If you’ve ever looked for a way to make some extra money or searched around for a new job opportunity, chances are you’ve stumbled onto a few multi-level marketing (MLM) outfits that promise you can make a lot of money really fast, and really easily. You probably know that most MLMs are pyramid schemes where the only real way to make money is to keep recruiting new fools into the scheme, but there are “legitimate” (sort of) MLM businesses where you actually can make some money selling products.
But not a lot of money. Even the most legit MLM is a waste of time for the vast majority of people—most people make less than $100 per month from MLM businesses. And those are the legit businesses. So you might wonder how people keep getting sucked into MLMs like Amway when no one seems to make any money at them?
The answer is simple: The key word in “Multi-level Marketing” is marketing, and these organizations are good at leveraging psychological tricks against you.
Folks involved in MLMs usually sell a pretty compelling dream: You can work for yourself, set your own hours, and be financially independent. They usually target folks who are seeking work or in desperate need of extra money, which makes them vulnerable to the pitch. Recruiters for MLMs will often depict their own lives as ideal versions of the American Dream—no worries over bills, lavish vacations and lifestyles, all with just a few hours of work every day. Many MLM companies actively target stay-at-home parents seeking ways to earn money on the side and immigrant communities that lack access to more traditional work opportunities, counting on their vulnerability to make them overlook the red flags. If you’ve been tempted by an MLM, chances are you were in a bad place, financially and mentally.
Many MLMs recruit using a version of “lovebombing,” a firehose of positive attention. The MLM rep assures you that you have that special something that will lead to success, and will talk relentlessly about their own success, often showing you evidence of awards they’ve won or bonuses they secured. They will often try to get you to accompany them to a conference or other gathering where you will be surrounded by people who are just as eager to tell you how successful and happy they are while complimenting you for being smart enough to sense the opportunity.
Some MLMs also encourage members to leverage social connections to find new recruits, which means they’re often using social credit and established relationships. If a friend reaches out with an "opportunity," you might be less inclined to shut them down and more inclined to give them some time out of a sense of affection or politeness.
Once an MLM has your interest, there’s usually a pressure element—if you’ve attended a meeting, you will often be surrounded by people who want you to sign up right away, and there’s usually an "opportunity" involved if you do so, like lower startup prices on the company’s products (which you have to pay for upfront, of course).
When I was fresh out of school a family friend said he had a job opportunity for me. He picked me up to go to an interview—which turned out to be a meeting for an MLM company. After enduring several presentations from successful members, I was hustled into a room with a half dozen smiling people who suggested I sign up right away, and I had to insist—energetically—that I wasn’t signing anything, that I had to think about it, before they reluctantly let me leave. Combined with a bit of financial desperation, these tactics can be very difficult to resist.
Folks trying to talk you into an MLM will talk a lot about success—but usually offer very few details. Most MLMs have complex compensation structures that make it difficult to figure out how much money you’ll actually make, and recruiters will sometimes talk about the income their team has generated, without explaining the income has to be split among everyone, transforming an impressive number into a disappointing one.
MLMs also use deceptive disclosure statements to hide the true numbers involved. An FTC analysis found that many MLM disclosures emphasized a small number of high-earning members to obscure the fact that most members earned very little (or even lost money), omitted information (like the number of people who made no money), and often ignored expenses incurred by members entirely in order to make revenue look more robust.
Another trick MLMs use to trick you is an appeal to the “bootstrap” mindset that suggests the only thing standing between you and financial success is a lot of hard work. In a world where the “grind” is often touted as positive, this can be compelling—if you’re not afraid to work your fingers to the bone, the American Dream can still be yours.
This is effective because it’s a pre-built excuse for making almost no money at first. If you grind your way through the first few months of an MLM experience and have nothing to show for it, it’s OK—you were told it wouldn’t be easy at first, you just need to keep grinding until you hit the next level and attain the sort of financial success you were sold.
The possibility of passive income, financial independence, and being your own boss will always make MLMs compelling to some folks. Being aware of the techniques they use to pull you in can make you more resistant.
