Multi-level marketing is a lawful and legitimate business method that uses a network of independent representatives to sell consumer products. Compensation must primarily be based on the sale of products and services to the ultimate consumer.
The vast majority of Multi-Level-Marketing models are considered to be scams, Ponzi's, and pyramid schemes, and for good reason. They inherently prey on the lower class and normally leech value from their own workforce up to the top of the chain. Not only that, they leech money from the family and friends of the workforce. Most people get chewed up and spit out and hardly anyone makes any real money.
Fledgling members of what some would describe as a cult-like work-environment will make it appear as though they are successful when they are actually just living beyond their means and loading up on debt. Fake it till you make it. Image is more important than reality.
Are MLMs just pyramid schemes?
Pyramid Schemes are, however, fraudulent schemes, disguised as an MLM strategy. The difference between a pyramid scheme and a lawful MLM program is that there is no real product that is sold in a pyramid scheme. Participants attempt to make money solely by recruiting new participants into the program.
Some examples of legal MLMs?
I watched a documentary a few years back on a little office space scam called WeWork. Perhaps you've heard of it. In fact, the company still exists and it's publicly traded on the stock market. You know it's been so long since I've seen the documentary that I've forgotten a lot of things, but needless to say they engaged in a lot of unsustainable business practices. The documentary was very good... and thorough. I'm not even sure if it was technically an MLM but that doesn't matter. What matters is more the energy around it and the cult-like atmosphere. Very similar to what a good pyramid scheme will cultivate.
On Becoming a God in Central Florida
This show is a fiction (a very good one) loosely based off of Amway.
Amway is an American multi-level marketing company that sells health, beauty, and home care products. The company was founded in 1959 by Jay Van Andel and Richard DeVos and is based in Ada, Michigan. Amway and its sister companies under Alticor reported sales of $8.4 billion in 2019.
Stinker Thinkers!
Kirsten Dunst is a national treasure.
The thing I really love about the show is that it really portrays exactly how deeply the betrayal is between the company and the employees. These people think they're going to make it big and finally claw themselves out of the gutter, only to be kicked even further down and left with nothing to show for it. Definitely worth the watch.
LulaRoe
I forgot I've seen this one as well. Yet again we see MLMs preying on housewives looking to make some extra income for the family. In the case of LulaRoe, it seems like there were more success stories than most MLMs, but there are still obviously plenty of horror stories as well.
I suddenly feel like I've talked about this before...
Let's check...
https://peakd.com/@edicted/odds-and-ends
I believe a crypto MLM will be invented where the downlines and uplines have a much more symbiotic relationship.
https://peakd.com/@edicted/middle-class-in-crypto-millionaire
The demand is there.
We see it flaunted and exploited on a daily basis. How many MLM pyramid schemes are focus fired directly at housewives looking for a way to make some extra money?
- Amway (cleaning products)
- Herbalife (supplements shakes)
- Avon (makeup)
- Mary Kay (makeup)
- Doterra (essential oils)
- Scentsy (candles)
- Lula Roe (clothes)
- Etc. Etc. Etc. Etc.
Hm yes so I have talked about this a bit a year ago,
but there is still much more to say.
What is the product?
In order for an MLM to not be a pyramid scheme, at the very least it needs a product to sell. However, crypto itself can be the product, which greatly muddies the waters in the case of differentiating a scam from a legitimate product. If it is an MLM and the community IS the product... doesn't that sound like the actual definition of a Ponzi? This creates a certain level of paradox when it comes to combining crypto with an MLM strategy.
Think about it:
If we assume that all MLM cryptos are scams because there is no actual product, doesn't that just mean all cryptos are scams as well? Bitcoin is a legitimate network. But an MLM version of Bitcoin would be a scam? Isn't Bitcoin an extremely valuable product? That logic doesn't make sense within the context presented.
This would imply that currency isn't a valuable product, which is also obviously incorrect. Controlling the ledger (or in the case of crypto, making sure no one controls the ledger) is one of the most profitable products in the world. So profitable in fact that a hyper-inefficient solution such as cryptocurrency has been able to gain ground exponentially despite all the pitfalls. If we think of MLM as an inefficient way for users at the bottom of the pyramid to make money... does it matter? It's possible they could still make a living wage even given the inefficiency of the system employed.
And then what happens if we take a fake or largely worthless product and place it on top of the scam? Say a really bad video game or a social media site or video/streaming platform. Could be anything. If the Ponzi coin builds something like that they can just point to it and be like, "That's our product." Even if it has little-to-no value and the real product continues to be the community itself, doesn't matter because they have a scapegoat if it all goes belly-up.
I honestly find it hard to believe that such a thing doesn't even exist yet. I mean sure we had Bitconnect or whatever but that imploded quite quickly (was it even an MLM or just yield farming unsustainability). I'm talking about an MLM that has real staying power (even if it's not necessarily a good deal for the users at the bottom).
It's also important to note that a lot of what I'm saying right now is just Devil's Advocate theory-crafting. It would be very difficult to create a legitimate crypto MLM, but regardless of the difficulty I think it is quite possible. Not only possible, but also profitable for all users involved.
Much like Bitcoin is the most basic version of a crypto, so to must we come up with the most basic version of other systems as a prototype to see if they work. If the basic version doesn't work, it's highly unlikely that a more complicated version that tries to loophole around the flaws is going to be any good.
So basically the only requirement of an MLM is that it has those multiple levels. There are uplines and downlines. Your upline is the person that brought you into the system (and the person that brought them in and so-on). Your downline are people you brought into the system and anyone they recruited.
The ultimate problem with the upline/downline model is that it is almost always toxic and downright parasitic. The downline has to pay the upline tribute, almost always in the form of a percentage cut of all sales made. I assume most of my readers know how this works. A basic version would be 10% of all the money you bring in goes to your upline. Then your upline has to pay 10% of the money they make to their upline, and so on until we get to the very top of the line... who pockets everything for themselves. Obviously everyone wants to be that guy, but how does one become that guy, and in what situations would you not want to be at the top of the line? These are serious questions that need answering if we actually want to create a legit MLM.
Within a successful crypto MLM, this toxic relationship obviously should not be allowed to exist. Rather than a parasitic relationship where only one party gains, we want to create symbiotic relationships in which both parties have something to gain and a reason to maintain the relationship. If at any time this partnership lacks the required synergy, the party who feels like they are getting a raw deal should be allowed to sever the connection.
The gain that the upline receives is obvious: cold hard cash in the form of tribute from the downline... but what value can the upline offer the downline in return? Connections? Tips and tricks about how to succeed? Access to new networks? Organizational strategy?
We need to start looking at MLMs like a business. What is the point of middle management? What's the point of a CEO and a CFO and other executives? What are the point of the grunts who have boots on the ground? It's very easy to see that a big group of people could be organized within an MLM to create a sort of mini-company within the greater network, and this mini-company would be more efficient than everyone just running around trying to do their own thing. But again, it needs to be equitable for all members, and arguably every mini-company within the MLM would be competing in a healthy way to give the best deal to said 'employees'.
If there's one thing we've seen about decentralization, it's that it lacks structure, direction, and leadership. We have to lean into the efficiency and streamlined nature of centralization when it suits us. Just like mining pools are DPOS with extra steps, so to do we see the exact same concept apply over and over again to dev teams and founders within crypto. So then we must ask ourselves: why are we not creating templates for these kinds of structures directly into the protocol if we know they exist on layer zero no matter what?
We already know the answer: "because that's centralized." This is an irrelevant answer. It's going to happen whether the platform accounts for the tiered architecture or not. The only question is if the layer 1 has any say over this structure or not. If not it will be left to the founding team to decide. This is perhaps not the best strategy to employ in all cases, as we are doing today. There is perhaps a better way to do this that we haven't even considered yet, hiding right under our noses.
Airdrops as a product
To give an example of how crazy this could all become, imagine if certain ranks of the MLM were authorized to give small airdrops to newcomers in order to lure them into the system. How many pyramid schemes do you know of that operated by giving away a little free money in the hopes of more money pouring in than being gifted away?
It's models like this that are already known to work. Back when crypto was in the bull market, I gave $100 away to people here and there, and you know what happened? Some of them threw down thousands or even tens of thousands on the token that I airdropped them. Crypto can do things like this that legacy models just can't. This is the magic of owning and controlling the underlying currency directly. It opens up an entirely new world of possibilities and is going to catch a lot of people completely off guard.
Conclusion
It is very questionable if MLM is a valid business model. This is especially true considering how most of the time in practice it turns into a very one-sided parasitic relationship that does not properly distribute power to all employees in a fair way.
However, if any kind of technology was going to make this kind of business model viable and fair for all parties concerned, it would be cryptocurrency and the ability to program the rules in a transparent way that is a provably fair arrangement. That's the entire point of crypto, right? Decentralizing power in a fair way. Crypto could become the secret sauce that makes MLMs stop tasting like garbeau. It is possible that crypto could adapt the MLM business model in such a way that empowers it to become one of the effective means of economic growth ever known to mankind. I'm not joking.
Imagine being able to harness that kind of cultish togetherness we see within MLMs (and even crypto maximalism) without any of the toxic leeching within the system. The fictional MLM in "On Becoming a God in Central Florida" is called Founders American Merchandise. FAM for short, which of course funnels into the whole "we're a FAMily and we all help each other." What if crypto could make its own FAM token and harness that spirit of togetherness without actually becoming a toxic garbage pile? I believe this is not only possible, but guaranteed to occur within the next decade. That's powerful.
As always, the Devil is in the details. the chance that greed would corrupt such a project is high, but once a good template is created (that can't be gamed) I imagine it would get copied a thousand times over, just like the ICO craze and the DEFI craze and the NFT craze. There will be an MLM craze. I guarantee it. And it's going to be nothing but terrifying I'm sure, but one out of 100 projects will be legit. We only need one for it all to have been worth it. That's just the name of the game in crypto. Throw it all at the wall and see what sticks.