How The Modern Pyramid Scheme Stays Barely Legal

The modern pyramid scheme has undergone slight tweaks in order to stay just with the bounds of the law, and still keep the fun scam times going. When you strip away all the pretty foil and chocolate, though, a naked Ponzi sits in the center, laughing his ass off.

It all stems from the basic idea of pay me $5 and I’ll tell you how you can sign up five people to pay you $5 each. Instant riches! But see, U.S. law likes to see some sort of tangible product involved. So then we get a multi-level-marketing company supposedly built around diet pills, travel arrangements, energy resale, or lollipops, you know, “suckers.” It doesn’t really matter. Your recruiter fills your head with talk about salesmanship, relationship building, building up your team, and of course, all the fabulous amounts of easy money you can generate

But somewhere along the line you’re going to have to pay some fee. Often there’s an upfront “investment cost.” Or maybe there’s some fee that disproportionately large in comparison to the service or good it’s supposed to be covering, like could be $39.95 for them to put up and maintain a webpage for you, or $49.95 per month for some nebulous “support” the company provides. And right there, you’ve found what the company is really about.

That’s the juice that flows upwards through the ranks, the residual income that feeds your recruiter, and his recruiter, and your recruiter’s recruiter recruiter, and so forth. This fee can come in all different colors and names and variations, but at the end of the day, it’s all just the same old scam.

Or, you could just say no thanks to anything introduced as a “(insert positive adjective) business opportunity” and save yourself the hassle.

Comments

Edit Your Comment

  1. humphrmi says:

    How does Amway fit into this nowadays? I remember back when I was a kid, someone tried to get me involved in that. There was apparently a fee to sign up as a “member”, and I heard later they eliminated the fee in order to stay in line with the law.

  2. SaveMeJeebus says:

    I work with someone that does the Your Travel Biz thing. They had to pay $5K up front and some stupid maintenance fee per month for the personalized travel booking website. Hook, line, and sinker with nothing to show for it after six months.

  3. weave says:

    A lot of Amway income comes from the sale of motivational material the lowbies are strongly encouraged to buy.

  4. Televiper says:

    My parents are in Amway but they no longer buy into the whole business building scheme and just sell a few products on the side. In Amway you make money off the products you sell, plus the products in your down-line and that percentage is based on the size of your down line. The big scam in Amway was the networks who pushed massive amounts of books and tapes and other inexplicably lame Tony Robbins like crap. My parents finally figured out there’s still people who like the product that will happily buy it if you don’t mention the plan. Too bad the company didn’t just stick to selling soap and the odd experimental product.

  5. synergy says:

    I had this experience first with Mary Kay and then years later with Avon.

  6. tcolberg says:

    A lot of kids these days in Los Angeles are doing this scam called “USANA”. It’s scary how people get caught up in this stuff.

  7. dancemonkey says:

    a lot of these things do sell actual products, and some of them are actually of very high quality.

    but you can tell it’s ultimately a scam when you are discouraged from trying to make a living trying to sell the product, and rather are encouraged to sign up new members or associates, etc etc.

  8. rbb says:

    And let’s not forget about the biggest Ponzi scheme of all – Social Security…

  9. Snakeophelia says:

    I sell Avon and I’ve found that I am pressured (and mildly at that) only to sell products, not to sign up new “Avon ladies”. Of course there’s a bonus for doing that, but you pay a very tiny nominal fee (I think mine was $10) to start and you don’t have to buy a big batch of product up front, which is what I think you do have to do with Mary Kay (hence all the MK stuff on eBay). Avon does give financial ncentives for buying a big batch of stuff at once, but I have only a few customers so I never do that.

    Overall, I’ve been delighted with Avon. It doesn’t feel like a MLM at all.

  10. Pasketti says:

    I feel obligated to point out that a Ponzi scheme and a pyramid scheme are different animals.

    A Ponzi scheme is where you promise a high rate of return on an investment, but instead of actually using the invested cash to generate the return, you use the invesments of later investors to pay off earlier ones.

    See [en.wikipedia.org]

  11. Anonymous says:

    Man, these pyramid guys are ALL over the place here in Richmond, VA. They hang out in Targets, B&Ns, the local malls, gas stations, etc. and always start out with a HORRIBLE “pickup” line. The best was when I had a Yankees shirt on right after the All Star Break. The schemer tried to chat me up about how the Yankees played well the past night. I told him it was the All Star Break, and he continued to say that, “yeah they beat them”. I had to inform him the break meant they didn’t actually play. At that point he stopped talking, gave up, and just walked away. I was so close to an exciting and profitable business opportunity! Crap!

  12. yendi says:

    My wife got sucked into the Avon scheme a while back. She got charged at least three different “fees,” and had terms change on her after signing up. We actually had an alleged “credit” agency after us (one of the ones that comes from an “unknown number” and refuses to send letters when requested to do so), even after Avon themselves emailed her to tell us they’d waved the fees.

    The company is made up of scammers and those who have been scammed and are trying to turn their investment into a profit at someone else’s expense.

  13. mario says:

    You can not judge all multi-levels as equals and come to the conclusion that ALL of them are scams, and specially you can not conclude they are scams because they allegedly make all their money just by selling books. I don’t know other multi-levels besides Amway/Quixtar, and in our case the production of educative material is made by affiliated business organizations and not directly by the corporation.

    I ask, don’t motivational speaker do exactly the same with their “supporting” material?, they get paid tens of thousands for speaking to a bunch of depressed executives, but they get paid millions for selling their self-help books to the ones that couldn’t afford to paid over $500 for just attending their conferences. Go ahead, tell Tony Robbins ([en.wikipedia.org]) he’s a dirty scammer for selling his books outside his conferences.

    In Quixtar, the purchasing of those educative materials is totally optional, and you can perform business and be incredibly successful without ever buying a single sheet of paper, as long as your organization moves products in good volumes. It’s market economy in it most pure form, the more products your organization buys/sells/consumes, the more money you get paid, fairly distributed along its whole hierarchy. You enroll 10 thousand people that don’t buy/sell a single shampoo and you get paid nada, zero, zip. But you enroll 10 people and teach them to teach to other 10 people each, that also learn to teach their knowledge to other about buying, selling and consuming excellent quality products, and you will get paid tens of thousands per month.

    Of course, I don’t expect you guys to believe me, but at least I invite you to research more deeply before discharging your attacks against a whole industry, just because a bunch of con artists exploited its loopholes.

  14. XopherMV says:

    Mary Kay requires new consultants buy a $100 starter kit and $200 wholesale in product. With sales tax, it comes to $350. The value of the starter kit is more than the $100 spent. The value of the $200 wholesale product is $400 retail. After that point, you just need to spend $200 wholesale every three months to stay active. If you go inactive, you have a whole year to place a $200 order before they remove you as a salesperson. There are no “hidden fees”.

    The company, nationals, directors, and consultants all push to sell product, first and foremost. Yes, there is some emphasis placed on team building, just like all businesses, but that is secondary. Everyone in the company is focused on the makeup and making women beautiful.

    And no, I am in no way employed by Mary Kay. However, my wife, my mother, two of my aunts, my (male) cousin, my mother-in-law, and my sister-in-law are Mary Kay consultants. It has really helped bring and keep my family together, especially after the recent death of my grandmother, who was also a Mary Kay consultant.

  15. LatherRinseRepeat says:

    Pre-Paid Legal is a pyramid scheme that’s still around.

  16. arachnophilia says:

    i got “recruited” once by one of these places.

    they spent half an hour in their introductory seminar explain why they weren’t a pyramid scheme. i was nice enough to not get up and leave right then and there, but i certain let the person that asked me there that “if you have to explain why you’re not a pyramid scheme, you are.”

  17. speedwell (propagandist and secular snarkist) says:

    @mario: Tony Robbins is a dirty scammer, and you’re a brainwashed party-line-spouting zombie. Sorry, mate. Mary Kay opened my eyes to MLM nonsense, and you’ll have yours opened sooner or later, unless you’re one of those sociopaths who finds a way to get rich off of your downline churn.

  18. k4_pacific says:

    The title of this article reminds me of spam I get.

    HOT 18 YR OLD BARELY LEGAL SCHEMES. CLICK HERE!!!

  19. BigNutty says:

    Starting a pyramid scheme is where the money is. We (me and my scam associates) would start what we called the “Airplane Game” with a big whiteboard we used to show how the “investment” worked.

    For $1500 you would “buy in” as a passenger in the back seats and work your way up to the Captain seat where you would then become rich. Of course you were told to bring in your friends to get you to the Captain seat faster.

    To make a long story short, after a quick 20 people signed up we would disappear. This was in 1981 in Texas and a part of my past life.

    I can’t believe this continues today but in a much more “business” way.

    If anybody is interested there is a site called merchantsofdeception.com about Quixtar (formerly Amway) that details this guy’s experience as a former Amway distributor.

    He even wrote a book that he allows you to download for free. No spam, no catches, no money. Very interesting if you like this type of stuff.

  20. OnceWasCool says:

    Don’t forget Prepaid Legal. I had a friend get into this and it was like he joined a cult.

    Although Avon and Mary Kay is trailer park makeup, I know several that makes good money peddling this crap.

    I just wish all the MLM systems would just go away!

  21. humphrmi says:

    @mario: The difference between Tony Robbins selling his material directly and Amway/Quixtar charging their members a fee to join them and sell Tony Robbins’ material is the joiner/member fee. Tony Robbins doesn’t charge me an additional fee for the right to buy or resell his material; I can buy it for cover price if I want it ([www.amazon.com]), and resell it on Amazon or eBay if I want to, no Amway or Qixtar membership necessary.

    By the way the word is “Educational”, not “Educative”.

  22. reykjavik says:

    @humphrmi:

    You’re right, Mario is wrong. He can sell anything he wanrts because the utlimate goal is not for you to go out and resell it to make him rich. BUT you are wrong, educative is indeed a word. Look it up.

  23. tadowguy says:

    Social Security is a Ponzi scheme and it’s the law.

  24. ry81984 says:

    @XopherMV:
    So you have a family of losers?

  25. ry81984 says:

    [www.lightyearalliance.com]
    Light Year Alliance is another MLM scam company.

    They tell you how great VOIP is and how easy it is for you tell sell it.
    All you have to do is pay fees and recruit your friends to pay fees to become salesman.

  26. quail says:

    Didn’t Amway change it’s name to something else before becoming Quixtar?

    I had a step-brother-in-law try to get my parents and I involved in it years ago. They went so far as to pay our way to some convention in Kansas City. We spent eight hours one day watching their “triple gold diamond what-evers” doing inspirational speeches. What I took away was to make any sort of money you had to go “double diamond”, which meant getting x number of people signed under you. And then go “double diamond” again and again.

    The other thing they pushed was that you should tell people that even if they don’t get people under them they would still be saving a butt load of money by buying the products for themselves. Why give the profit to the big company’s when you can keep it in your own pocket? It seemed to be the soft sell to say that they were more of a co-op than anything else.

    They also talked non-stop about people’s misconception of them. If one speaker said it, then they all said it: “We are not a pyramid scheme”, and “We are not a cult.” They said this along with the fact that their faith in Jesus was what helped them to succeed. In the hallways of the jam packed football arena (yes, it was held in the KC Chief’s arena)they sold tons and tons of kits that would improve your sales and bring you closer to Jesus, or some such thing.

    We were suppose to join the step-family the next day but my mom faked being sick and we enjoyed ourselves shopping and eating out instead.

  27. ceejeemcbeegee is not here says:

    Isn’t a corporation structured in the same exact way?

  28. speedwell (propagandist and secular snarkist) says:

    @ceejeemcbeegee: No. Thanks for playing. Go look it up.

  29. somecop says:

    I once had a friend that was the most intelligent man I had ever known. He had a couple of doctorate degrees and a masters in something I could never understand. And he spent every waking hour chasing the next ponzi scheme that came along, absolutely positive that the next one would make him rich. I was a poor dumb bastard at the time and was 10x happier than he was. People really get addicted to this stuff.

  30. revmatty says:

    Prepaid Legal are actually the scummiest I’ve encountered. This was my experience and I’ve talked to dozens of other people who’ve had the same one:

    I used to do freelance web development on the side and was always looking for small to medium sized businesses to work with. So I got a call from this guy saying he was interested in hiring me. We agreed to meet and he walked me into a conference room in his office. It was set up for a presentation with about 30 suckers already there. He said “I figure it would help if you knew something about our business in order to build our site”. I sat through the first hour of the presentation, and at the break I told him I understood enough about the business and was ready to start talking about the site. That’s when he started the hard sell on joining PPL. I politely declined and told him to give me a call when he was ready to talk about the site.

    He called me 2-3x a day for the next two weeks to try and pressure me into signing up.

  31. XopherMV says:

    @oncewascool:
    Say what you want about Avon. But, if you consider Mary Kay “trailer park” makeup, then you have no idea about the product or how to rate quality.

    @ry81984:
    So, you come from a family of assholes?

  32. Consumerist Moderator - ACAMBRAS says:

    @XopherMV:
    I was about to tell ry81984 that his/her comment was uncalled for, but it looks like you’ve called him/her on it…

  33. ChaosMotor says:

    @speedwell: Maybe not a single corporation, but corporate parentage and relationship networks often do.

    You can also argue that a consumer is the lowest level of a supply-chain that has the same fundamental structure as a Ponzi scheme, if not the same effective result, where the closer you are to the ‘top’ – ownership of production – the higher your returns. At the bottom you’re actively losing money.

    In most of these cases though, the money ‘lost’ is exchanged for a useful product, not just ‘sailboat fuel’ – one of the most successful sanctioned Ponzi schemes in recent history.

  34. ry81984 says:

    Why would you proudly post that a bunch of people in your family are invovled in a MLM scam company?
    Everyone on here knows they are a scam. Everyone on here bashes MLM companies. Everyone on here knows that people who get dupped into wasting their money on these things are stupid.
    If you are going to post that MLM companies are great and that a bunch of people in your family are stupid enough to be in one, then do not be upset when someone connects the dots and posts the truth.
    You can read all about the Mary Kay scam by searching google or here: [www.thepinkingshears.com]

    Also, I do not come from a family of assholes, but I do come from a family where no one is stupid to be scammed by a MLM company.

    Here is a link to videos about Dateline doing a story on Amway/Quixtar:
    [www.amquix.info]

  35. ry81984 says:

    Here is the top 10 reasons to not join Mary Kay:
    [pinktruth.com]

    The #1 reason is enough for you to not want to join:
    1. People usually work to make money. In MK you’ll likely be one of the over 99% who lose money in the venture, and if you do make money, it’ll probably only amount to minimum wage.

  36. Anonymous says:

    There is nothing remotely “legal” about a pyramid scheme that uses some sort of product as window dressing. They are all driven by the recruitment of new members, not retail product sales. Recruits are typically required to buy thousands of dollars worth of water purifiers or some other junk that fill up their basement and never are sold to anyone outside the scheme. Notwithstanding the deceptive earnings claims that are used to promote *all* pyramid schemes, it is a mathematical certainty that the vast majority of participants (over 90%) will not recoup their investments, much less make any money. For these and many more reasons, courts that have looked at such schemes have consistently found them to be inherently deceptive and therefore a violation of state and federal consumer protection laws. The FTC and various states have brought numerous cases over the past ten years against some rather large and nasty operations (Skybiz, Equinox, Bigsmart, etc.).

  37. XopherMV says:

    @ry81984:

    When your first post is on the level of a twelve year old, don’t get all upset for someone replying on a twelve year old level. I have no idea whether your family are a bunch of assholes, but I certainly know about you.

    Mary Kay is a cosmetics company that recruits throughout the community. It is a MLM company, but it is no scam. People can an do make money selling the cosmetics. People do set up legitimate businesses that are successful. THAT was my point bringing up my family. Granted, few of them are making a great deal of money, but they are all making some kind of profit. Given the low number of hours most of them put in selling to their friends or coworkers, that’s to be expected.

    And no, these people aren’t stupid. My wife has a master’s degree in Marketing. My mom has a master’s degree in Public Health Nursing. One of the directors my wife works with is a former executive of Microsoft. Another director is a Neurosurgeon selling on the side.

    That website you bring up was put together by a religious nut who believes the bible gives her credibility to bash the company, “My credentials lie in that scripture.” She dislikes Mary Kay because of the materialism of the culture that -gasp- actually wanted her to sell. She dislikes the company because -gasp- she had to work hard. She sounds like any other former employee who bitches about their former company. No company is ever as bad as someone like that complains.

    @ry81984:

    Let’s go through that list:
    10. Customers don’t want to order product through you. They expect you to have the items they want when they see you. That’s why Mary Kay consultants drive around with their car trunks full of cosmetics. And yes, -gasp- you need inventory to be able to sell. The more inventory you have, the more you are likely to have what a customer wants. That’s business 101.
    9. I’d agree with that regarding some of the costume jewelry. However, my wife did get a mini-fridge that was cool. We also got a pink 4-slice toaster that fits bagels. And let’s not forget that the pink Cadillacs are prizes as well, although that does take a considerable amount of work. They do offer two other cars that require a lot less effort.
    8. Actually, you can advertise your business. However, you can’t sell through Ebay. There’s a reason there are no Mary Kay stores, although there certainly could be. They really want their consultants to connect one-on-one with their customers.
    7. There is a lot of saturation. However, this is an exaggeration.
    6. This complaint is applicable to any business. Why buy the new 2008 Ford Mustang? How much better is it over the 2007?
    5. This is a little old-fashioned, but so what? Again, this complaint is applicable to any business. Try working in an office some time.
    4. My aunt sells to her sisters. She’s a housewife looking for some extra cash. She’s not looking for a full time job. But, this brings in some money. And, she doesn’t spend a great deal of time doing this.
    My mom sells to everyone. She brings catalogs to her day job and places them everywhere. She gives catalogs to my step-dad to place at his work. And, she talks with people and drops the fact that she’s a consultant. It doesn’t take much time. But, she brings in about $1000 a month in profit doing this work part-time.
    You can make money without recruiting. But, you do need to be able to sell, which obviously this person couldn’t figure out.
    3. Nonsense. Become successful and people will respect you.
    2. Yes, you have to work. And that means working some nights and weekends. That’s certainly not all nights and weekends like this person exaggerates. This sounds like more grousing that -gasp- they actually had to work.
    1. Yeah, it is difficult to get a business up and running and making money. Yes, you can put in a lot of time and earn nothing. However, I don’t buy that 99% figure. 57% of statistics are made up on the spot, and I believe that’s one of them.

    This whole article and the previous one sounds like they are upset because they didn’t become instantly wealthy overnight. They’re just grousing because they actually had to do some work.

  38. ry81984 says:

    @XopherMV:
    Well that shows masters degree mean nothing because if they really had them they could be making more money getting a real job.

    Anyways Mary Kay has to provide statistics in Canada.
    Out of 34,272 independent Mary Kay Beauty Consultants:;

    2,422 earned more than $100 Canadian;
    362 Directors earned more $16,500 Canadian;
    16 National Directors earned more than $100,000 Canadian;

    I doubt that those in the US make much more than in Canada. Are you saying all the people in your family are in the top 1% of Mary Kay?

    Also, would you trust any company that would make you buy your inventory up front and then only let you get 90% of the value back when you return it?
    Mary Kay is a scam company no matter what you say. They make money recruiting. They can care less about their consultants because they already got their money and loose nothing when they quit.

    10. You do not need inventory to sell. You can easily take orders and then give them their products a few days later. Stores that have huge inventories like Walmart receive full credit from their suppliers when they cannot sell the products. Thats business 101. Mary Kay sells you the products and keeps 10% of your money if you have to return it. They make money if you cannot sell which is just wrong.

    9. Those prizes could be paid for with much less work having a real job. Also, The car is not yours, its leased by Mary Kay and then taken away as soon as your sales are too low to make the lease payment. Also they technically charge you hundreds over what they actually pay the dealer to lease it for. It is actually much cheaper to get a real job and lease a Mary Kay car yourself.
    8. So there are Mary Kay billboards out there?
    7. That is not an exaggeration.
    6. Again a real supplier would take back their old stock and give you a refund or full credit.
    5. No real company would force their woman to wear skirts only. They would not want to be sued.
    4. Its MLM, you have to recruit to make money to live off of and thats why people do not make much money. It can be tough to scam your friends when they know you do not make money. The profits are too low on the garbage you have to sell.
    3. Who can respect someone who tries to rip off people who they are supposed to care about. You can get better makeup at Walgreens and for much cheaper.
    2. Some or all, that does not matter. You know the BS your family has to go through.
    1. I certainly believe the 99% statistic. Just look at the real numbers from Canada.

    If you actually read the website you will see those people have done Mary Kay a long time.

    One person wrote “I have been a director a little over 10 years, and a consultant for a long time before that.” “This experience with Mary Kay has caused more heartache for my life than I can explain. I want to see us all work together to expose the truth until there isn’t a guest left who will listen or attend a recruiting event.”

    Another woman who was high in Mary Kay:
    “I was on top when I left MK. Not only did I have 1 offspring Director, she had potentially 2 DIQ’s that would have offsprung by Christmas and I had 2 or more that would have done the same. One week before my decision to quit, my National called me and presented me with an option to go National in 2 years with her daily support. I have no doubt in my heart, with my ambition, and my drive, this would have happened.”
    “The question is, what would I have accomplished in those 2 years? Probably divorced…. my kids would have had to gone back to the public school system and who know where that would have led them with a mother too busy to intercede… .tons of women in debt because they wanted to “help” me reach my goal of National”

    Again, I guess those in your family must be in the top 1% of Mary Kay for them to have such a great experience.

  39. XopherMV says:

    @ry81984:

    I dug up your statistics, which leaves out some critical information. First off, they were referencing commissions, not total earnings, which as they state are higher. Secondly, those commission numbers were from consultants with recruits, and not every consultant has recruits. Finally, those commission numbers were of the 34,272 who had been part of the sales force for one year, which again limits those numbers.

    It comes from this page. [www.marykay.ca]

    “The vast majority of the independent sales force members’ primary source of profit is selling product. In addition, all Mary Kay Independent Beauty Consultants can earn income from commissions, dovetailing, prizes and awards. To be eligible for commissions, Independent Beauty Consultants must be active themselves and have at least one active recruit during the relevant period. Members of the independent sales force are considered active in a particular month (and for two months after) when they place at least $200.00 in wholesale orders for cosmetics intended for resale during the month.

    In 2006, there were over 34,272 members of the independent sales force of Mary Kay Cosmetics, Ltd. in Canada. Of the 4,843 who were in the independent sales force for at least one year, and who earned commissions, 50% earned commissions in excess of $100. Of the 724 of those who were Mary Kay Independent Sales Directors, the top 50% earned commissions during the year of $16,500 to in excess of $100,000. Of the 21 of those who were Mary Kay Independent National Sales Directors, 76% earned commissions during the year in excess of $100,000.”

    Your post is intentionally dishonest. So, excuse more for not taking any more of your nonsense seriously. As you have proven time and again, you are an asshole. Now that I’ve conclusively shown you to be a dishonest asshole, I’m done with you. I’m not going to bother responding to the rest of your nonsense post or any others on this topic.

  40. derobert says:

    Wait. Since when is $40 to put up and maintain a webpage overcharging? I don’t think that’d get you half an hour from most web design firms, and probably no more than an hour from the cheap ones.

    If that’s a yearly hosting fee, that’s $3.33/mo – which makes it a reasonable price in cheap web hosting.

    Please tell me you had something else in mind?

  41. crankymediaguy says:

    “Starting a pyramid scheme is where the money is. We (me and my scam associates) would start what we called the “Airplane Game” with a big whiteboard we used to show how the “investment” worked.

    “For $1500 you would “buy in” as a passenger in the back seats and work your way up to the Captain seat where you would then become rich. Of course you were told to bring in your friends to get you to the Captain seat faster.”

    Back in the 80’s I was a wacky morning drive radio DJ in the Allentown, PA area. This exact same scam came through the area. As I’ve long had an interest in scams, etc., I did several on-air rants on it, advising people that it was illegal and wouldn’t work.

    In the 1980’s, the Lehigh Valley area was, along with much of the rest of the country, in a recession. $1500 was a lot for people there to lose.

    I kind of became the local expert on that type of scams, getting me a few death threats, apparently from people involved in it. I also heard from people who decided not to get involved in it, thanks to what I said on the air.

    The forecast for the American economy isn’t looking good, at least short-term; I’m predicting that we will see more of this kind of thing as people get scared and try to make big money quick.

  42. doctor_cos wants you to remain calm says:

    @XopherMV: Don’t forget this religious nut is selling stuff as well (“Shop the Pinking Shears”) !!
    I hope if your quoting scripture as your ‘credentials’ that the money you make on those shirts goes right to the church, dear, or you’re starting to look a little like the moneychangers your own self.

  43. ry81984 says:

    @XopherMV:
    My post was not dishonest.
    You are being dishonest to yourself and everyone else by just trying to say anything to justify what a bunch of people in your family do. Your just being self serving, and I guess you have to or all those brainwashed women in your family will hate you and no one wants that.
    You are an asshole to try and explain that a company that makes money off of people that fail is a good company. Mary Kay, just like any other MLM company, does not view cosultants as employees, they see them as customers and treat them as such.

    Its irrelevant to say the one religious person’s personal experience is wrong because they are religious so that makes Mary Kay great. Mary Kay uses religion to recruit and to guilt people to buy stuff, so that lady using religion as a justification makes sense.
    Here’s another account:
    [www.pinklighthouse.com]

    Also, it does not matter that one site is religious or if the woman is selling things, she does have to make back the money MK scammed from her somehow. There are thousands more personal accounts that show Mary Kay sucks.
    Just search “mary kay sucks” on google and you will see the truth.

    How can you argue with people who have been in Mary Kay for many years, moved up in the company, and realized their life sucks and would be much better off getting a real job.

  44. Rachacha says:

    I see several people commenting about Amway/Quixtar, Avon, Mary Kay and others. Each one of these companies offers a buy-back policy of unused inventory for 90% of the purchase price. The advantage of this is that if you jump into this opportunity and purchase several thousands of dollars in inventory, if you later decide that the business is not for you, you can return it and get 90% of your money back. When you compare this to the classic pyramid scheme (like the airplane game), you could not get your money back. Whether you like MLM or not, the buy-back policy can minimize your loss if you decide you want out. I just wanted to make that distinction

  45. ry81984 says:

    @Rachacha:
    No respectable supplier would only give you 90% back. Real companies like walmart return their product for full refunds to suppliers.
    The MLM companies sell product for $2000 and make at least $200 off of it if you return it. Then they can resell that same product to another consultant and they save money by not have to pay to warehouse all of that inventory. You pay them to warehouse their inventory for them. The MLM company keeps making money and they can care less about their consultants and if they actually sell anything.

    The buyback is just another way to scam free money from consultants.

    A consultant to a MLM company is just a customer, not an employee.

  46. savvyshopper says:

    Here is a great Mary Kay video courtesy of National Sales Director Gloria Mayfield Banks:
    [www.youtube.com]

    And here is what she is REALLY saying:
    [www.youtube.com]

  47. NoneMoreBlack says:

    All you need to know to see exactly why anything like this is bunk is efficient markets. You exchange your time recruiting people for Quixtar or whatever for money, in essence earning a wage. Since there is little barrier to entry, anybody with a voice can try their hand at it. Thus, the wage is a reward to little more than time, and amounts to beans.

    If most people could earn real money providing this service, then everybody would do it, and the rewards would necessarily fall until it was again worth beans.

    .01% of people are able to leverage their innate ability to schmooze or whatever into real rewards; everybody else is best off just picking up some more hours at their regular job.

    If anyone ever offers glittering prizes with no mention of commensurate risk, kick them out like they’re on fire.

  48. Beerad says:

    @rbb: @tadowguy: Social Security is a ponzi scheme only to the extent that our growing national economy is. I think most people would agree that having a basic financial safety net for our citizens is worth the government intervention (after all, that’s the whole point). And investing the money is probably better than our government keeping all of the nation’s Social Security in a shoebox buried in the rose garden, no?

    Yes, I’ll be extremely irked if our government has toppled and our economy collapsed by the time I’m supposed to cash out of the system, but methinks lost SSI will take a backseat to other problems in that situation.

  49. nardo218 says:

    Pinktruth.com is a *fascinating* look at the cultish practices that keeps the Mary Kay pyramid scheme afloat. Personal stories, exposes on the stupid business mores, husbands’ stories, tips on how to get out and sell your thousands of dollars of unmovable inventory on Ebay.

  50. Rachacha says:

    @RY81984
    I don’t think that it is fair to compare the return policy that retail stores (like Wal-Mart) offer to consumers to the return policy that MLMs offer to Consultants. In any of the MLM businesses (just like the retail (Wal-Mart)outlets), the end consumer is free to return the product if they are not satisfied with it. The 90% buyback policy applies to the consultants returning their inventory if they decide that they want to drop out of the business. Does McDonalds offer this if I decide that running a Fast Food Franchise is not for me? Or if I decide to start my own “mom & pop” (or independent) retail outlet (whether it be a restaurant, craft store, specialty store, clothing store or cosmetics store), and I decide that the market is too compenitive or sales is just not for me, will the suppliers and vendors who I purchased all of my inventory from refund 100% of the purchase price…likely not, otherwise you would not see so many stores offering “50%-90% off Everything Must Go-Going out of Business sales”

    I know that you will say that the MLM Consultant does not “own” their business like a traditional “brick & mortar” location, and this is true. The advantage of this is that the consultant’s liability is limited (for the reputable companies) to 90% of the inventory cost. Is there risk in MLM, ABSOLUTELY, just as there is in any business venture where you hope to make money, but when I can invest $2000 and know that I can return my inventory and get $1800 back if I can’t make it work, the financial risk drops dramatically.

    I personally amd not involved in an MLM, and I certainly do understand the point of view that critics and praisers have for the industry. Are there are several “bad apples” who give the industry a bad name, YES, but I prefer to take the high road and think of solutions to the problem rather than simply complaining about the problem (like the critic links that you offered do).

    RY81984 (or anyone), as a critic, I am sure that you have several ideas on how to improve MLM. Running on the assumption that MLM will not be going away anytime soon, what would you do, or what would you like to see changed to make the MLM business model more tolerable. I am interested in hearing inteligent, well thought out comments (and “MLM Sucks, it should be illegal” is not an inteligent well thought out response :-) )

  51. Rachacha says:

    @RY81984
    My apoligies, I mis-read your post. You were talking about the return policy between retailers and vendors, not retailers and consumers. You are correct (sort of) that large retail outlets like Wal-Mart can retun un-sold inventory for 100% return because the retail outlets do not purchase the inventory, and the vendor OWNS the product until such time as it is sold to the consumer. I will clarify with an example. Black and Decker works out an agreement with Home Depot to sell B & D products in their stores. When I go to Home Depot and purchase a drill, I give money to Home Depot. Home depot takes their cut, and at that point pays B&D for the drill that I just purchased (i.e. no money between B&D & Home Depot changes hands until after I purchase the product). This is the situation for many “name brand” products. For retailer branded products, that is not the case. The retailer MUST pay for the inventory at the time they purchase it from their vendors. If they can’t sell it at the retail price, they must sell it at a discount, gradually lowering the price until they can get rid of their inventory. Do you really think that a factory in China is going to buy back 1,000,000 Wal-Mart branded Christmas tree toppers on December 26th…NO, that is why the retailer drops the price on this product by 90% so that they can minimize their loss on the product that they did not sell.

  52. ry81984 says:

    @Rachacha:

    You obviously work for a MLM company.

    Anyways if you want to see how it is done right just look at our children.
    Boy Scouts selling popcorn
    Girl Scouts selling cookies
    Students selling magazine subscriptions
    I never heard of any of them having to pay money for the opportunity to sell product.
    I never heard of the consultants/children loosing money.

    If MLM marketing companies worked like those, then they would only make money off of the product and not off of the consultant.

    The consultant and company would make money off of the profits from what they sold. Everyone wins and nobody looses. If a consultant fails, no harm done.

  53. ry81984 says:

    @Rachacha:
    You must work for a MLM company.

    If you want to easily see how a MLM company is done right, just look at the children.
    Boy Scouts sell popcorn
    Girl Scouts sell cookies
    Students sell magazine subscriptions

    If those consultants/kids do not sell anything, they do not loose their own money.

    Any company that makes you pay to sell their products is a scam.

    These companies will never change because their primary business is recruiting and getting people to pay and join. Thats how the few people at the top get really rich. Their secondary business is selling overpriced product.

  54. Beerad says:

    @ry81984: Well, there are plenty of people who consider “students selling magazine subscriptions” as examples of doing it wrong, myself included. Kids are in school to learn, not so they can be pressed into service for some marketing company.

  55. Rachacha says:

    @ry81984: Actually, I have no connection for an MLM, I am simply capable of looking at BOTH sides of an issue, and forming my own opinion.

    Lets look at school/scout fundraisers:
    The kids usually don’t sell, it is the parents who sell it to their co-workers. The children are enticed with cheap “prizes” as a reward for selling items (looking at my child’s fundraiser, they can “earn” a 25 cent bouncy ball if they sell $50 worth of products. And for the $50 in products sold, the school/scouts MAY get $20 for their troubles with the countless hours of work put in by parents.

    Girl scout cookies come close, but if parents buy extra cases which is quite common, especially for the pack leaders, they have inventory that they have to sell (or eat), or they are out that money. You example has all of the qualities that MLM critics site.

  56. ry81984 says:

    @Rachacha:
    Every MLM tells you to sell to your family and friends first as they know you can guilt them into buying stupid overpriced stuff.

    You logic is flawed. You say you are looking at both sides, but you are not. Your trying to justify MLM companies as a whole. All the MLM marking companies that charge you money for the opportunity to sell their products are scams.

    Also you try to say my statements are wrong after you admit that retailers get full refunds for name brand products. The Amway and Mary Kay crap is not special order Walmart brand products. Its name brand crap they make anyways and not to the specifications of the consultants. If the products suck and cannot sell its the fault of the manufacturer or parent company not the consultant, but they make the consultants take the hit instead of the parent company.

    How can you justify companies that make money off of peoples failure. If those MLM marketing companies cared about their consultants they would not make the consultants pay to be trained in selling their products and not make them loose money on products that cannot be sold.

    The MLM companies are in the recruiting business first and second in the selling products business.
    If you view it from both sides, please explain this uncaring business model to the world.

  57. forever_knight says:

    social security is a pyramid/ponzi scheme only because of how it is currently administered. meaning if was done correctly (meaning that the ss purse wasn’t stolen from on a regular basis) and excess income was held, then it would work fine. it isn’t so it does resemble one of these schemes.

    religions and corporations are similar to ponzi/pyramid schemes. give your money for eternal life or for this piece of trash trinket from china. recruitment done by having kids (religion) and “recruiting” them or by watching tv or supporting it, seeing advertisements, and then wanting to buy all those trinkets.

  58. Rachacha says:

    @ry81984:
    With regards to selling your product to friends & family. I agree that this tactic is used in MLM, as well as with school & scout fundraisers. So I guess this is one more area where the fundraisers you sited as the “Right way to do it” are just like MLM.

    How is one supposed to look at an industry other than the whole. I fully admitted that there are bad apples in the MLM industry (just as there are in all industries). Is it fair to say that all things Wal-Mart suck because the cashier did not say “Have a nice day” or the mandger did not refund your money for something that was clearly mis-used…No. It may however be fair to say that that particular cashier or manager sucks. When you talk about an industry or a company, you must look at the whole.

    I think that you need to read my last post again, I never said that retailers get 100% buyback from their vendors, I said that the retailers often times do not need to pay for the inventory until it is sold, so if the product does not sell at a particular store, the vendor simply takes the product back and tries to sell it elsewhere (or tells the retailer to lower the price, and the vendor takes a cut in profit. Not all vendors have arrangements like this. Think about a local restaurant. If they purchase 10 cases of spaghetti sauce and 5 cases of salt and pepper it is theirs to keep and hopefully they can consume it before it goes bad or they go out of business. If the restaurant does go out of business they can TRY to sell it back to the vendor, but more often than not, they will sell it at auction (hopefully at their cost, but likely at a loss)

    My original post simply stated that legitamite MLM companies offer a buy-back policy for unused inventory. While this will not guarantee that you won’t lose money, it does minimize the loss (unlike the classic pyrimid scheme “The Airplane Game”).

    You ask “How can you justify companies that make money off of peoples failure.” Isn’t this what the state sponsored lotteries do. Offer the chance of riches to people, and all you have to do is pay for the opportunity to win, and if you buy multiple tickets, then your chances increase? I am not saying that it is a good thing, simply pointing out that the problem is not limited to one particular area. You might also want to look into some of the sources of information that you sited in your earlier posts. The owner of one of the sites you mentioned is accused by some to be manipulative, and profiting off of people’s failures. I have no evidence one way or the other, and will let you do your own research especially as it is WAY off topic.

    Since you were not able to provide improvements for the industry, I will start you off with some of my own critiques/criticizms of the industry to get you started:

    1) Completely do away with Non-company produced sales literature & training materials. This would effectively eliminate these busineses within the MLM industry who charge several hundreds of dollars for training materials/books/videos. Training tools should be free or priced to cover the costs of producing the materials and only purchased from the company HQ.

    2) Encourage companies to audit their consultants. Attend meetings undercover to make sure that people were not trying to oversell the opportunity. Most of the corporate literature accurately shows the average earnings of consultants, and the upline needs to be held responsible if they are not providing accurate information to potential recruits.

    To those who may be considering an MLM, I would offer you this advice:
    1) Research the company thoroughly. Look at both the pros & cons.
    2) Don’t go in expecting that you will be able to make thousands for 10 minute of work a day.
    3) Legitimate MLM is generally a very “Hands on” type of selling experience. If you do not believe in the products, and that they are truly the best things ever made, and you are not passionate about the product/service, you will likely not be able to sell them.
    4) Set a realistic goal when you start. This will make the process less daunting
    5) Rome was not built in a day, and neither will your business. As with any business, it will take hard work and determination. Even then you may not succeed. If you decide you want out, return your product to the company, and consider it a lesson learned.

  59. ry81984 says:

    @Rachacha:
    Its funny how your tone has change and your agreeing with me in every way, except you won’t just come out and say I am right.

    Your restaraunt anology only applies to MLM companies if the owner of the restaraunt charges the SERVERS for the unsold product instead of taking the hit themselves.

    You improvements are what needs to be done, but will not work since MLM companies are in the recruiting business and they would have to completely change their whole company to the extent all that is the same is the name.

    The simple test to know if the company is good is by looking at how profits are made. If the company ONLY makes money when the consultant makes money that its an ethical company. If they make money off the consultant even if the consultant does not make any money then it is a scam.

  60. perfectly_cromulent says:

    @ry81984:

    back off attack mode for a minute. sheesh.

  61. derobert says:

    @ry81984: As long as the 10% discount on repurchased merchandise is made clear at the outset, I’m having a real hard time seeing what’s morally wrong with it. Certainly anyone considering going into any business should look at the costs, risks, and potential rewards as best he can before doing so: if the person considers the risk of loss of 10% of merchandise costs acceptable, then it doesn’t seem my place to condemn it. It is, to me, an personal, amoral, strictly economic decision.

    Personally, I do not find MLM to be favorable, and I suspect the same applies to you. Others may have different costs (e.g., opportunity costs) and different benefits (e.g., they may like sales). They may thus rationally make other decisions.

  62. Rachacha says:

    @ry81984:

    Please don’t say I agree with you in every way. I do not believe that people who work in MLM come from a family of losers or stupid like you feel, I do not believe the information posted on the blog links you posted like you do, therefore I can not agree with you in every way.

    I do agree that the MLM industry is not perfect, but the same can be true for any industry (The auto industry needs to increase fuel economy and decrease emmissions, the telecom industry needs to increase internet bandwidth and decrease costs to the consumer, and the airline industry needs to stop holding customers prisoner while waiting on the tarmac for countless hours.)

    I understand that you are on the side who are opposed to MLM, and I can respect the fact that you have an issue with the industry, but you demand a higher standard for the MLM industry than any other industry…Why?

    Would it be fair for Wal-Mart to not make a dime until the their cashier made money? Granted, the employee is getting paid a wage (probably around minimum wage maybe a bit higher for a cashier or stock person), and out of that wage, they need to pay for transportation to and from work, possibly child care, health insurance (although I seem to recall seeing where Wal-Mart recently started offering low cost insurance to its employees), rent/mortgage, utilities and other expenses. So according to your theory until the employee can pay for all of those expenses and make a profit from working at Wal-Mart, Walmart should not turn a profit. The result, Walmart would go out of business and thousands would be out of work, but at least Wal-Mart dod not profit from its employees.

    It may sound ridiculous, but that was essentially the statement that you made, and the expenses that I listed were the types of business expenses that the the pinktruth website you linked to said were the expenses that an MLMer needed to pay for out of their profit from selling lipstick.

    Perhaps you meant to say that the MLM should maintain the inventory until the product is actually sold to the end user. To this I say, any MLMer can do this today if they chose to. Their profits may suffer from increased shipping charges, and they may lose customers because they have to wait 7-10 business days for their purchase, but if you wanted to truly run a no-risk business, it could be done this way.

  63. mikagsd says:

    For those of you bashing the entire network marketing industry, did you ever stop to think about the fact Warren Buffet owns a network marketing company?? As you have heard, there a bad companies in EVERY industry and the amazing part is people actually believe that MLM is “easy”. Fact is, it is hard and who honestly believes at their core that you can make all this money without some hard work or effort?? And who starts a business, ANY business with no upfront costs??? There are reputable companies out there, you must do your homeownerk and proceed with caution and ask LOTS of questions. Be a pain in the neck with questions & concerns to the person introducing you to the opportunity, don’t let them off the hook by laying down, signing up & then regret it. Be blunt with your concerns, if this person is honest, they will actually be happy you are doing this.