Alert #221: 4/26/2013

Corporate Hype  
INM Podcast is Back! 

Corporate Hype

The subject of Part 7 of my Inside Network Marketing video blog series deals with the claims that are often made by M.L.M. companies which are usually technically true, but not always entirely true.

This analysis of corporate hype includes a series of real world examples and offers a number of ways to detect such deceptions and how to get to the truth. There are also two case studies at the end related to a couple of companies that claim to be experiencing massive growth. Are they? You decide.

I’ve found that when I record video blogs entries I seem to enter some alternate universe where for every minute I think I’m speaking three minutes actually pass. This segment is 31 minutes long, but I swear it felt like 10 minutes when I recorded it. But hey, that’s the beauty of recorded video and audio blogs. You can always stop it and come back to listen to the rest later.

For the record, all this applies to a minority of M.L.M. companies – but still way too many.

Inside Network Marketing Podcast is Back

The first edition of the new INM podcast reboot is a little rough. I’m not pleased with the sound quality (I’ll fix that before the next one, I promise), and I’d like my new co-host, Cathy, to show off her intellect and sense of humor a little more. I asked her to allow me to do most of the talking and she mistakenly did as I asked (the irony of that will be clear when you listen to the show). The topic was M.L.M. products. Not so much about product claims, but more from the standpoint of how goofy and absurd a lot of what we offer, as an industry, can be. We (mostly I) rip on Amega’s magic wand, of course, but also products like canned air, sour milk perfume, soap formulated by God, and what will likely the the most controversial… homeopathy.

You can check out the new INM podcast here:

Flame mail can be sent to

Len Clements
MarketWave, Inc.

Corporate Hype [V1-N8]


An analysis of corporate hype within the MLM industry, including a series of real world examples. Many MLM companies are masterful in making claims that are technically true, but not always entirely true. This segment offers a number of ways to detect such deceptions and how to get to the truth. For the record, this applies to a minority of MLM companies (but still too many).

MLM Products: Shouldn’t We Be Ashamed?

By Len Clements (c) 2001

Once upon a time, one of the greatest bragging rights of most all network marketers was the superiority of our products. The theory gos: MLM operations don’t have huge advertising and marketing budgets, so they can afford to pump a lot more dollars into developing their products. They also, again in theory, are afforded a greater margin thus lower priced products than comparable items sold through conventional means.

So much for that theory.

In reality, there is rampant inflation in this industry. Product pricing is spiraling out of control, and has for most of the decade. This is likely due to the massive influx of MLM opportunities into an already over saturated market. As the existing distributor pool continues to be spread thinner and thinner, most companies have chosen to compete for distributors by juicing up the numbers in their compensation plans. The bigger the pay out, the more distributors they will attract. One need only peruse any of the MLM trade publications and it will become glaringly obvious that the vast majority of MLM programs today compete by comparing the theoretic pay outs of their comp plans. And, sure enough, prospective distributors do migrate towards the program that promises the greatest income. After all, we aren’t doing this for our health. Are we?

So, as the percentage of each product sale that goes towards commissions increases, so must the margin between the company cost and wholesale. Thus, the wholesale and retail price of the product increases as well. And it’s been steadily increasing for fifty years, and skyrocketing the last five. Just take a look at the first MLM compensation plan back in 1945. It paid 3% down one generation! Most plans back in the 60’s paid overrides of around 15-20% down four or five generations. During the 80’s total pay outs of around 40% were common. I remember designing a unilevel plan back in 1991 that paid 7% down seven levels (49% maximum pay out) and being concerned that the 35-40% it would actually pay was too much. Today, that plan would be laughed at. Most compensation plans have theoretic maximum pay outs of 60-75% or more, and many actually pay somewhere in the neighborhood of 45-60%.

The result is an 8 ounce bottle of shampoo with a suggested retail price of $25.00! Nine to twelve dollars wholesale for shampoo is common place in this industry today. Of course, they all try to justify their pricing with the old “superior quality” routine. Hey, for $25.00 the stuff better not only clean my hair, it better soak into my brain and make me smarter. Or, how about a 1.5 ounce candy bar for $2.20 — wholesale! One Halloween and, boom, you’re wiped out. Or, how about a box of laundry detergent for $49.00? Oh, but it’s “concentrated” they’ll tell you. For that price, it better be so concentrated that not even light can escape from the box!

All of the above are real examples. To only a slightly lesser degree, the examples are endless. And we should be ashamed.

Not only are the prices of most MLM products getting ridiculous, so are the types of products. I mean, how many prepaid calling card companies do we need? Several companies now have gone so far as to not even offer a product. Instead they provide you with the fundsto purchase a wide array of products and services from third-party, non-related vendors (usually a catalog company of some kind). They then claim to be offering “thousands” of products and services. Uh uh. They are actually selling nothing but the opportunity to make money. The travel industry has been inundated with quasi-travel agents trying to get discounts by flashing laminated “independent outside travel agent” cards. The MLM industry was quick to jump into the foray in a big way. After all, imagine how much commission you could pay out (and profit you could make) by selling a $4.95 laminated card for $300-$500 per year! Yes, there are some legitimate travel deals out there that do offer a bona fide service, and a few are network marketed. A few. Most, however, are nothing more than “card mills.” Every month it seems we have some new gimmicky miracle product on the market. A few companies are, once again, offering a smoking cure (this is a fad that comes and goes every few years). Of course, if the product actually worked it would be front page news all over the world, the pharmaceutical industry would surely be trying to classify it as a drug, and the tobacco industry would be spending billions to debunk it.

Another company is selling a single product — an aphrodisiac based on green oats. This is the same ingredient that was the basis for a short lived fad back in the late 80’s, before the media began to report that it didn’t really work on men and gave many women headaches (which, of course, kind of defeats the whole purpose of the product).

Most recently there have been a wave of “fat sponge” products based on ground up crustacean shells. This ingredient was previously used to soak up oil spills and as an ingredient in hair conditioners. Very few formal studies have been done (that I know of, and I looked hard) on the long term results of ingesting this stuff in the body. In this case, only time will tell if we have another aminophyllin on our hands, which was an asthma medication found to reduce thigh circumference when applied regularly to the skin. Several MLM companies had heated battles over the rights to aminophyllin a couple year ago — which dissolved about the same time that many woman began reporting adverse reactions to the product.

One MLM company has devoted itself almost entirely to ridding us of parasites in our bodies. Their cassette tape which describes the benefits of their product is certainly compelling and moves a lot of product, I’m sure. Curiously, though, I’ve yet to speak to a single user of this product (and I’ve spoken with several) who didn’t have some variation of an “I passed an eight inch tape worm” story. I’ve even heard about one woman who claims she rubbed the product on her arm and eventually induced parasites to emerge from her skin! I mean, come on people.

Today, with the success of such tapes and the “parasite tape” and the “Dead Doctors tape” it was inevitable that more MLM companies would start to ask, “What kind of tape can we produce that will scare the hell out of people?” The result (and it’s only the beginning, folks) is a new product that will rid you of microscopic arachnids (spiders) in your bed. Something this companies tape claims we allhave! In fact, one part of the tape I listened to the doctor/speaker went so far as to claim that the feces from these little critters can account for “up to 10% of the total weight of your pillow!”

If the Cold War hadn’t ended, there would undoubtedly be some MLM company right now distributing tapes describing the great threat of Soviet nuclear weapons and the horrific effects of radiation poisoning — and the need to purchase their radiation testing product and/or bomb shelters. And I’m only exaggerating slightly.

Probably the most ridiculous MLM product I’ve seen yet was a set of shoe insoles that apply accupressure to key points on the bottom of your foot. This product was then suppose to make you healthier and even cure diseases.

It’s funny, in a strange sort of way, that for decades we have all been taught, over and over and over, to “duplicate what works… don’t reinvent the wheel… find out what your successful upline is doing and do the same thing.” Then, as soon as these same people go out and try to start their own MLM company, what’s the first thing they do? They try to come up with some gimmicky compensation plan no one has ever tried before and look for a product niche no one else is currently in! Folks, there is a fifty year history to network marketing. There is half a century of precedent to go by to help us determine what works in this business and what does not. And for fifty years, tangible, consumable products have worked and almost, but not quite, everything else has failed! Try to come up with a list of all the current MLM companies that do notoffer tangible, consumable products (i.e. skin & hair care, nutritional, home care, automotive, personal care, foods, etc.) that are at least three years old. I came up with fourteen (such as Primamerica, Discover Toys, Prepaid Legal, Jewelway, Excel, etc.). Just fourteen. Out of thousands and thousands of companies over the last fifty years. Fourteen! And don’t put NSA on your list. Over half their sales today is a nutritional drink. Quorum? No, they also added consumables to their line, as did Nikken and The People’s Network. Companies such as Personal Wealth Systems and American Benefits Plus tried to convert to a consumable product line just to survive (the former eventually merged with a product company, the latter became KaloVita, which also merged with a product company). Even Destiny Telecom won’t be eligible for the list in a couple years — they just added consumables to their line!

Personally, I believe that most MLM companies out there today were started by a group of people, usually ex-distributors, sitting around a table with the idea that they can make a lot of money by running their own MLM operation and asking the question, “Now, what can we sell?” The result is a hodgepodge of token products whipped up simply to support an MLM compensation plan. Think about it. Were there really hundreds of people out there who were into the pycnogenol/DHEA/Cats Claw/Colloidal Silver business who all decided to start an MLM company right about the same time? Come on. (To their credit, at least they were following the “duplicate what works” theory). Or, how about all these “lead generation” deals where you spend $100.00 per month for 500 names of “opportunity seekers” (which likely cost the company less than ten bucks). Oh, they claim they are generating their own leads with their own ads, but if they even get 1,000 people to join they are going to have to come up with half-a-million leads per month! Yes, some such services, such as Ad-Net and Pro-Step do offer a service of value, but most are simply using “leads” as an excuse to exchange cash.

These are all MLM programs for the sake of an MLM program. So many such companies today offer mundane, token products with basic formulations designed to keep production cost to a minimum and margins high — so they can pay out “the most lucrative compensation plan in the industry.” And their products are still twice the price of the stores!

What I wished more distributors understood was that the calculation to compute your commissions has a number on both sides of the multiplication sign. It’s V x P = C. Or, sales Volume times overridePercentage equals Commissions. In other words, PRODUCTS times COMP PLAN equals commissions. And it’s the product side of the equation that is as, if not more important in determining your income. I don’t care if a plan pays 10% down fifty levels — 500% of zero is zero! Any pay out multiplied by a small amount of volume is going to result in a small commission check. It’s the volume side of the equations that has an “unlimited” ceiling. It doesn’t matter what the percentages are, how many levels you’re paid, or even what type of plan you are working — you move enough volume through it and you are going to make money!

The point here is that when you price your products outrageously high to accommodate a higher pay out, guess what happens. Thepercent side goes up, that’s true. But the volume side goes down. You don’t have to be an economics professor to figure that out. It’s tough to move a lot of $25.00 bottles of shampoo. On the other hand, if more companies would keep there pricing in line, even if it meant reducing the percentages in the comp plan, income might actually increase! Why? Because 6% of $100.00 is more than 10% of $40.00. Not only that but we might actually reduce the number of MLM company failures at the same time. Let’s take another look at our equation: V x P = C. Now let’s add another variable called CP, or Company Profit. Now, raise P and V goes down, C stays the same (at best) — and CP goes down as well. Not good. Now, lower P, raise V, C stays the same (at least) — and CP goes UP! In fact, it’s even possible that the company could end up paying morecommissions to the field — and increase their profit at the same time. Imagine that. Increasing profit while increasing an expense! Increased sales volume is a wonderful thing, isn’t it?

And, by the way, if you can find a way to increase P and increase V, C and CP, then contact magician David Copperfield as soon as possible. He’s looking for new material.

How do you create a higher sales volume? Find a product line that accomplished the following:

1. It is highly consumable. Not just consumable. I have a 2 ounce bottle of skin cream I purchased from an MLM company that I’ve been using as an after shave balm for almost five years now — and it’s not gone yet. And I still haven’t used up the water purifier I bought back in ’87 or the gold ring I bought in ’89.

2. It lends itself well to transfer buying. In other words, there are a variety of products you would likely have purchased anyway. Most folks usually don’t add Ginkgo Biloba or colloidal minerals to their weekly shopping list.

3. Can actually be retailed. They are products that people would actually want to buy even if they weren’t part of the income opportunity.

4. Are of genuinely high quality. Genuinely being the key word here.

5. And most importantly of all, they must be priced reasonably!

All compensation plans have a certain personal volume that must be met each month to qualify for commissions. Most distributors tend to do what ever the minimum volume that is required of them. The whole idea behind numbers 1 through 4 above is to get the distributor to purchase more than they have to. And you just can’t do that if you fail at number 5. Paying $29.00 for a $12.00 bottle of vitamins in not transfer buying, even if you would have purchased vitamins anyway. And you certainly can’t mark up those vitamins even higher and retail them.

Please understand that this is not a condemnation of all network marketing companies. There are a few that have held there pricing to within reason, maintained their quality, and still have very competitive compensation plans, although they may not look as good on paper percentage wise.

But then, I pay my bills with dollars, not percentages.

MLM Advertising – Are We Shooting Ourselves in the Foot?

Compiled by Len Clements © 1996

Once again we take a pointed stab at those among us who take it upon themselves to write their own ad copy. Only this time it’s not for laughs. These are ad headlines from a variety of MLM trade publications, as well as several outer-circle business magazines — and they are not funny.

As you may have noticed, MLM doesn’t exactly have the greatest reputation in this country. Many of those we are trying to pursued to take a look at MLM seem to feel our industry is made up of get-rich-quick schemes that are really designed to make them go-broke-slowly. Their impression seems to be that MLM doesn’t really work, or if it does, those who participate in it are all con artists.

Well, here’s a sampling of how we, as an industry, are trying to convince them otherwise.


Have Them Gladly Refund Your Money

(Card Deck, 5/95)


Free Audio Tape Explains Why 99% Of All People

Fail In Network Marketing

(Postcard, 5/95)


(MLM Magazine, 7/95)


(MLM/MO Newspaper, 6/95)


(MLM Magazine, 7/95, different ad than above)

If You Have Lost Your Shirt In Other Programs, Here

Is Your Chance To Get It Back!!!

(MLM Magazine, 7/95)


(MLM Magazine, 7/95)

No More Unstable Companies, Disappearing Uplines.

(MLM Magazine, 7/95)


(MLM Magazine, 7/95)


(MLM/MO Newspaper, 7/95)


(Business Magazine, Spring ’95)


MARKETING. Free Report…

(Business Magazine, 11/94)



(MLM Magazine, 2/95)


(MLM Magazine, 1/95)


(MLM Magazine, 2/95)


(MLM Magazine, 2/95)



(MLM Magazine, Spring ’95)


(MLM Newspaper, 6/95)


Your (sic) Being Lied To And It’s Costing You A


(Business Magazine, 5/95)


Unless Your (sic) Willing To Work Hard And Pick A

Company That Lasts

(Business Magazine, 5/95)


(Business Magazine, 5/95)



(MLM Magazine, 4/95)

Although they are not specifically negative towards MLM, such ad headlines as these should really enhance our image as well:

CRIME PAYS (Numerous MLM publications)

FREE MONEY (MLM/MO Newspaper, 3/95)

I RAID DOWNLINES (MLM Magazine, 3/95)

BULLSHIT (MLM Newspaper, 7/94)

Now let’s all think real hard and see if we can come up with a theory as to why MLM has such a bad image.

Hey! I have one…

The Hype Cycle Revs Up

And Up … And Up … And Up

By Len Clements © 1999

In late 1996 I wrote an article simply titled “The Hype Cycle.” I suggested then that if we could measure “hype” and then construct a graph of its occurrence, intensity, and duration, it would likely appear much like a sine wave – a wavy horizontal line intermittently dipping above and then below a certain median point. Each rise in the level of hype was followed by a sharp drop, usually due to some industry shaking regulatory strike on a major MLM company. All the rats in the industry would then go away for a little while, leaving the rest of us to compete on a more level playing field. For a while. Slowly, eventually, once the heat was off and the smoke had cleared, they would creep their way back in. Until the next big hit, then the cycle would repeat.

So, what is “hype?” Messieurs Funk and Wagnalls define it accordingly: “To increase artificially; to deceive; to publicize extravagantly.” Do many network marketers practice such activity? A loaded question, obviously. But still an interesting one in that the current rage of hype being heaped upon our industry has maintained a definite pattern to it, only now the regulatory hits are not knocking it back down. And this most recent, ever rising wave is dredging up a mountain of sludge and debris onto our happy little beach that we all have to play in.

In fact, if we were to take a look at the hype cycle today, it might look something like this:

Note, as I mentioned earlier, that each peak is immediately followed by a sharp dip. This is usually due to one or two prominent MLM companies being made examples of by various regulatory agencies, followed by the aforementioned lull (rarely are the attacked companies the most guilty, they’re just the most visible). After the big guy gets punished for being too rowdy, everyone calms down and plays nice for a little while. Most take on a very conservative, low hype approach. No one else wants to get caught in the web, plus the actions taken against the target companies usually result in a clear definition of what not to do or say and most try to follow the model.

Unfortunately, like a punished child who promises never to misbehave again, the tendencies gradually return. Everybody’s cool, most are playing by the rules, no one is getting in trouble, and the hypsters get lulled into a sense of security. They start taking a few liberties. They start pushing the envelope. They begin to be a little more aggressive in how they present their compensation plan, what people are earning (or how much they could earn), and what the benefits of their products are.

For those of you who were around during the mid-70’s, you may recall prominent MLM programs such as Holiday Magic, Culture Farms, Koscot Interplanetary, and Unimax. All were eventually deemed to be illegal pyramids and closed down. But one company back then fought the “pyramid” label. In fact, they spent millions of dollars and four hard years to defend themselves against an attack by, not just a state attorney general, but the Federal Trade Commission. Fortunately, Amway won that battle and to this day they offer a model of what both state and federal authorities look for in a “legal” MLM program — and what you can say about them. What’s curious, though, is how well most companies abided by that criteria around 1980 and ’81. I know that 1982 saw a resurgence of at least some amount of hype because I remember being taught how to practice it. Then, in 1983, Herbalife was blasted on both a state and federal level, primarily due to product and income claims, and 1984 through early 1986 was real quiet again. Hardly any hype. Then came United Sciences of America (USA), perhaps the most hyped MLM opportunity in history (and arguably the record holder for first year growth). While USA was not actually “shut down,” it was gone by the end of 1987. This was due in part to a barrage of negative press concerning their over zealous promotional campaign. National Safety Associates (NSA) also began to share the burden of anti-hype scrutiny about that time as well — and 1988 and 1989 were real quite years (relatively speaking, of course — network marketing has never been completely void of hype). Then in 1990 things started to heat up. In 1991 practically every windshield in America has a little card on it exclaiming they could earn “$10,000 within 6 to 18 months from today” if they joined Nu Skin. Photocopied checks, grossly exaggerated income projections, and curative or anti-again product claims were pouring through the U.S. Postal Service (again, Nu Skin was not nearly the most guilty, just the most visible). Most of us surely recall what the result was — Nu Skin was slaughtered in the press and sustained hits from both federal and state regulatory agencies. The next few years the newly reformed Nu Skin was the industry model that most companies followed (although, even they are back to pushing the proverbial envelope with their Big Planet division). Photocopied checks, exaggerated income promises, medical claims, and the like were as close to nonexistent during 1992 and 1993 as I’ve ever remembered it. And sure enough, 1994 it returned. It reached what I thought was surely it’s peak in 1995. Yet, in 1996 it may have reached record levels not seen since the pre-Amway v.s. FTC era. I predicted then that if history repeats itself yet again, somebody was about to get killed.

Well, somebody did get killed. A lot of somebodies! Boston Finney, Destiny Telecom, Jewelway and International Heritage were the most prominent of the group (the latter three each claimed well over 100,000 distributors). As of this writing, some operational, but wounded survivors include TravelMax and FutureNet. Although none could claim the prominence of an Amway, Herbalife, or Nu Skin, surely the combined impact of all of these regulatory attacks, along with many other attacks at the state level on several minor players, would create the same motivation among MLM companies to clean up their act and not follow the tactics of these target companies. Yet, I see one example after another of companies not only implementing the very same hype tactics and questionable compensation methods, they’re far worse that those who were attacked!

The hype cycle likely has reached such monumental proportions due to the massive proliferation of MLM opportunities entering the market and the resulting increase in competition. To compete in the MLM marketplace in 1999 you almost have to practice some amount of hype. You place yourself at a marketing disadvantage by telling the truth (a sad, and perhaps cynical comment, but one that is unfortunately quite true). I’ve had discussions with various MLM leaders and corporate-folk who are, to varying degrees, guilty of hype and I keep hearing the same explanation/excuse: “Our truths are not as good as their lies!” Frankly, although I certainly don’t condone the practice of excessive hype, from a strictly business standpoint I can almost see their point. How can a good, honest distributor compete with those who claim their company is signing up “4,000 distributors per day,” or their comp plan pays “$1,000 with just 25 distributors,” or their product “reverses the aging process 20 years.” All of these statements are right out of material I’ve received in just the last few weeks. Offer after offer claims I’ll make tens-of-thousands of dollars within “a few short weeks.” I’ve got a pile of material here with not only exaggerated income promises and projections (both illegal), but direct claims of income by the distributors themselves — including the resurgence of what was just a few short years ago considered one of the most taboo items one could possibly offer: photocopied checks!

In the past the hype was primarily directed towards compensation plans and income, where as the trend today is now heavily weighted towards outrageous product claims. Isn’t it fascinating how decades old pharmaceutical companies with access to some of the greatest scientific minds on Earth and billion dollar research and development budgets can’t find effective treatments for arthritis, cancer, diabetes, or baldness, but little start up MLM companies can? Isn’t it amazing that someone who discovered a microscopic crystal that makes water freeze at room temperature, improves your car’s gas mileage, increases the effectiveness of skin care products by 85%, and cleans your clothes without laundry detergentisn’t making front page news all over the world and isn’t accepting his Nobel Prize, and is marketing this miraculous technology through two start up MLM companies (the first of which was shut down by their state AG)? Isn’t it just a little curious that there are people being injected with Human Growth Hormone (HGH) and paying $300 per dose, several times a month for it, and several MLM companies, all about the same time, discovered a way to increase HGH levels in the body and “reverse the aging process 20 years” for $90 per month by simply swallowing a tablet?

Does anyone else see anything wrong with this picture!?

There also seems to be a glut right now of “downline building” schemes and fluff programs with grossly overpriced token products. “Gimmick Marketing” is all the rage. Today, everyone has some “revolutionary” new comp plan, product or service, or marketing system. They don’t! This is a 53 year old business, folks. Everything has been tried. Everything you see out there is a variation of stuff that’s already been done. Over and over. We have half a century of precedent to look back on to know what works and what doesn’t work. It’s not a secret. We don’t have to guess or experiment anymore. And history is telling us – in a loud, booming voice – that traditional, merit-based companies offering legitimate products of value work, and almost, but not quite, everything else has or will fail.

Unfortunately, those traditional, merit-based, network marketing companies offering legitimate products of value either have to try to compete with this bunk, or tell people the truth — that success in their program will take time, commitment, patience, hard work, and a financial expense that might even cause them to operate at a loss in the beginning. Of course, if you do you stand a good chance of being out-hyped by your competition. Hype is designed to recruit you, not inform or educate you. Hype is used to destroy realistic expectations, not create them.

But, there is hope!

I recently ran a series of “anti-hype” display ads in several prominent MLM trade publications. The ads were practically a negative pitch – but they were honest and realistic. I expected the number of responses to drop, but the quality of the lead to increase. Amazingly, the total response rate has increased by over 50%! I’m becoming more and more convinced that the hypesters are the over-zealous, over-aggressive minority in this industry. There are still a LOT of good, professional network marketers out there who still understand that, sure, you can keep to the high road and get out-hyped. But, those prospects you lose will inevitably discover the truth sooner or later. And when they do, they are going to remember those that were honest and realistic with them in the past. And, the next time around, those people will have all the credibility.

Help us end the hype cycle.

Be the one that they remember.

MLM Ignorance

By Len Clements © 2002

Ignorant does not mean dumb or stupid. Ignore – ant. That is, to ignore readily available facts, thus resulting in a lack of knowledge, not a lack of intelligence. Let’s be clear on that right away lest I offend anyone who finds themselves guilty of the acts and practices described in this article. For this article is going to delve into what is surely one of the most common factors resulting in not only failure, but in many cases utter devastation, both financially and emotionally. I’m going to attempt to defy human nature (a result of millions of years of evolution – I’m not saying it’s going to be easy) and cause you to reevaluate your MLM choices from a logical, rational, educated perspective.

The now cliche’ definition of insanity is doing the same thing over and over and expecting different results. It astounds me as to how many folks I see fail at building an MLM business, then go right on to do the exact same things in their next business. Or, worse yet, join a quasi-MLM opportunity with more red flags sticking out of it than the Russian Consulate (out of ignorance as to what defines and illegal pyramid), then when it crashes and burns – they jump to another deal that is almost identical!

Why? Well, here’s where the human nature part comes in. We are, as a species, drawn towards the opportunity to get something for nothing. We don’t want to go to the gym and work out, or eat less fatty (thus delicious) foods, we want to take a pill to lose the weight. We don’t want to work for our money, we want to win the lottery. We, not all, but millions of us, believe in psychic healers, fortune tellers, and yes, pyramid schemes. All in spite of the Everest size mountain of evidence that they don’t really work. Yet, we still believe. Because we want to believe, so badly. The idea of ridding someone of all known disease by a touch on the forehead, or of someone telling you what your future holds (for $3.95 per minute), or – that you can be a millionaire in 90 days by buying some tapes for $1,000, is just so compelling, so awesome. Don’t confuse me with the facts because I have to believe this!

You would think that a little common sense, logic, and rational thinking would make the evidence pile unnecessary. Yet both appear to be powerless against that allure of “something for nothing.” If a pill or potion really cured literally everything (as some marketers will attest, and no, I’m not exaggerating), then wouldn’t this product be front page news all over the world? Wouldn’t the inventor of the product be at the head of a ticker tape parade on his/her way to receiving their Noble Prize? Wouldn’t this mean that the average lifespan of a human would now double, with all that that entails? Yet, what would appear to be the single greatest scientific breakthrough in human history is not only not being marketed by the pharmaceutical company that won the multi-billion dollar bidding war for the rights to it, it’s being marketed, with little fan fair, via only medium to small multilevel marketing companies. And thousands of what appear to be intelligent, rational people are buying these products. Or, more specifically, buying into the pitch.

Same goes for money games. If you could really get rich by buying $1,000 worth of, whatever, why aren’t we all rich? If it was really that easy, that simple, that quick, why aren’t we all doing it?

What we can and can’t say about our products, and what defines an illegal pyramid scheme, is knowledge that every network marketer should have, yet few possess – in spite of the the numerous, easily accessible, totally free sources of this information. A company with over 50,000 reps was recently shut down for alleged illegal pyramid activities (among other things). Yet, over the months or years that these good folks were putting their heart and sole into this business, the information that would have revealed the legal vulnerability of this company was less than 5 minutes away the entire time. A few clicks of a mouse is all it would have taken to avoid possible financial and emotional ruin.

But they had to believe.

Where is this information? All around you. Want to know what limitations the FDA and FTC place on our product claims? Why not ask the FTC and FDA? It’s that simple. Always has been. The FTC will tell you at The FDA will tell you what they’ve told others at Read, then reconsider your company’s product presentation. Are they (you) vulnerable? Now you will absolutely know. No more questions. Ever.

Want to know what defines a pyramid scheme? You don’t need to be an MLM expert, or lawyer, or Attorney General to figure it out. The qualification is so utterly simple. Just ask the same question that the FTC asked of Amway in 1979. Can the last person still make money? Not only is it that simple, I’m not even paraphrasing legalese. That’s literally the question the court asked (obviously, in the case of Amway, they said Yes). The ignorant position holds that you can’t be a pyramid scheme as long as you have a legitimate product. Yet, every single company that has been attacked by a state of federal regulator for pyramid violations has had some kind of product. Some, like Equinox and Jewelway, had great products. The trick is, it’s not the presence of a product that matters, it’s the motivation for buying them that regulators look at. In other words, if only distributors are buying the products and few, if any, can realistically mark up the products and retail them to non-distributors, then the last person in can’t make money. If recruits are the only one’s buying the product, then you have to keep recruiting to make money. If the distributors are buying the products because they actually want the products, that’s fine too. Ask yourself, would most (not just a few, but the vast majority) of these people still buy these products if there were no income opportunity involved? If the answer is NO, don’t touch. And just because a company pays on legitimate, retailable products, doesn’t mean they can pay on distributor training or enrollment fees as well. Just because all the commissionable products are retailable doesn’t mean you can buy $5,000 worth just to qualify for the Platinum-With-Diamonds-In-It Presidential Executive position in the compensation plan, or that the primary motive for joining might still be the hype attached to their compensation plan or recruiting system. And just because other companies have been getting away with it doesn’t mean yours will.

Sure, there is the occasional shade of gray which requires a little research and studying to interpret. But like I said, the resources are everywhere, and they are easy to understand. Check out or for everything you ever wanted, or could know about what defines an illegal pyramid. My own site at has an abundance of such information.

There is also an abundance of good, qualify, legally sound network marketing opportunities to choose from. They’re not hard to find either. They’re the one’s that don’t make ridiculous claims about their products, which people are actually buying because they like them. They have merit based compensation plans, and they’re training and support systems involve, God forbid, doing some of the work yourself. That has been the formula for long lasting financial success in this industry for over 65 years. Nothing will ever change it.

If every network marketing distributor were to spend no more than two hours, total, doing nothing more than perusing the five web sites listing in this article, pyramid schemes could be wiped off the face of the Earth forever, and not one person would ever again see their family’s livelihood crumble into a pile of regulatory rubble. But, alas, at least half would read it all, then ignore it. It wouldn’t support what they want to believe.

It’s just human nature.