What Does Dave Ramsey Say About Multilevel Marketing

pink-pyramid-selling-scamBack in 2013, I criticized Dave Ramsey sharply for promoting the idea that multi-level marketing is a way for consumers to make a lot of money.  This article was published on his site, and it said:

Truthfully, if you have a go-getter personality, and you can follow some basic business and personal etiquette, you can make a lot of money in an MLM. The trick is to avoid all the potential pitfalls along the way.

That statement upset me because it has been proven that 99% of people involved in MLMs lose money. Dave cautioned:

MLMs can be awesome if you understand how they work, but they can also be a financial and personal disaster if you jump right in without thinking.

The sad truth is that no matter how careful you are, you are almost guaranteed to lose money in MLM. You can follow all the rules, invest lots of time and money into your “business”, and you will still lose money.

Later that year, this video was put on YouTube. A caller asked about multi-level marketing, and among other things, Dave said:

  • There is nothing wrong with MLM
  • You control your destiny.. there is no glass ceiling…
  • He knows people who make over a million dollars in different MLMs
  • It’s not a pyramid scheme because an actual product is being sold (wrong!)

One of the good points Dave made to this caller is that you’re “constantly recruiting” in MLM. He also mentioned that the vast majority of recruits who get into MLM are gone within a year.  He pointed out that if you just sell the product, you’re going to be making minimum wage. To make more than minimum wage, you’ll need to recruit. NOW we’re headed in the right direction, with your advice, Dave!

Dave Ramsey talks about the constant need for recruiting and the fact that retail sales will not generate much income. Lazy Man and Money provides a good analysis of an important part of the video:

Ramsey now states that MLMs aren’t about selling the product or “whatever they do.” He says it is about recruiting: “constantly recruiting, recruiting, recruiting… everyone is a recruit.”

Ramsey’s description of an MLM is exactly an illegal pyramid scheme according to FTC guidelines. The FTC makes it clear that a legitimate MLM is focused on selling the “whatever they do” and that “recruiting, recruiting, recruiting” is a pyramid scheme.

Dave (2:59): And if you don’t recruit people… because your fall-out is very, very, high. The vast majority of people are gone within 3-4 months, but certainly in a year almost nobody is there.”

Again, does this sound like a legitimate sales business or a pyramid scheme based on recruiting?

Also, remember that 99% failure rate above? I’m not saying that running a legitimate sales job is easy. However, we know that mathematically pyramid schemes based on “recruiting, recruiting, recruiting” are unsustainable.

A “year-long” person in your hierarchy is extremely rare. When you get one of those and they go build their own hierarchy that’s when the serious money seems to happen.

I like how Ramsey is calling it a “hierarchy” now. Maybe if we call it recruitment hierarchy it won’t sound like a pyramid scheme?

So having one consistent person in your pyramid is extremely rare. And then you have to consider that person needs to build their pyramid of extremely rare circumstances. This continues on and on.

While Dave provides a few pieces good advice in the video, there is too much bad advice and simply wrong information. The original article I criticized is still available on his site. I don’t like the conflicting information Dave Ramsey provides. He gets some things right, but he gets a whole lot of things wrong, and I hate that it appears that he does endorse MLM as a legitimate business, when it is not.

19 Comments

  1. Iescaped

    If anyone was told the full Truth about MLMs, recruiting would be harder than it already is!!

    This is just my opinion, but I think that the only way a MLM can work is to go in from day one with the intention of recruiting non stop and be completely comfortable with scamming and lying to everyone.

    If you can’t be a con artist, then stay away from all MLMs!!

  2. sally

    It really depends on what you want. I did another DS company prior to MK and made a car payment each month doing 2 or 3 parties a month. I didn’t care about recruting. I just wanted a little side $. MK is nothing like that one was. I am so glad I’m no longer with MK, a director or spending/wasting $ to hear the same old thing at leadership from a National that shouldn’t even be one! Dressing women up and having them stand in front of women and bold face lie about their lives and stories isn’t empowering. Funny thing is I still have great friends from the other company. My supposed sisters with MK….not so much since I didn’t ‘work’ like them and I’m negative and to be avoided…..

  3. raisinberry

    Love the “recruitment hierarchy”. Yep, just another one of those Peer to Peer Vertically Aligned Retail Cooperatives.

    Call it whatever you want. You still have to sell the potential of your so called opportunity while lying about the reality.

    1. Lazy Gardens

      Many MLMs are this way.

      Look at “Bellamora”, which imploded before it got off the ground. The management and the ones doing the early recruiting were serial scammers. They had been in multiple MLMs before Bellamora and went right on to the next one. You could look up their names on the Internet and see a long list of failed MLMs they had founded and then abandoned.

      They have a hard core of minions who move with them, and each is really GOOD at luring people in.

      By the time the rumor of the new MLM reaches the general public as a “ground floor opportunity” the first levels are already filled up with insiders. You may get in on the ground floor, but they are already in the penthouse waiting for you to start sending money up to them.

  4. ran4fun

    I actually think he is intentionally walking a fine line:

    1. He has friends who are high up in MLM. He won’t keep them as friends if he calls their endeavor a scam.

    2. Legally I think he is covering his a(xx). As long as the Feds don’t recognize it as a scam, he could face serious legal blow back by calling it a scam. I can only imagine how much grief Tracy gets, and her profile is nothing compared to Ramsey.

    3. Once he says the nice things about MLM, he very clearly talks about the negatives.

    Every thing he says is true: He knows people who make money; It’s legal; It’s recruitment based and most don’t make money.

    Like all of you, I am frustrated that someone with his name recognition and credibility doesn’t come out more forcefully. Clark Howard, too. They both have such huge national audiences. Their 2 voices could do a lot to bring down the myths of MLM.

    While it would be nice if the government would make MLMs illegal, I don’t see that happening for decades. The better way to kill MLM is through education. That’s where PT comes in, but those 2 national voices could do wonders. Kill the myth of executive/residual income and you kill the bait that hooks most into these schemes.

    Myths busted – recruitment stops – MLM dies.

    1. Nightowl2548

      Tom Leykis constantly calls out MLM as a scam, he also calls out these 1-800 number Trade Schools that advertise on Daytime TV as scams to selling low quality, overpriced versions of the same thing you can get at your local junior college.

      He isn’t covering his but if he calls MLM in general out as a scam, only by naming specific ones could he face a harassment lawsuit.

  5. I’ve never liked Dave Ramsey. Even though the world of finances is alien to me, my problem with Dave Ramsey is that he is just another mouthpiece of the Wall Street establishment with a healthy dose of Prosperity Gospel mixed in to make him seem down home.

    1. Jp71

      Boom! You said it perfectly tamtam! His fast talking gobbledegook about debt and money is a bunch of crap. I used to listen to him on the radio years ago and someone called in with a debt problem: his solution was sell the car and figure out another way to get to work. Period, the end. When the person said there’s no public transportation in his area he was shot down and waved away as if he was purely a negative nelly. OMG I wanted to SCREAM.

      The prosperity gospel (I’m talking to YOU JOEL OSTEEN) mixed with “buy my book/system/DVD/CD’s that will show you the shortcut to RICHES with virtually no pain and discomfort” is so irritating and makes me so annoyed for those people who fall for it hook, line and sinker. It’s never easy, there are no quick fixes, and just because you filed bankruptcy once and managed to get yourself out of it by peddling your stupid crap to the unknowing does not make you a superstar for the poor. Be honest for pete’s sake: just like losing weight, losing debt is not done overnight!

      1. I remember listening to his bloviating in college back when I was a die-hard Republican. Even back then, I could tell he was talking sh*t. And then the whole “Financial Peace University” thing he pushed to get people to buy his overpriced debt “relief” program, that just SCREAMED scam!

        I get worked up and seeing red when either the subject of or an apostle of the Prosperity Gospel is mentioned. It’s very disingenuous and gives God a bad name

    2. chaimsmom

      Thank you! I don’t understand the love affair some people have with him. We all know debt is bad and the way out of it is to pay off your credit cards, starting with the lowest ones, and then cut them up into little pieces. People drowning in debt don’t need to pay $$$ for that advice.

      1. No kidding! A basic home economics class can tell you that.

        It’s the whole Prosperity Gospel message that gets people flocking to Dave like moths to a flame. Someone who says you can make money hand over fist without much work is bound to get lots of attention

  6. cindlylu

    After Amway…I am surprise that there are any recruits left in North America who aren’t aware of the scam known as mlm or pyramid. Mind you we need to list mlm’s such as MK, Avon, stella and dot etc so more know to avoid these companies

    1. Lazy Gardens

      Erin … you know people who CLAIM and ACT LIKE they are making tons of money. Unless you have access to their business finance records you have no idea it they are rolling in cash or drowning in debt.

      It’s called “fake it until you make it

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