This chart shows how a typical Multi-Level-Marketing (MLM) operation sustains itself by ripping off the entry-level salespeople. Most of each of sales commission flows upwards, or to the “uplinks.” Additionally, there may be entry costs, like Cutco reps who have to buy their $150 demo kit.

Even if you’re making $600 a week, that breaks down to less than minimum wage once you factor in spending half the day selling, and then rest in hype meetings and hanging out with other the other MLM heads from the “office.”

Why then do the grunts keep toiling? They’re told that if they prove themselves and start bringing in more recruits, one day they’ll move up to manager and someday be allowed to open their own office, and victimize a whole new batch of suckers.

Unlike a straight pyramid scheme, MLM is a smart virus. It keeps the host alive enough to continue drawing blood and replenish itself. — BEN POPKEN

[Image via Discover Vancouver]

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.