Network Marketing: The Pyramid's Back

Flying to Sydney this morning on a commuter flight, I met a friendly woman next to me. She was genuine and I had a great chat that brightened my morning. But she asked me if I would be interested in a job as a network marketer.

I said while I've heard of that term I have no idea what it is. She said it gets some criticism but it's great.

I Googled the term. I got positive reviews on the first page (these guys know their SEO). So I put in some more critical terms and bang, got a paper from an economist.

He makes these stand-alone sensible points, saying it's pyramid selling re-branded:

  • in the marketplace, reducing middle men is the ideal but MLM (multilevel marketing) does the opposite, adding costs to distribution that are born by sellers
  • markets can't sustain increasing amounts of sellers. There's a point of saturation, and with MLM, the premise is that sellers are limitless
  • it relies on winners and losers; lots of losers selling just a few things give a cut to one person who makes money (the winner).

The worst part, this economist points out, is that with more failure comes more opportunities for 'business owners' to give away more to the scheme through paying for seminars, DVDs, and training.

The Promise

You've gotta give them credit for being honest. This promotional material (above) says they have half a billion in revenue. But divide that by 10,000 sellers (at least) and you have revenue of $50,000 a year. Not even including head office taking their cut to pay for "over 1,000 employees", that's a mediocre business at best. If it has to pay the salary for just one person--like the business owner--it's making a significant loss.

But that's the premise of pyramid schemes: relying on other people failing. It's capitalism at its most disgusting. But don't worry, you won't fail. You're special.