I vividly remember a house in the neighborhood where I grew up as a kid. My friend Tony lived there. It was a massive structure, likely over 5,000 square feet, dwarfing all others in the area. This residence boasted a huge swimming pool (rare in Columbus, Ohio), a fish tank that took up an entire wall, and a foyer staircase that rivaled that of the von Trapp family mansion in the movie ‘Sound of Music’.
Because the property’s stature and opulence seemed an oddity for a lower middle class African-American community, I asked another neighborhood friend what Tony’s parents did for a living. “Oh“, came the response, “they’re involved in something called Multi-Level Marketing. I hear you can become quite rich in that business.”
So What the Heck is Multi-Level Marketing?
Just the other day, I mentioned to a friend of mine, who happens to be a millennial, that I was writing an article on Multi-Level Marketing. “What’s that? Never heard of it,” she retorted.
As a boomer, my awareness of MLMs is quite extensive. Back when I was young and impressionable, it seemed like profiteers in this industry were seeking me out on a regular basis. I was told that they were attracted to my gregarious personality and vast network of professional connections. Yet to this day, my understanding as to how it really works is shrouded in mystery.
Here is my own simple definition of MLM. Having signed up for the MLM of a certain product yourself, you then contact everyone you know – starting with family and friends – to persuade them also to sign up for the same MLM product (with you as the referring representative, of course), in the hope that they will sell enough product for you to be able to sit on your couch and watch tv while you reap the rewards of all their referral commissions.
I know, I know… .my definition is a bit warped. But consider it an honest portrayal of my experience with this over time.
My first direct exposure to MLM, a.k.a network marketing, was back in 1995 while I was living in Chicago. I got invited to one of those infamous events that was clouded in secrecy where what you’ve gotten yourself into isn’t revealed until you are seated with coffee and donut in hand. It was a cheesy print publication, a subscription report that featured randomly aggregated research information on society and the world. Surprisingly, tons of unsuspecting folks bought into it with the hope of accelerating their knowledge to become better informed citizens. Me? I attended a couple of meetings and had an uneasy feeling about what was about to go down. On my third visit, I was greeted by a sea of dour faces; they had all been taken financially by the founder.
My brief dalliance with this particular MLM company is not intended as a broad indictment of the entire industry. In fact, I’ve been involved with a wide spectrum of other MLM companies – primarily in the wellness products realm – that had a modicum of integrity and transparency. Some folks I know who were involved with these companies even saw success. But in my estimation, this success scenario was quite rare.
Good Intentions or Taking Advantage of Others?
An acquaintance of mine works with a very profitable MLM company called Vemma Nutrition. She’s a person with integrity who has worked hard to achieve success within the company. Sadly, the Federal Trade Commission just put a temporary strangle-hold on the company’s operations for operating what they deemed to be an illegal pyramid scheme. Company assets were temporary seized by an Arizona federal court. The primary charge against them hinged on their promising college students untold financial returns while selling nutritional drinks. According to the FTC, Vemma earned $200 million in 2013 and 2014. And the students? Well, they were not so lucky, as most were unable to even recover their initial investment in the company.
My Take on MLM Investment Opportunities
In short, if you are considering joining a MLM, I encourage you to tread slowly and keep your wits about you. Have some people seen a ROI in building a profitable business clientele? Certainly, there are some examples. But is it a path to riches? Personally, I believe that’s likely to happen less than 1% of the time. “