products and snake oil salesmen.

Simply put, MLMs lie and teach their reps to lie. This is why you will so often see incredible earning claims. When you ask for any proof of the claims, you will be met with hostility. It is actually very common to see groups of MLM reps attack someone that says something negative about their products.

MLMs Are Cults

This last untold truth is just horrible but it is something you have to be aware of.

There are not many differences between how MLMs operate and how cults work. You will often see reps viciously defend the company with an incredible passion. What they do is due to the fact that MLMs use shady cult-like tactics in order to retain and recruit people.

To highlight this, let’s just mention a few ways in which MLMs operate like cults:

  • Empty promises are offered, usually of some sort of utopia, like making a lot of money.
  • What is presented is not backed by science. Just like the law of attraction, there is no real data to back the claims made.
  • There are always some god-like figures presented as the best people in the MLM.
  • Fear is used to control reps. When one leaves, family members and friends are encouraged to avoid future contact and even discredit or bully. Just like when you try to leave the Mormon church.
  • Unnecessarily complex structures are used to hide the actual business model.
  • Moral high ground is used as a diversion or a cover for the cult.
  • MLM reps need to change their personality, like when they keep posting positive messages on social media to make their life seem better than it is.
  • An authoritarian grip is kept over MLM reps. When someone questions anything, the person is shamed. Even untrue rumors are used for this
  • Alienation from anyone that disagrees is encouraged. Basically, if a friend tries to tell you that there are problems, you are brainwashed into thinking that person is jealous or negative.

At the end of the day, the MLM can exist only when there is unquestioning devotion present, just like with a cult. When you analyze everything with the use of hard facts, you quickly figure out there are problems. But the way in which MLMs are promoted makes it very difficult for most people to even question the facts presented.

When an argument appears, deflection and emotion are used to stop everything. It can quickly become close to impossible to have an honest, open conversation with a person brainwashed by an MLM.

Final Thoughts

MLMs are simply pyramid schemes. But they are much more dangerous.

When I was young, many people tried to recruit me into pyramid schemes. But they were actually honest about it. They told me I had to bring in X money, then bring in a specific amount of people that bring in X money to make a specific amount of money. This does not exist with MLMs.

The sad part is, once you get deep enough into the delusion of multi-level marketing, it is very hard to get out. After you get out, you feel ashamed. This is especially the case when the person that got suckered into the “business” is educated.

What I want to say is there is nothing to be ashamed of if you are tricked into one of these MLMs. You have to accept the mistakes you did and just move on.

I was also in a MLM without even realizing it. After I figured it out, I left. Fortunately, I only lost like $50 on it. But so many lose thousands or their entire life savings.

If you know someone that is in an MLM, do all you can to get that person out! But get ready for the offensive and the attacks that will come your way. It is your choice if you keep trying. Nobody can blame you if you give up. But it will get ugly!

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