In the past, I’ve shared the story of the worst job I ever had. In a lot of ways, it felt like I was part of a pyramid scheme or multi-level marketing operation. I’ve been approached to participate in similar operations since then: once by my veterinarian (?!?) and once by a stranger in a book store. Sometimes you cannot tell a scam is a scam until you see it up close, and then the sunk-cost fallacy will sometimes force you to make a poor choice. GRS reader Bozemblem recently sent me this story of his close encounter with a “business opportunity” that turned out to be a scam.
I’ve been reading Get Rich Slowly for about a year now, and I can definitely relate when you talk about your struggles and triumphs with money. Here’s an experience I recently had.
I currently work and live in one of the most expensive parts of the United States. I’m going to school part-time to get my MS in Computer Science. School is very expensive, even with my employer paying a great deal of the tuition. On top of that I’m getting married next year and I have a tiny amount of credit card debt. I do a very good job of budgeting my money; I follow it quite closely and it won’t be long before I’ve rid myself of the debt. However, as you might be able to tell, money is a bit of a concern and so I’m always looking for way to either decrease my spending (which I think I’ve done a good job of so far without going crazy) or increase my income (which is much harder to do, and it is my attempt to do so which is why I’m writing you).
Business opportunity
The other night I was in the grocery store buying some items for my sick fiancee. Unfortunately, there was only one cashier on duty and I was one of an unusually large number of customers that night. As I waited in line, a nice gentleman in line behind me struck up a conversation. I spent some time talking to him and eventually we got around to talking about what we did for a living, and I mentioned that I am a software engineer. Upon hearing that, he got pretty excited and told me that he was a small business owner in need of someone with my skill set. Seeing this as an opportunity to possible earn some extra money, we exchanged number and he promised to call me the next week to talk about opportunities for some part-time work with his company.
Later that next week he called me, and we set up a time to meet. He told me to meet him at a hotel the next week; he and some of his fellow small business owners were part of a larger corporation, and he presented this to me as an opportunity to network and meet other people who may be interested in my skills. Cautiously optimistic, I agreed.
Well tonight I met this individual and had quite the experience. It slowly started to come together for me, and the saddest part about it is that those were three hours that I will never get back. Turns out, it was just one large pyramid scheme, and it didn’t matter if I was a software engineer or not.
Pyramid scheme
Here’s how the operation works: you join as an “apprentice” of another member, and you maximize your profits by getting other people to become your “apprentice”. It was disguised as an “e-commerce” (sorry for the abuse of quotation marks) operation; basically you bought your home goods from this one organization instead of a place like Wal-Mart. Everyone else you got to sign up and buy those same goods from that organization would gain you some money. And when they got people to sign up, then you would get a cut of the profits as well. As soon as I had an opportunity, I left, feeling disgusted and embarrassed.
I however, was the only one. Of the other “candidates” in the room, only I left. Everyone else seemed excited. It’s not hard to see how. The speaker was very compelling; very funny and personable. He spoke of living a “lifestyle” as opposed to a life (my first red flag). Then he talked about stuff like “how would you feel if you could drive a different car…every day of the week!” He then had us list out which 7 cars we wanted. Actually, we listed out 6. Aston Martins, Rolls-Royces, etc… The 7th car he picked. And it was the car he drove, and he implied that it was through this program that he was able to afford it. I wish I could have left right then, but I was sitting near the front and although I hated myself for being there, I couldn’t bear to be rude either.
Your readers should be aware of these operations! They may sound good, and the money may be real, but it’s all top-heavy. The ones at the bottom (ie. YOU) won’t be making all that money, but you’ll help someone else do it! Beware of the charismatic speaker; this guy was really good; going so far as to say “I don’t even care if you join or not”. Implying, of course, that he’s doing us a favor, despite the fact that he wouldn’t have any money if no one signed up.Â
But that one statement was so powerful, and I could tell my fellow attendees were getting sucked in. That one statement created such a sense of urgency and yet indifference on his part. He was basically saying that he didn’t need us, that he can find more people, the “right” people. And he kept talking about us being “candidates”, and he spoke often of a selection process. I’m not privy to such information, but if I had to guess, I would say that we were all going to be selected.Â
Get rich quick!
That and numerous other methods were employed to give us a sense of opportunity, and give us a taste of the rich lifestyle. He was damn good at his job, and I don’t doubt that he’s made plenty of money off of his considerable talents. Oh, and don’t forget the $200 registration fee, the $150 insurance costs, and the undisclosed costs of the training materials. By the way, I only got those figures by pressing my “sponsor” until he finally relented.
It’s easy to see how people can get sucked in. Everyone else was just like me; needed a little extra cash, pressed for time and anxious to explore any opportunity, we were rip for picking. I thank goodness that my dad instilled in me a sense of skepticism, else I may have ended up with the rest of them.Â
Unfortunately, the road to riches isn’t that easy. It’s simple, but it isn’t quick and painless. You just gotta spend less than you earn (by prioritization and reducing the number of unnecessary “wants”), save as much as you can, diversify your investments, and constantly improve the most critical investment, yourself (through taking on a variety of tasks at your job, even if they’re outside of your typical skillset and by continuing your education). Invest in index funds, open a high-yield savings account, contribute at least enough to your 401(k) to max out your company’s match and fund your IRA; doing so will provide plenty of wealth going forward, just do the math!
A learning experience
There is one positive that came out of my experience with the pyramid scheme. The speaker preached constantly about how his program is different than a typical job because it gave you “freedom”. That’s not really true, it just transfers your obligations, and it provides you with a significant amount of risk if you are one of those who chose to do that type of thing full time (and there are those people).Â
The bright side for me was that I realized how much I hated the lack of freedom that working in a traditional career offers. And I’ve always had an idea for a real small business (as opposed to the scheme’s definition of a small business) that I’ve always wanted to open, and I’m going to start working towards that goal. I’ve been inspired to work to free myself from work, and to get to the point where I won’t be susceptible to schemes like the one I got sucked into tonight. Perhaps not the motivation these guys were looking for, but that’s what I got out of it!
Bozemblem’s experience is similar to several I’ve had in my own life. I believe he’s right: programs like this can provide income and success to those at the top, or to those who have special luck or motivation. But for most people, they’re actually a net loss. Do you have experience with pyramid schemes or multi-level marketing? Was this experience positive or negative? What advice do you have for others who might be considering this as a way to make money? Checkout line photo by szlea. Conference photo by Jeffrey Beall.
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I work in a hotel bar and after what I can only assume had been a long, hard-sell performance in one of our conference rooms, the scammers brought their prospective clients down to the bar. In an effort to impress the suckers, the leaders were literally throwing money over the bar at me. 4 shots cost $16 bucks, so he tipped me $20, 10 drinks for all his “friends” is $50, here’s a $50 tip as well.
By the end of my normally sleepy Tuesday night shift, I had made over $600… my average on a Tuesday being about $75. It almost made me uncomfortable to take his money because I could see that he was trying to show off, and I had a feeling this kid didn’t really have the money to spend.
I don’t know for sure what the product or plan was for this group, but I’ll bet I probably have the highest income/time-invested ratio in the whole company…
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I think the legality of these types of organizations can be debated until we’re all blue in the face but just the fact that we can debate their legality is reason to take pause before pursuing these “opportunities”. Every day I walk into work I don’t give one thought about whether what I’m doing is legal or not. Every time I trade a stock I don’t think about whether the SEC will flag the transaction. And I think the importance of that cannot be overstated.
Also, with regards to whether or not you can actually make money at this or not, I don’t doubt that there are those who have gotten rich off of these type of things. But those people are always at the top; and if you’re getting in by attending a meeting at a hotel, you’re not at the top, and you’re going to be forced to gather the scraps at the bottom of the pyramid. And I think someone mentioned this before me, but I guarantee you that way more money was made on the sale of “training materials” or on application and registration fees than was ever made by participating in the program.
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I’m pretty sure the only way to make money in a pyramind/MLM scheme is to actually start one. If it’s top heavy, why not be the top?
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Wow – sounds like they even work their approaches to people based on the same script. I got approached the same way maybe 15 years or so back. The guy arranged to meet me some place and talked about this great opportunity – “say, we’re having this big regional meeting next week down at the convention center and all the big wigs will be there, want to go and see how this all works?” It was all very sly. I was suspicious, but decided to go to the meeting. It turned out to be Amway, and the meeting, as someone else said, was creepy. Fortunately, my wife had been busy and wasn’t able to attend, so when I made excuses and went to leave, my contact suggested I bring her with me next time, but noted that I shouldn’t mention “the A word – it tends to scare people off”. So, you want me to lie to my wife and not tell her it’s Amway? Any shred of credibility he had left evaporated at that moment.
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hey i didnt know such things took place in US as well. One of my friend fell for this kind of scheme here in India and almost drove him to bankruptcy and eventually to suicide but thank god his life was saved. Ofcourse now the pyramid schemes are banned but then that is almost 6-8 years ago they werent banned here in India…
So a good and a informative article!!
Cheers!
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I get approached ALL the time with stupid lines that are so easy to see through. One guy who had come up to me at a Target tried to hit me up at Lowes a week later. It’s getting to the point now where my wife and I play games to try and spot them and it’s almost like daring them to come try to talk to us. It’s something about being young, presentable, and friendly looking that makes them think we’re easy targets.
The funniest part is when I’m looking at something in the grocery store- usually some obscure ingredient, when some guy in khakis and a polo without a grocery cart or even a basket saddles up beside me and starts looking and evenutally notices my college hat or shirt and uses that as an excuse to start a conversation. Some guy even tried to ‘pick me up’ while I was at a gas station by asking me about my car. It’s a shame because I’ve found I’ve turned into a much less trusting person- I don’t believe in people just being friendly for friendlies sake- eventually it always comes down to someone trying to sell me on some scheme.
I used to work for a political party here in Virginia and a colleague of mine and I were sitting on a bench downtown having lunch and we were approached with these same techniques. We flipped the conversation around and basically started selling them on being involved in politics. They kept trying to make an excuse to leave, but I used all the lessons that I had learned from their brethern and kept them there for 25 minutes talking about my candidates and my party. They couldn’t get out of their fast enough– serves them right.
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I have a brother with a “get rich quick” mentality. He’s involved with Primerica. I don’t understand why I should take financial advice from a guy who’s almost 40, has no job (except Primerica, of course) and Dad pays his rent and credit card bills.
He says he works for them, but last I heard HE was paying THEM! HE was paying to attend conferences, HE was paying for training, I wonder if he had to pay for the materials he sent us.
At least he doesn’t talk about it when the family gets together Christmas and Thanksgiving.
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This is not entirely related, but my sister has been looking for jobs and answering newspaper want ads. She gets call backs and even interviews for jobs which are described as office-based in the ad, but when she gets there finds out it is a commission-only based sales job, where often she is not only not paid for her time training but will have to pay in some way for this training! It has been very frustrating and discouraging for her to get her hopes up and then go on one of these “interviews.” It has gotten so bad she feels there are very little real jobs posted in newspapers, or the ratio is so low it is not worth the effort.
These type of money making schemes really mine the capital of politeness, faith, trust, and goodwill people have for others in this country; it really is a shame.
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I posted my resume on Monster, and got a call the next day from a gas company in Ontario, who was ‘impressed’ by my fresh-out-of-university resume, and wanted to interview me for a sales position. I was curious enough (or dumb enough) to bite on the interview.
The interview, which I missed a few hours of paid work at my unglamorous job for, was a complete scam. I was interviewed by a ‘recruiter’. It took place in a very barren office in a newer industrial/commercial area. Seemingly no business actually went on there. I would not be getting my own desk at this company.
The lady spent the whole 10 minutes trying to sell the job to me; I did not have to sell myself at all. Had she actually interviewed me, she would have noticed that I was absolutely wrong for the position. She talked about all the potential perks: a company trip to Egypt IF I can sell enough contracts by a certain date, all the handsome young salesmen who would be my trainers and coworkers, and the potential money I could make (and that just one or two top sellers were making – $3000 week – and spending on flashy things!) By this point, I was expected to have stars in my eyes, thinking that I too could be a top seller. She did make sure I was OK with there being NO base pay, only commission on sales ($110 per sale.)
She didn’t talk at all about hours or the actual job itself. She just hinted to it being some work on weekends, and everyone getting into a car together from the office and going out to the site. She was quick to sign me up for the training session the following day (training sessions were WEEKLY.) I’d even get my own experienced salesman to shadow for my first few days on the job. Oh boy, I hope he’s cute!
To make matters worse, my interviewer was completely unprofessional. She told me about getting drunk and hitting on her boss, then asking if I’ve ever “gotten really loaded and done crazy stuff like that.” She also asked if I was single, and when I explained my relationship situation, she asked me if I was sixteen. Thanks for listening to me, lady. Glad you skimmed my resume beforehand.
The company was “Energy Savings Group” or “Ontario Energy Savings”. They’re the door-to-door salesmen who try to get you to switch from your current gas provider (Terasen) to a fixed-rate 5 year contract with them. I could not imagine going door-to-door in rainy Vancouver, only to get turned down again and again as I try to sell people something they absolutely do not need.
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I have all the same comments about MLM schemes. I have been approached many times. I at least heard them out the first time because the couple was friends of mine. They took me to one of those meetings at a fancy house and made us feel really uncomfortable by making us stand in front of everyone and introduce ourselves. I shot people down every other time before they even said what they were selling. What I think is the most sleazy thing is that they prey on college students saying that it’s an easy way to make money when in reality these are the people who can least afford to make these mistakes.
As far as sales – My philosophy is if I am the least bit skeptical or not sure I want to buy something, I remember the name and look it up online. I also take the person’s card telling them I’ll call if I decide I want something. This makes me feel better about saying no, although it is not necessary. If I still want it after thinking about it for a day or 2, I can almost always find it cheaper online or find an off-brand replacement. And at the very least, you can call up the salesperson and buy one after the fact. It isn’t like they are going to turn you down! This has served me well many times, most recently with a nail care system at the mall. It cost $59 for a lotion, cuticle oil, and buffer, but I did really like how it made my nails healthy and shiny. So I went to WalMart and bought a buffer for $1.75, cuticle oil for $6, and I already had lotion at home. I got the same results for much less, not to mention the satisfaction that I wasn’t scammed into something.
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I got approached by some guy at the grocery store the other day who said “Hey, don’t you work for [big local employer]? Maybe in the [presumably randomly picked division]?” I wasted 5 minutes talking to him, thinking he was being honest and straightforward. I did find it odd that he shook a stranger’s hand twice in 3 minutes. Eventually he got around to asking if I was open to new business opportunities and I was able to shut him down. My guess at the time was that he was looking for people to invest money in his business, but this timely post presents a more likely scenario.
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There may be some legitimate MLM organizations out there, but I’ve wasted several hours being pitched for this stuff. Three things about it deeply offend me:
1) Their zeal for making a sale leads them to insincere contact with others. It ostracizes family and friends who should enjoy each other as persons rather than financial entities.
2) Some of the organizations like Qixtar blend Christianity with their mission. While I believe faith should guide vocation, what I’ve seen would lead Jesus to overturn their tables.
3) If you have a fraction of business sense no one seems to be capable of having a rational discussion with you. What is the capital cost? The risk? The ROI? It is as if the whole crowd is afraid of numbers but loves to talk about dreams and soft stuff.
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I’ve watched family members do Shaklee, Amway, a “weight loss cookie” thing, Mary Kay, etc. My cousin’s wife was probably the worst, or best, of the bunch. She could give a 6-pack of “cookies” or a $30 Amway gift certificate as a Christmas gift and make it clear she thought it was the best thing in the universe to give me. Gee, thanks.
Back in the Microsoft boom years, a coworker told about a couple who tried to recruit her and her husband for Amway. The recruiters started by asking these two Microsofties to imagine what they would do with an extra $1000 a month. My coworker thought a minute and said “We’d save it.” No no, she was told, what about a new car? “We got a new minivan after the second kid.” Vacations? “We’re spending most of our vacation time on long weekends at home so we can have more time for us and the kids and not get too behind at the office.” What about sports equipment, musical instruments?” “We don’t use the stuff we already have.” Remodeling? “Oh GOD no, remodeling would be complete CHAOS!!!”
My coworker said the scary thing was that the recruiters were totally flummoxed. They couldn’t come up with ANY OTHER PITCH other than extra cash flow. Nothing about hands-on experience with sales or marketing or tracking profit/loss. Not even something about building relationships. Nada. And they had NO response to my coworker’s unwillingness to take on more commitments other than “but you’ll make money!”
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You think getting suckered into going to a hotel is bad, imagine having a couple of Amway bots in your own house!! My (now ex) wife was fool enough to fall for all the Amway hype about Quixtar back in 1999 that our neighbors were pushing. I thought I was going to have to physically throw the Amway people out of my house since they wouldn’t take ‘no’ for an answer, and had the most ridiculous canned responses to all my questions. The one I remember the most because it was the most asinine was when I asked if Amway/Quixtar was a pyramid scheme. One of the Amway guys said “take a look at the org chart for your company. Doesn’t it look like a pyramid? Ergo, everyone who works for a company is part of a pyramid scheme.” Oh my god, I could go on. Stay away from Amway people. They are crazier than an outhouse rat.
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I started tracking personal finances last year, when I quit my job to be a stay-at-home mom. I had to do it; we just couldn’t make it otherwise. But, the other motivation was that I did not want to be like my parents.
My parents are really terrible with money, and they’ve always complained about being poor and in debt, but the truth is they have spent thousands of dollars in bad business ventures throughout my lifetime. They did Amway, Melaleuca (still do), some Rain Forest thing, and my mom sold MaryKay and Avon products. My mom started two real businesses that lasted only a day (a $10K loss each time) and has spent almost $20,000 on schooling to be:
*A medical transcriptionist
*A medical assistant
*A phlebotomist
*A realtor
Yet she doesn’t even have an associate’s degree — they were all certificate programs. And she barely made a profit as a realtor, because she is so shy, she can hardly talk to strangers at all!
The worst one she did was selling a fake “miracle” machine. You took a drop of blood, put it on a piece of paper, and FAXED it to them. Then they took crystals out, diagnosed you, and sent you the results. Of course, since the illnesses were fake, it was easy for the machine to “cure” them (most people were diagnosed with both cancer and AIDS/HIV). But they bilked people for $1800 a machine. A lot of these people were elderly and sick. And, though my mom made a lot of money in this venture (all under the table, I might add), she also lost a lot (she gave one woman alone $5000 for “off-shore stocks,” without getting even a receipt, let alone a stock certificate). I was overseas for much of this one, but when I got home and realized what was happening, I called the cops on the company – the attorney general’s office was searching for their base of operations, and the local news had done an expose on the scheme. I told my parents I had notified the police (before they raided, I might add, but my mom still refused to accept it was illegal), and luckily my mom fell and twisted her ankle and couldn’t go to work the day the police came, or she might have done time. I have never seen my father more furious with me in my entire life, though, than when I told him I had called the cops on the operation. He just couldn’t see what was happening — to him, it was his “last chance” to get the easy life, never mind the morals. For myself, it was one of my lowest points; I was terribly disappointed in both my parents.
My parents are 58 and 62 now, and they’ve finally seen the light and are going to a real financial counselor. They are saving money, investing in index funds, and paying off debt. The sad thing is that, even though they’ve found what works, they have less than $10,000 saved for retirement, with my father only 7 years away from retiring.
Listen to the author of this post: Don’t fall for these schemes. I really wish my parents had. And J.D., thank you so much for this guest post. If it warns even one person away from a scheme, it’s worth it.
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MLM – the surest way of losing friends!
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This is quite a timely article too. I’m a software developer who has been employed to make software for MLM companies several times (amway, tupperware, etc..). They all make huge profits on the backs of their people. Sure it’s a business, but many use the slickest gimmicks in the book to get people in.
Now, what’s most timely about this is that there are many reports that prove when recession’s seem imminent, the business sector with the largest *growth* is mlm’s. This would be a great entry for JD to present here, as an additional caution. Right now all the MLM’s are pushing into overdrive, because so many people are in a crunch. They will see this as the opportunity they need to make ends meet, or to get out of their ‘bad spot’.
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Kym,
My buddy helped setup 12 Daily Pro. He’s paying for all the crap he did. FBI hit him hard and fast.
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My husband did Quixtar for a while. Creeped me out, and while the people who recruited him were super nice, we couldn’t be friends with them outside of the company. i went to one meeting, didn’t join, but my husband (then boyfriend) bought into it, amid loud warnings on my part. He didn’t force anyone else to join, though, so he quickly fell out of it.
Question for everyone: i started selling Tupperware 2 years ago, which doesn’t seem so bad. i don’t do much work, but people go online and buy from my site about enough for me to break even of the $7.95/month it costs to have a tupperware website. i mostly do it for the discount. i could do it more, but am terrible with sales. My husband keeps telling me that i shouldn’t have talked so badly about Quixtar, since Tupperware is the same thing. But it doesn’t feel the same to me. What do you guys think?
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I happen to like companies like Avon, Melaleuca and Tupperware. I despise Amway and Mary Kay. Why? I’ve had good experiences with the former and bad experiences with the latter.
My mother sold Avon when I was a toddler and won a car from them (back when a customer’s average order was probably under $5) and I really like the products of all 3 companies.
But my first husband agreed to buy something from Amway that turned into a real hassle from getting the item to returning it to getting the money back when it turned out to be unsatisfactory.
I went to a Mary Kay party around the same time, fully expecting to buy something (because I don’t think you should agree to go to one of these things if you aren’t interested). But the woman wouldn’t *allow* any of us buy a lipstick or an eye shadow. You had to take the whole set of cleanser/toner/moisturiser for $72 (which would be like paying about $300 in today’s dollars) before you could buy anything else. Her analogy was that it was like baking a cake–you couldn’t do it without the right ingredients, so there was no point in just buying the decorations to go on top.
So she demonstrated for 6 or 8 women, using products, disposable stuff, etc. and didn’t make a single sale because none of us were in a position to spend that kind of money, but we each would have spent $7 or $8 if she’d let us.
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Oh, man…we’ve had really bad experiences with Amway affiliated folks.
My husband and I have always made friends readily, and have always gone out of our way to make new folks to our places of work, our area or our church feel welcome there.
But twice in our married lives, shortly after we’ve moved to a new state, the ‘favor’ was not reciprocated.
We were approached by folks that we presumed were just friendly people like us, trying to make us feel welcome to the area, only to learn that it was all under false pretenses, and all they really wanted from us was to be part of their pyramid in Amway.
I will never support Amway products for that very reason. I take tactics like that personally.
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I live in the birthplace of Amway, and their pure evil spills into the community constantly. They own everything here. I’m entirely surprised their awful energy bars haven’t replaced the evening mints on the pillows in their hotel. Ick.
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Even in my short time on this Earth, I too have been approached about a MLM scheme (this one from Quixtar, formerly known as Amway). I knew it wasn’t too legit after talking with the promoter (a former classmate) on the phone, but agreed to meet with him “associate” anyway, as a learning experience. A learning experience it was (fortunately didn’t take 3-hours) and the next time the guy called, I declined to get further involved. My parents taught me a good rule, which is that if someone with a business cannot quickly and easily explain what product or service they are selling, it is probably not legit.
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MLM has even invaded Japan. I teach English here and one of the other teachers at my school was involved with Neways. We started talking about nutrition and whatnot and then it shifted into the sales pitch. And the talking with people in her upline.
I ended up getting my own # and dropping $30 or so on vitamins and stuff, but never did anything else, or bought anything else. I’m pretty sure my “membership” has expired by now. Like others, you engage and maybe buy something mainly not to be rude, be polite, and – in my case – foster that positive working relationship.
[And the "not be rude" factor is kicked up a notch here in Japan.]
Was glad of the language barrier, as it probably kept the hardsell away, but flipping through their literature and catalogs and everything, the cult/pyramid bits shone through.
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ah when these MLMs are in the family, it really is the worst. My much older brother who I’ve never been very close to, invited me over for dinner once after I finished college and did not have much money. It was the first time he’d ever invited just me over for dinner. Well half-way through the pizza, he started to tell me about this great new internet company, not a pyramid scheme etc. I knew he was in Amway (and to his credit, he’s one of the super successful Amway people) so I asked him if this was Amway and at first he said no and then when I pushed him, he said yes, it was related to Amway (it was qixtar). To be polite, I said it sounded interesting and he gave me some motivational tapes to listen to. I later told him no and he has never since (10 years now) invited me back for dinner just myself.
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I had the opportunity right out of school to attend an Amway “Dream-night” conference.
Which at that time was a huge pep rally for whatever “diamond direct” distributor you work for.
Duane nailed the biggest turn-off for me.
I saw a thin veneer of Christianity pasted over a naked materialism that would make Satan blush.
As I pointed out years later to another potential recruit:
As hard as you have to work to be successful in any MLM, you should instead start your own company and keep ALL the profits for yourself instead of slaving for an upline.
The best book to read by someone who did get to the point of making real money, but ultimately could not “become” Amway is _Amway: The Cult of Free Enterprise_
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There is a thing called the Direct Selling Association to which many upstanding MLM companies belong. If a company does not belong to that association, beware, because there are many, many dishonest companies out there looking for vulnerable people.
Then it also needs to be said that you need to separate the company from the individual making the sale. A company’s approach to MLM may be completely upstanding, but an individual salesperson may take something good and turn it into a cheesy sale that makes you feel taken advantage of. There are many people who are of the highest character that work for MLM companies that are solid, ethical organizations.
One sign of an ethical MLM company is their products – are they of good quality? If they have good products and are selling their products and not just their opportunity, they are probably a good company. A company cannot exist without customers; if they just have salespeople (aka just talk about the opportunity), you have a problem.
Finally, with everything, it’s not just the opportunity, it’s what you do with it. You can take the most upstanding MLM company, invest in a kit and then do nothing with it and claim you’ve been scammed. Treat a business like a hobby (do it when you feel like it) and it will pay you like a hobby; treat it like a business (with hard work and good ethics) and it will pay you like a business.
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A couple of the comments here remind me of an incident when my girlfriend and I first moved into our condo. My girlfriend received a call asking if we would allow somebody to come in and demonstrate the Kirby vacuum cleaner to us; in exchange they’d clean two of the carpets in our condo. Of course she said yes.
I told her I wanted nothing to do with this and so as soon as the lady came over I went upstairs to work on the computer. 4 1/2 hours later I finally went down and kicked her out myself. Even when I came down, she kept trying to lower the price and “calling for approval” for the new price to get us to buy. She even tried to guilt us into it by saying that if *we* bought a vacuum then *she* would get a free trip to Cancun (what a salesgirl!)..
The only upside to the event was that we realized what color the carpet actually was, hated it, and ripped it out in favor of wood
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Wow… 76 comments so far!
The worst experiences I’ve had with these people, all Quixtar, has been on airplanes sitting next to them. Imagine getting the whole schpeel for 3 hours, with no way out!! It’s happened to my wife and I twice!! It was the same strategy for both of them, they were talking about how they both have full time jobs and do this on the side but make an extra $5,000 a month, and they both drive amazing cars, live in big houses and buy expensive crap. Yeah right, that’s why your sitting in the middle seat in coach! What a joke.
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The timing of this post was just uncanny! I had an old friend from high school call my dad’s house trying to reach me, and he gave me her number to call back. (I haven’t lived at home in nearly a decade.) When I finally talked to her, last night, she tried to get me to join some MLM/pyramid scheme thing. Luckily, my cell phone connection was bad (ha!) and I was able to end the call before she got too involved. This woman was trying to reach me for weeks! Unbelievable.
For the record, the scheme was “cutting out the middlemen” between large companies and the consumer. The website was so unprofessional and so obviously a template that I almost laughed. It said “It’s that simple!” no less than every page.
It’s never that simple.
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The one funny thing about Cutco is that the knives are actually pretty good.
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Some time after my parents divorced, my mom told me that my dad’s parents had lost a lot of money in Amway when a sleazy upliner (or whatever they’re called) absconded with a lot of money from his marks. My grandfather’s ill health after that was something my mom blamed on the stress of the scam. I’ve never spoken to my dad about it, but I do recall a lot of Amway products in my grandparents’ house when I was a kid.
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Just chiming in with my own primerica experience – the person who recruited me was very kind and it was all within her family, who I thought were too nice to be doing this type of thing. Her uncle, who gave the presentation, had this constant look of guilt on his face while he was talking. The good news is that I brought my husband, who knows that I’m interested in personal finance but never seemed to care. After listening to what they had to say about compound interest and the power of saving, he really started to jump on board with me about handling our own finances. So at least I got that out of it – but I never talked to any of the other people again.
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upstanding MLM companies
Sorry, but this is an oxymoron…all MLM companies are, by definition, pyramid schemes. As such, their business structures are both unsustainable and inherently dishonest. If their products are really worthwhile, they would be better sold through either door-to-door or direct marketing approaches and be more honest.
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Remeber the nurse who rescued her boyfriend out of a courthouse by shooting a few people and tried to take a cab from Kentucy to Columbus, OH? They were reported by suspicious cab driver and finally got caught? When people asked the cab driver why he thought the couple is unusural he said that the couple told him they are Amway sale people – but they didn’t try to sell him anything during the 2.5 hour drive!!!
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I just wanted to chime in here-
I did Cutco right out of high school for a few months, and although it it a scam, I came out with some good experience. I got a small set of the knives (really, they are very good, despite the company sucking. At my house we’ve ditched the Wustof set for them). I also got some practice public speaking, plus I made some money (I made a couple of grand, and the set was only $139). It wasn’t a stable income though, obviously. If you like doing sales, its not so bad, but even if you wanted to do it part time for fun they would never let you.
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A friend has been talking to me about SendOutCards. It has a real product — a centralized, computerized system that can create custom cards with your message, and mail them — but it is definitely an MLM. I’m torn. The initial cost is $400.00. If you sign up three “distributors” below you, you get back $120.00 for each of them, so your initial investment becomes $40.00.
There’s a real business idea there, and I think the financials are good for the small business people who I think would be the main users of Send Out Cards. (For example, a caterer who wants to send periodic messages to potential customers — in fact, any small businessperson who depends on many repeat customers.)
One thing that worries me is, I don’t know how I would see an accounting of how many customers actually sent cards — and if I don’t know that number, I don’t know that I’m really being paid the % I’m supposed to be paid for each card sent. I doubt there’s a way to audit the sales.
Well, I guess that’s my answer right there. If there’s no way to see the books, why would I pour effort into the business?
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WOW! This post is great! I just wanted to say something about this “opportunities scams”.
The wind blows equally to everyone…
I have been involved in the multilevel marketing industry since my 17 years old. Traveling to various places and countries. My experience teach me that this kind of business aren’t for everyone. There are a lots of testimonials of people in need of a real opportunity who join network markeitng and became part of the 97% that fails!…This industry it’s just an option…and if you fit in the industry, you’re gonna make very nice income but first you have discover if you like to help people (You must read the Business School book of Robert Riyosaki)
It is business (habits) skills that make you rich, not the money…
MLM is not a standard make-money-on-the-side job. For many, it becomes a lifestyle. Some have tried to incorporate spiritual principles. MLM “pep rallies,” training seminars, workshops, and retreats are the industry norm. Network Marketing has its own distinct culture, and financial growth is impossible without becoming part of that culture.
That’s the real truth…financial growth is impossible without becoming part of that culture…
I believe that mlm business works but isn’t for everybody (you have to do your research of the company management, the product, the timing, etc, etc… just like every other business have to do before it goes to the public)
Anyway, all i have to say is that thanks to my network marketing experiences now a day i am a better person and learn to see life from a complete different perspective.
I am an electrical engineer, I loved my career but to be honest I hated the lack of freedom that working in a traditional career offers.
That’s why i’m doing online business, including, online network marketing business….
I know that Network Marketing and Internet Marketing is asking people NO permission to grow and is a non-stop trend and a challenge. Every day I learn more about it and decided to be part of it spreading the mlm vision based on education, the same principle that kiyosaki recommends. It is not what you can do with the business, is what you can get out of yourself, your mind is your most valuable possession!
This is my vision in my currently mlm’s opportunities: My vision is to provide great information about the MLM industry and multiple streams of income resources, to give them support, training and financial opportunities for people who has the desire to overcome their financial struggles through home entrepreneurship.
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Has anybody heard of Arbonne? My wife’s best friend is trying to get her to do it. I know it’s an MLM business, but it seems legit. Basically you set people up with an account online and they can order what they want, when the want. You can see your “team’s” sales for the month and they give you all the information you need to calculate what your cut will be.
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Any sort of stock-market picker software or up front membership fee to sell products biz is a scam.
I had a friend go into one of the PrePaid Legal scaminars awhile ago in college. I literally dragged her out of the meeting two hours in, with her screaming that she wanted to stay and would put the 2K on her credit card.
After a day, she profusely thanked me for saving her financial life.
I hate scams.
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Don’t fall for MLM schemes. They are all scams. Now, what if I told you that you can make all the money you would EVER need, CHOOSE your own hours, and buy EVERYTHING you’ve ever wanted?
Well, you can do all that and MORE with Dr. icup’s magical mystery pills, guaranteed to cure any and all diseases, and increase your pep, vim, and vigor by 150%.
But wait, I know what you’re thinking. “I’m just not a salesman, I couldn’t sell a Pardon to Scooter Libby.” Well, my friend, may I call you friend? That is the beauty of Dr. icup’s Magical Mystery Pills. YOu don’t have to sell the — they sell themselves! It really is that easy to have everything you’ve ever wanted.
Best of all, since I really like you, I’m going to let you in on the ground floor. And there is no ceiling!
How much would you pay to be able to quit your day job and make millions? $500? $250? $100? Since I like you, I tell you what I’m going to do. You too can have your very own Dr. icup’s Magical Mystery Pills information kit for the shockingly low price of $59.95, and then just 10 easy payments of $99.95!
Sign up a friend and I’ll GIVE YOU BACK 3 of your payments! That’s right, you will be SAVING NEARLY $300! Couldn’t you use an extra $300 right now? Who couldn’t?
Act Now!
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Hmmm, Moses, let me get this straight: you “decided to be part of it spreading the mlm vision based on education” that is, to use the educational spiel as your sales tatic. And the rest of your post attempts to educate us on mlm. Ergo, your post is an ad for your mlm business. Is that allowed?
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ms_junen, thanks for your reply…
As a fan of getrichslowly.org, isn’t my intention to promote my mlm businesses, because this is not a blog to promote anything besides getting rich slowly theory…experiences, etc, etc, etc..
I didn’t mention any name of my businesses opportunities like other people are doing, i’m a professional on what I do.
Finally, my point is this: Network Marketing has its own distinct culture, and financial growth is impossible without becoming part of that culture.
It’s Simple but harder at the same time…
To whom may it concern:
Do your homework! Read about mlm industry and then decide if you fit or not…remember that your mind is your most valuable possession!
God Bless!
PD
I hate sales by the way…I prefer to have multiple streams of passive income working for me, and one of my vehicles is the mlm business model integrated with the internet… I like to have options and get rich slowly…
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Indeed, great post! My friend recently became involved in an MLM. It is a totally shady organization and everyone in our circle of friends disapproves of his involvement. Saddest part is that it has changed the way I view him — I never realized he could be so materialistic.
We all hope he smartens up soon and gets out.
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My wife joined an MLM about 3 years ago, and has had tremendous success. She has enjoyed success due to many of the same reasons people succeed in any sales orientated business:
1. She is an extremely hard worker and a self-starter
2. She is good at what she does
3. She is a professional, and treats her business as such
4. She is a little lucky
5. She is driven
6. She is brutally honest to everyone she speaks to that the 5 above are REQUIRED in order to be successful.
In our experience, most that fail do so because they lack #1 and #3, not because of the MLM business model.
There are all kinds of MLM’s out there. Some are shady, some are border line illegal. Some, however, ARE legitimate business models that, given the right MLM, the right person, and the right time, can be a tremendous success.
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I studied principles of persuasion in Grad school and came across Robert Cialdini’s work. He shows why/how these tactics persuade people and contends that simply recognizing the approach will disarm many sales pitches:
http://en.wikipedia.org/wiki/Robert_Cialdini
Very helpful in fending of MLMs as well as sales pitches in general.
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1) Do not pay the company/firm/whatever that is ‘recruiting’ you for ‘required training’ for whatever position they are recruiting you for. If they are legitimately recruiting you but you need training, they should provide it at a minimum for free, or as paid training. Or, if the training required is legitimately needed, it should be available from a university, community college, trade school, etc.
2) Avoid situations where you have to buy a product before you can sell it (ie buying your ‘demo set’ of cutco knives; they probably make more money on those demo-sets than actual ‘managers’ selling the knives to others.
Scams will almost always want you to put up money up front to get a position. A legitimate business is not going to demand that a recruit pay them to be recruited.
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The perfect comeback to a MLM pitch is this. Tell them you are always willing to look at investment opportunities, but you treat all opportunities the same. What you require is three years of tax returns to verify the kind of income this business will generate. (If you were to buy a business, your banker would ask for the same thing before you were loaned money, so it is a perfectly reasonable request) Tell them if the tax returns prove they are making the kind of money that they claim, you will seriously look at the opportunity.
I have used this line many times, and no one has taken me up on it. I will stick with investing in real businesses and rental property thank you.
Now, they may tell you their tax returns don’t show the type of income because the opportunity is “tax efficient”. That means you lose money…..
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(Dittos to Moses Colon’s comment above)
Once upon a time I was a network marketer. You know what, after swearing it off I am back in the mix 5 years later.
I originally did Quixtar. That had been the only MLM I had heard of and I got approached 4 times over a 6 year period. I gave it a try. I didn’t last. It wasn’t the right opportunity/product for me.
The difference this time is I have a use for the product and respect the people that are in my group.
I am with NetWorthUSA, and their 4 products teach people how to invest in real estate.
I am fortunate that in Kansas City we have 350 other distributors that form an investor community to network with. We have a huge contact base to draw from if you have a need for someone involved with buying, selling, renting or maintaining property. If you have questions you can get a multitude of answers.
I wanted to start investing in real estate. THAT is why I got back into network marketing, I wanted the contact base.
Has it worked? I bought my 1st house last fall via a lead from another member and made ~$10k with an additional 20% equity in the property and no money out of pocket. My rents provide enough profit to cover 3x my re-occurring monthly costs for NetWorthUSA.
I’m sold. It works…for me.
The deal is you have to find something that fits your style and that you have an ongoing interest in. I am interested in real estate and can give a strong endorsement because I have seen the benefit of my products and company.
Green cleaning, cookware, cosmetics, financial/legal services, health & nutrition, travel, real estate…you name it there is a MLM company out there that offers something for every interest. There are good companies and bad companies. Do your homework. You have to remember that the individuals that work their businesses all have different methods. Some may be less than forthright or ethical in their methods. That does not mean that the parent company or the industry is any less legitimate.
The bad experience always speaks louder than the pleasant one. I don’t agree with many of the methods PEOPLE many use either. Don’t condemn an entire industry based on poor marketing, communication, customer service and yes ethics of individuals. Most people are not trained how to do this stuff (as a software engineer I know I’m not). We are too busy trying to make it through our day jobs and many unfortunately many try to “push” things in the limited time they can devote to their MLM venture. Should you ever become a network marketer use those distasteful experiences to become a shining example of how it should be done.
Doing this is not easy and it takes a lot of work to see results. You may or may not make any money but the relationships you form along the way and your personal development is half the reward. Enjoy the journey.
Am I wildly successful and rich yet? No, but I will keep trying, growing and getting there slowly. One step and one income stream at a time.
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The funny thing is, I had a very MLM day today. First, my coworker was approached by a guy in line at Chipotle at lunchtime, who talked him up (seeming VERY interested) for a few minutes, then giving him a card for his local “team development” business. At least my coworker didn’t give the guy his phone #.
Anyway… My mom’s main advice was always, “it should be about the products.”
My aunt sold Pampered Chef several years ago, and a cousin of mine sold Cutco (and my GF did too, very briefly, several years before we met). Those were solid products and we had a few (of the cheaper ones) while I was growing up.
Then, a few years ago my girlfriend and I got suckered into Quixtar by a coworker of hers. I was new to her area, so I attended meetings and so forth to just meet people and “network” (but not really in a business sense), and to kinda get the feel for the “business”.
The funny thing was, they had several products that I actually liked — but was very much discouraged from treating the business as an actual business, since the “local team” ran it in the “just buy from yourself and recruit others” vein (which I found out was essentially illegal, but the entire organization skirted on a loophole). After attending one of the “big learning conferences”, which was essentially just a weekend of bragging by the diamonds, and then a semi-literate calvinistic “nondenominational” church service, I decided to slip out of the deal, despite the fact that I liked some of the stuff I could get. I do kinda lament not being able to have people buy the stuff from me as “clients”, but the system really isn’t set up to facilitate people getting stuff from you anonymously — they have to be signed up for stuff.
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