It’s Not a Scam. I Made Money.

Our member Char provided this as a comment to last week’s article on Gloria Mayfield Banks and the swindling of thousands and thousands of women. I thought it deserved a post of its own.

Sometimes I don’t think people completely understand why MLM is a scam. Not because the person is dumb, but because the rhetoric has been repeated so many times by con artists, that the public accepts it as true.

MLM is a closed-loop system. The money that comes into that loop is redistributed amongst the same people in that loop. That means that some people have to lose for others to win. But, everyone is sold on winning to get them to join the scheme. If that person can’t find “new money” to make a commission off of, they will be the loser.

The opportunists joining the loop of other opportunists should not be confused by being dubbed a product reseller. That actually plays a very minor role in this scheme. It really only serves as a talking point which makes the whole scheme ‘sound’ more legitimate – and appear legal. Understand, a scam must sound legitimate or it wouldn’t be a scam; it would be blatant theft. Selling the opportunity to sell the opportunity is not legal!

Why is product reselling insignificant to the MLM scheme?

  • Mary Kay wants people to directly buy from them. They don’t profit off a consultant’s resales. MK relies on orders from opportunists for them to profit. This is about them, not the supposed new “business owner”.
  • Psychologically, “Opportunists” will place a larger direct order with MK. These opportunists dubbed business owners will put more money into the scam, and MK keeps the lion’s share. This is why they are debt-free and worth billions.

Everyone and anyone can join and buy direct from MK. Why pay double to a supposed reseller? Plus and as mentioned, that’s not what the company prefers. This is why “training” teaches you to recruit and “build a team”…….of people who buy directly from them!

MLM is just a sales and marketing strategy FOR THE COMPANY. MK is a direct seller and doesn’t use stores. They dub their customers “consultants” because it sounds impressive and will likely get them bigger orders. Remove the rhetoric, and the consultant is just a customer. I’ll bet that hurts some people who thought they were special as a consultant. I don’t say that to be mean, but to point out how effective the MLM psychological strategy is.

Yes, MK will provide a kickback to someone willing to perpetuate their lie of a product re-selling business to lure in new “direct buyers”. GMBs commission check of $14 million is NOT from reselling product. That is all from recruiting enough new “losers” into the closed loop.

But wait…

“It’s not a scam, I made money.” People DO make money in scams. They are simply successful liars or con artists, or in MLM they’re called “leaders” like GMB. Remember, bank robbers and drug dealers collect money too.

And….

“Corporate America is a pyramid scheme too.” Here is the all important difference: Money to pay the corporate pyramid participants comes from OUTSIDE the loop of “money seekers”. The new corporate employees don’t pay into the company which would then pay the older employees. No, that would be the MLM pyramid closed-loop scheme. A legitimate corporation makes their money from non-affiliated people buying their product from genuine desire. They do not buy the product because of the attached “opportunity” to make money. It gets confusing, but in a nutshell, MLM is inherently flawed.

11 Comments

  1. Lazy Gardens

    It should be called what it is – a kickback, vigorish or just the pimp’s cut of the take. “GMBs commission check of $14 million is NOT from reselling product. That is all from recruiting enough new “losers” into the closed loop.”

  2. NayMKWay

    Congratulations to Char on hitting the front page with a very well-stated and succinct article. MLM is a scam and those who succeed are successful scammers. Few understand that, in particular our Friday Critics.

    The BIG LIE is that you have to run your MLM pretend business as “a business.” Nope. You have to run it as the scam that it is. You have to be willing to screw people over so you’re not the one getting screwed.

    Why do you think it is that you can only “win” a car if you have recruits under you? If Mary Kay is all about selling product to customers, why is it not possible for a stellar salesperson with no recruits to earn a car, hmm?

    Why does Mary Kay claim not to be able to track retail sales? The mechanism is already in place, it just requires the consultants fill in and send copies of their sales tax rebate forms every year. Of course, Mary Kay has no such requirement because they need to be able to claim ignorance. The FTC requires only that half (HALF!) the product be consumed by retail customers, but MK doesn’t even reach that low, low bar. So they make vague non-statements like “We know women love our products” while generating revenue by selling to their captive buyers.

  3. Char

    (I’m honored.)

    I was going to add something that I thought needed clarification about it being “closed”:

    Sure, “new” people can enter/join the MLM company, but they are all still opportunists. That is the “closed money loop” where everyone is an opportunist recruiting other opportunists.

    Everyone cannot be an opportunist making profit if their own money is used to pay others’ profits within the same group. The math won’t work.

    Income must be generated from outside the circle of people, or there will be losers if there are also winners. It is basically a gambling system. The problem is, they don’t tell you that to get you to play. The MLMers tell you it’s a “business opportunity”.

    P.S. I always welcome anyone who is a better writer than I to rewrite what I’m attempting to convey. It’s a group effort to untwist and explain the MLM scam. I’m confident I tap into some good ideas, but I realize my sentence structure stinks sometimes. Anyway, twenty years ago I focused on exposing EACH company, evaluating them and their products. It dawned on me one day that it was the system itself. “An MLM” was actually MLMing. Therefore, any company that used the MLMing system was, by default, already a scam. It’s so much easier to understand and identify now. Unfortunately, MLM companies bank on people thinking each MLM company is different. No, they all use the same scam method. MLM is short for multi-level marketing. That’s a method and not a company or product. Avoid MLM i.e., “MLM-ing”.

    1. NayMKWay

      “It dawned on me one day that it was the system itself.”

      The same thing hapened to me. About 18 months ago, I did a little thought experiment to see if it was possible to create a fair and just MLM business. I soon realized that by the time I took out the bad aspects of MLM, it was no longer MLM; it was direct-sales (which many MLM companies like to call themselves; another lie).

      Upon further thought, I realized the root of the evil was endless-chain recruiting. Every other loathesome aspect of MLM descends from endless-chain recruiting.

      Example: the average income in MLM is peanuts. Why? Because if everyone involved is making a decent income, more will be attracted to join until the average drops. We all saw that with LuLaRoe: at first people were writing in to Tracy bragging about how much they were selling. But soon others jumped on board (even with the sky-high entry costs) and the result was trailers full of inventory and no customers, because too many customers had become sellers.

      One of the regular contributors at the site behindmlm calls themselves “MLM Broken Model.” Pretty apt.

      1. Char

        “But soon others jumped on board (even with the sky-high entry costs) and the result was trailers full of inventory and no customers, because too many customers had become sellers.” — Yes, and the resellers were all still buying from the company making the company founders billionaires. This was always the plan. Only scammers start MLM companies. Of course they are scammers when you accept MLM is a synonym for scamming. Suffice it to say, only scammers start scam companies.

        This is something I’d like to ask you to help me with NayMKWay – the perspective. We always seem to focus on it from the MLMers viewpoint, and I think that contributes to the problem. Since the MLMer is actually the customer, analyzing the business opportunity is essentially analyzing the illusion, the spiel. It’s a necessary evil, I guess. Once you approach the business from MKI’s perspective, aka the real business albeit corrupt, it’s clear that they don’t care about reselling and just want you to recruit and have people buy directly from them. I think you follow me and agree, so can you put a version of this explanation into a write up? You do it so well.

        Basically and as I write often, the sales and marketing strategy for the direct selling company is to call their customers business owners. It gets them sales, huge orders in fact. Truly, the CEO must be laughing at all the silly people who think they are “part of the company”.

        1. NayMKWay

          You’re absolutely right, Char. The people who start MLM companies make false statements about how the want to get their wonderful product into customers’ hands as soon as possible, or how they want their brilliant invention to allow all the world to have their own business they can profit from in their pajamas, etc., etc., but they all want one thing: MONEY. Everything else is secondary. Otherwise, they wouldn’t start an MLM company in the first place. They know what they’re doing.

          I’ll see if I can find time to write that up. People tell me I write good. I mean, that I’m a well writer. It’s the word usements I structure that really bring it all home. ;}

  4. Data Junkie

    This is fantastic, Char. Some additional characteristics of the closed loop your refer to:
    – The system works just fine even if the product is never used
    – The system works just fine even if product is never sold outside the closed loop
    – The product itself simply does not matter for the system to work

    The MLM narrative must effectively obfuscate the reality that the MLM company is completely dependent on sales to the folks in their own sales force, and they would quickly fail without this revenue source. Their products have little to no value at those prices in a competitive market landscape, which is why they chose MLM distribution in the first place. Given the poor quality for the high price, the product’s only identifiable value then comes from the associated “opportunity”, which as you pointed out, is a magnet for opportunists.

    I share your frustration at trying to boil this down to a simple phrase or blurb, but the MLM kingpins have mastered the terminology and the manipulation to make it nearly impossible to shed light on the reality of “MLMing” once the poor sap has bought in. The most frustrating is that these naïve folks on the inside just can’t see what is so obvious from the outside: the MLM company sees their sales reps as their target customer. And they count on these sales reps purchasing product of questionable quality or efficacy at well above market prices, at quantities they could never individually consume, and have no real chance of ever re-selling.

    If I were to take a stab at a one-liner about MLM it would be this: “The MLM business plan is built around maximizing the amount of product collecting dust in the homes of their sales reps, coupled with incentives to maximize rep churn.”

    Mary Kay has certainly mastered this.

    1. Char

      Thank you, and your post highlights the other complicated layer of: The products only serve to mask the money collection and redistribution of that money. The products themselves are essentially irrelevant, as you pointed out.

  5. Kristen

    I pin articles to my Pinterest all the time from Pink Truth and though I have a pretty decent following, I wonder is there more I can do to get the message out to save other women from MLM’s?

    1. Destiny Angel

      There’s the r/antimlm subreddit. There are lots of links there. One user breaks down the income disclosures and there’s links to other antimlm blogs as well.

      You don’t have to join reddit to be able to read the sub.

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