July 11, 2018 • 59 mins
If you've ever spent time on Facebook or Instagram, you've probably seen a few strange posts advertising tremendous opportunities to start your own business -- along with a friend or acquaintance -- selling anything from cosmetics to nutritional supplements. And the opportunities don't stop there! You can also recruit your friends, loved ones and complete strangers to sell these products for you. It might sound too good to be true... and often it is. Join Ben and Matt as they delve into strange world of multi-level marketing, and the stuff its supporters don't want you to know.
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Episode Transcript
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Speaker 1 (00:00):
From UFOs to psychic powers and government conspiracies. History is
riddled with unexplained events. You can turn back now or
learn the stuff they don't want you to know. M
(00:24):
welcome back to the show. My name is Matt. They
called me Ben. We are joined with our super producer,
Mr Paul Act now decand and of course you are
you friends and neighbors, and that makes this stuff they
don't want you to know. Matt, Matt, Matt, Matt. This,
this is something that's been on our mutual minds for
(00:45):
some time. Is that correct? Yeah. I've always wanted to,
you know, start my own business, really get out there
and just be my own boss. Yeah. Yeah, to bid
a due to the endless drudgery of working for some
other schmow or a company and become finally the captain
of your own fate, the master of your own soul
too paraphrase Invictus, which is a great poem, it really is.
(01:09):
So in in light of that, let's um, let's see,
I think somebody has an offer for us. So let's
let's cut to him and let's see what he's got
to say. Shout, come on, man, the dreams you told
me about. We can actually do them. Now, we don't
have to wait. Man, it worked, and I'm doing it,
and I want to help you do it because it's
(01:30):
so good. This is amazing. We can we can have
vacations and sailboats, and we can have modible homes, and
you can give your wife the jewelry that she deserves.
Then you're gonna be a hero. Come on, now, let's
do it. Get up, down, get up before it's to
let get up. Wow, Joe is getting the hard sell. Yeah,
(01:53):
he really is. Um. The part you can't see from
that is that this man is on stage in front
of hundreds of people, maybe a thousand people, and he's
yelling at a tombstone of this gentleman, a tombstone that
reads Joe nobody poorn in what something like that. So
(02:14):
the voice you just heard is the one of the
spokespeople for what's called a m l M or multi
level marketing based company, a direct sales company, and in
his performance, which is quite theatrical, he is gesticulating wildly
in front of this styrofoam tombstone and begging this tombstone
(02:39):
or the implied uh dead worthless person beneath it, to
rise up through the power of multi level marketing and
discover his dreams. He named several things boats, multiple homes. Yeah,
all the jewelry your spouse or loved one could ever want, right,
because of course every spouse to find six us through jewelry,
(03:01):
of course. But before we get to too critical, we
we played this clip which which I think we we
all thoroughly enjoyed, and we ask you if you have
time to, you can check it out on YouTube. I
think it's been featured in a number of places, one
of which was last week Tonight. Yes, last week Tonight
(03:24):
with John Oliver. There's an entire thirty five minute episode
or thirty one minute episode, however long it was, on
this topic in particular, right because it's a gigantic industry,
and today we're going to learn just how enormous this
industry is, how much of it is transparent, how much
(03:44):
of it is hidden from the public, from the civilians
as well as from the adherents. Dare I say, the
disciples or the recruits of these organizations. And the best
way to start off is, of course, with the American Dream.
But this guy is doing when he's yelling at Joe,
nobody is tapping into this concept that's familiar to anyone
(04:08):
across the planet. You don't have to be one of
our listeners based in the US to realize this. I
think everybody recognizes the idea two point five kids, a
summer home, and then you know a non summer home,
a boat, uh, and your own businesses and a Mercedes
of course, uh, an extra slow Mercedes because you don't
(04:30):
have to hurry, right, not at all. So this is
an enormously appealing, if intimidating opportunity, the idea of going
out there on your own, without a safety net and
becoming your own means of income. There are a multitude
of various programs, organizations, and institutions in the United States
(04:50):
today that claim to assist people in pursuit of this dream. Uh.
Some maybe government supported, such as government loan program ms
that happen with would be small business owners or even
incubators for certain types of companies. There might also be
tax breaks, right. Yeah. You can even get nonprofit consultation
(05:13):
services or even private companies that will just provide assistance
in some other form. Yeah, right, some assistance. So will
it will help you out? And today's episode centers on
a genre of company in that private sphere. Today's episode
is examining one of the more controversial types of phenomena
(05:35):
in the world of entrepreneurship, the practice known as multi
level marketing. It's got some other names, direct sales. A
lot of times comes into it, UM trying to think
there's one big one. It's uh, it's like triangle shaped, um,
triangle plan, triangle. Yeah, that's a triangle scheme. Is Sasa
(05:56):
Lese strategy? Yeah, something something to that effects. Oh, come on, man,
people are on the edge of their seats. Are what
are we really talking about, Matt. We're talking about currently
legally functioning pyramid schemes, It's true, also sometimes called Ponzi schemes.
You might recognize them if you tuned into the television
or the radio during the Made Off scandal. Uh, you
(06:20):
may recognize various forms of con jobs that have existed
in the past, in recent history and in older history.
And you may wonder, what's what's the difference between these
multi level marketing things and these pyramid schemes? Are they
all the same? To answer that question, first, we have
(06:42):
to ask ourselves what multi level marketing or m l M.
So that Matt and I don't kill ourselves trying to
always pronounce that tricky phrase. We have to ask what
these things are, how do we define them? So here
are the facts. Yeah, So, a multi level marketing company
or an entity that functions in that way. It's it's
(07:04):
really a general term, and it describes the strategies for
marketing that these companies use, and they use these non
salaried human beings. Their their workforce is all nonsalaried, and
they sell a product or service whatever the company is
pedaling while the earnings of the participants are derived from
a commission system that like, most of the money that
(07:26):
the people working for the company are not drive from
the sales, they're drived from the commission that you get
from the sales. Yeah. Yeah, this is where you hear
the allegations that's something that's a pyramid scheme. So specifically,
a direct sale company might use this strategy to encourage
existing distributors to recruit new distributors into this network, into
(07:48):
this hierarchy, just like you had established, Matt. So let's say,
let's let's read the room. We're gonna throw a look
over at Paul. Paul, may we use you as an
example in this hypothetical. Okay, he's he's noding a little bit,
just barely. Yep, there it is. Okay, he's he's so
tired of these reindeer cakes. Alright, So let's say Paul
act now decand is an existing distributor for we can
(08:12):
make up any company. How about vintage jelly beans? Yes, there,
aged vintage jelly beans. Are you tired of new jelly yeah?
These are the these are the ones you remember. So
let's say that Paul is pitched on this idea of
(08:34):
joining the Vintage Jelly Bean LLC or whatever it calls itself.
So we can buy product then from vintage jelly beans
from their factory and sell these jelly beans to our
hearts content. Paul can do that, and he can make
a profit of some sort based on the volume of sales. Okay,
(08:57):
so how much he sale, how much he sells, he
gets an like a little piece, right, he gets a bean.
And Paul is also told that he doesn't just have
to sell jelly beans. He can make additional income and
possibly quite a bit, by recruiting his friends, his family members,
his coworkers, and anyone else he can find, making them
(09:20):
distributors of jelly beans as well. So they do the
same thing that Paul is doing, but in the sense
they work for him because in addition to the small
cut of every bean sale that he makes, he also
gets a cut of every jelly bean sale that his
people make. WHOA okay, so that okay, So that means
(09:41):
the people, as you're going down, if distributors are getting
money and getting money and getting money and getting money
on the way up that Oh, this is already feeling
like a pyramid scheme. Guys, I don't know, because if
Paul recruits us in this story, then he stands to
make more money than us, for sure. Yeah. But then
we recruit somebody and we get a little bit of
(10:02):
their peace. But then Paul still gets a piece of
our piece. Yeah, yep, And so it does, it does
go up. You are right about the cognitive geometry, Okay.
So that's called a down line, right down, the down line,
not the down low, the down line. And the incentive
here is that once you or Paul or anyone has
(10:26):
the new recruits hooked and working to sell these beans,
you are making money not just off them, but off
of everybody they recruit. As each of the distributors. Under
you recruit more people under them, you get a percentage
of those people's sales as well. And as those people
recruit new people, you get Do you see how this is?
This is exponentially growing. Oh yeah, the the exponential growth
(10:48):
is pretty apparent, and it feels like it could be
quite a bit of cash coming into me if I'm
at the top, or at least if I start in
somewhere and get enough people below me. And let's pause
here just for a second. I I wanted to ask
you this on air, Matt. Have you ever been approached
by something some entity like this or do you know
someone who has? I would say most people, and this
(11:12):
is conjecture, but I would say most people who are
on Facebook probably have at least one friend that has
maybe either approached you or is consistently putting out feelers
to be like anybody anyone? Oh wow, Paul's nodding too.
I got this essential oil. You gotta get this essential oil.
(11:33):
Work from home, change your life? Are you? Are you
an active parent on the go and you don't have
time to be locked down in a nine to five?
Check out my Mary Kay products St. John's wort. You
know what I mean various supplements. So you have seen
it on Facebook that and uh, I have the dubious
(11:58):
benefit of at times in my college days being approached
by people with a shore fire idea. And the weird
thing was these would be people at career fairs, so
they would be they would have you know, they would
have a table or a booth right next to say
Coca Cola or something like that. There's an amway except right,
(12:22):
and I'm not I don't know for sure whether that
continues in the modern day on college campuses, but I
know we would like to hear from you listeners right
in a conspiracy at how stuff works dot com and
let us know if you have had direct experience with
these organizations. Wait a minute, is that how how stuff works?
(12:44):
Is that how you got picked up? Because the whole
thing here is that if you come on and you
start a podcast, then you get three other people to
start podcasts, and then you get That's how it works here,
right for our down line? Right? Yeah, yeah, thankfully that
is not the case so far as you're maybe we're
not far enough up in the pyramid though. Imagine, just
(13:05):
like the Dark Tower, what if there's a room at
the very top. We've got to climb this upline. We
have to climb this upline. Man, We've got to convert people,
proselytize and have them convert people, and then have those
people convert people. What could go wrong? Yeah, there's definitely
stuff they could go wrong, and we'll hear about it
right after a quick word from our sponsor. Here's where
(13:32):
it gets crazy. So much stuff can go wrong, plenty
of stuff. A cartoonish amount of stuff can and does
go wrong. So much so, in fact, that things going
wrong becomes more of the rule than the exception in
this industry, despite what its advocates may want you to believe. Again,
it's very very important. We are not saying that all
of these things are bad. Multi Level marketing itself is
(13:56):
a strategy employed by a company, right yeah, and it
really is marketing. I mean it's in the name multi
level marketing. You're marketing your product by getting people to
talk about it, mostly on social media. And it doesn't
matter what you're selling. That's the other thing. It's it's
product agnostic. It can be vintage jelly beans, it can
(14:17):
be Adidas wind suits, skin care products. Skin care products
is by far the most realistic thing on this list
at this point. So the place where it gets sticky
is the definition between m l A multi level marketing
versus what you mentioned earlier, a pyramid scheme, or, as
(14:38):
it's been known in pejorative terms, a Ponzi scheme. So
m l M multi level marketing as a strategy, a
technique grit approach, is not, in and of itself inherently illegal.
In fact, there are some companies that practice strategies like
this that juqua well and are fairly reputable. Tupperware for instance, Right,
(15:04):
they sell they tend to sell products through parties. Invite
somebody over for a Tupperware party. Very American thing, right.
I don't know anyone who has gone to a Tupperware party,
but I'm reasonably certainly exist. Yeah, they do exist. Have
you seen that show F is for Family? I have
the Bill Burr Show. There's a whole this is just
(15:26):
my I'm channeling NOL for this. There's a there's a
whole side story where um, the main character spouse joins
a group like that that sells tupperware specifically, and it's
this way in her garage is just filled with tupperware. Oh,
I'm so glad you mentioned garages. Oh we have, Yes,
we have to get to that. So this strategy, while
(15:48):
not inherently illegal or dishonest, becomes disingenuous at the very
least when new recruits are promised scads of money only
to find that there are hidden expenses that they are
required to buy in as an investor, for instance, or
(16:08):
that they are required to purchase x amount of these
products these jelly beans, skincare products, health supplements, what was
Adidas track suits? When suits whatever? And then they're also
extremely convoluted rules about what you have to do in
order to get the money that you're allocated from all
(16:29):
your other you know people, your down line or whatever.
It's it gets pretty crazy and it goes case by case. Yes,
it is purposefully up to well, maybe it's maybe it
is unfair. Maybe we are using a broad brush to
paint these things. Maybe the people who have built these
(16:50):
very elaborate rules for the distribution of money or products
on the down line or the upline, maybe they feel
that they have sound the most efficient and most transparent
way and perhaps the most fair way to distribute the money.
Maybe maybe that is clearly not true. In every case,
(17:11):
but maybe you have to give people the benefit of
the doubt, right. So an additional issue with this is
that let's say you're required to buy a hundred pounds
vintage jelly beans, or you know, X amount of cases
cases h x amount of cases of a miracle water
(17:36):
or a skin rejuvenator wrinkle remover. What you may find
is that the price you have to buy it at
is going to be higher than it would have been
if you went and bought X amount of cases at
Target or at a supermarket. Right, and it may not
be available in stores. That's another big thing. There's a
(17:56):
lot of proprietary branding. But then additionally, you might find
doubt these products are not what they're cracked up to be.
They they're not quality, they break, or the health claims,
if they exist, are wildly optimistic and not research, not
(18:17):
proven by anything other than long anecdotes. The Better Business
Bureau describes several red flags that you may find when
you initially begin conversations with one of these entities. Yeah,
the first one should be a red flag for anyone
at any time, and that's anytime someone is promising you, yes,
you high earnings, especially without having to do much at all,
(18:40):
just very little effort, very little time spent, or any
real serious commitment money wise or other. The money just
makes itself. It just rules it. Yeah, I mean, come on,
why do you think I do this? You did the
majority of the work you needed to do when you
took this leap of faith, when you recognize this opperat tunity, Ben,
(19:01):
have you ever thought about you could I think you
could recruit a lot of people. I think that I
think that you and Paul and Nolan could all do
an equally good job. What if we work together? This
is dangerous territory. This is dangerous territory, especially because, as
(19:22):
people will find out, we are ourselves already involved in
a type of m l M. But it's not, it's not.
So let's get to the second thing. So the second
thing is where you're gonna do this. You're gonna make
money super easy. You're not gonna have to do much.
But the one thing you do have to do. You know,
it takes money to make money. You gotta purchase a
(19:44):
whole hell of a lot of inventory, a lot of stuff.
You gotta buy it. That's just how you get started.
You gotta have that in your possession, so you can
sell all the stuff and got a prime. The pump
can't sell what you don't have, right. Oh yeah, and
we're also here's the thing. Look, you're you're doing the
you're gonna make all this money. The one thing we
can't do is guarantee that will buy back any unsold
(20:04):
products that you have. Okay, we're just gonna you know, well,
we might buy it back for like a percentage of
what you bought it for if we have to, like
a restocking fee. Sure, but we're you know, we can't
just we have faith in you as a distributor and
we we don't think we need to worry about it.
We also don't take checks. That's going to be another
(20:26):
red flag. The money you're required to uh invest that's
the term we like to use just to get started. Yeah,
that money must be paid in cash or a wire
transfer or a money order. Those are three red flags
when yeah, when you see them waving. The consensus from
(20:50):
most financial experts is to run, to leave, to remove
yourself from the situation. And you would you know, it's
easy for us now, all of us, all of us
listening today and for us exploring this in the safety
of a yeah, and the same they have headphones in
(21:11):
our Swell podcast studio. It's easy for us to say, well,
I would immediately leave. I don't fall for that sort
of flim flam, right, But as we will learn, there
are tried and true techniques that are used to make
people feel obligated through some sort of uh psychological manipulation
(21:33):
to buy into these things. It's similar to the way
that somebody might win a vacation. I know, I Matt Paul,
I know you guys have both probably received those mailers
that say, oh, it's a chance to win a vacation. Dude, No,
you already want to cruise. That's what it is. You've
already won. All you have to do is travel thet
(21:55):
Boco Braton or something like that. And what you what
happens is that you arrive at these places only to
find that I did win the cruise. But first we
want to give you a tour of these condos. Ye,
And you know, in the market today, real estate is
the best investment. It really is. And can you imagine
(22:15):
look here at the Windham Resort in Boca Raton. I've
actually been on one of those recently. Yep, A cruise
or one of those switch try to see if I
can do this the right way. Um, some family members
that I was with on a small vacation. I saw
(22:37):
that there was at this mall an opportunity to have
dinner paid for for our entire family. All we had
to do is take a trip over to this condo
and hang out for a while. Answer some questions, talk
to some people, watch some videos. We did it. We
had to like sit for a long time with somebody,
(22:59):
and they split us up into groups, into uh, like
husband and wife groups and like my wife and I
just had to calmly say, no, we we really don't
think we can afford it right now. Oh but what
if you know, we could give you this platinum package
and I'm sorry we can't. Oh but well the double
platinum I think you can really afford and it's an
(23:20):
investment for your future. And it went on and on
and on until we finally got to leave with our
visa check card. Oh wow, so did you ultimately get aid?
We got dinner, but it was like two hours out
of our day. And if you calculate the money for
all of that, you go, wait a second, are you
sure we should have done. This guy's like, yeah, we
do this all the time, and they all said no, No,
(23:40):
they loved it because they some members of my family
do that kind of thing a lot. Okay, I've never
heard this story. Kudos to you for resisting the psychological
pressure that might apply. Right, Well, I mean, how are
they going to apply pressure if there's no money in
my accounts? That now I'm picturing the internet meme where
(24:03):
the guys leaning in and touching his temple with his
pointer figure. So it's true. What what can happen is
that maybe you were invited to a seminar for an
MLM and you hear these very theatrical, very motivational speeches, right,
and it's difficult to leave. It's sort of like standing
(24:24):
up in the middle of church if you're religious and
walking up the social pressure alone. Yeah, it's not a
good look, right, and this becomes doubly powerful at the
very least when you are there with a family member
who is already active in this organization. You don't, I mean,
who wants to disappoint Aunt Linda or uncle Greg? Right? Yeah,
(24:49):
your mother in law? Oh man, that air I gotta
follow up on this. Uh So, another thing you find
is that this all means, in the case of multi
level marketing or pyramid schemes, that initial recruits are essentially
(25:09):
paying an organization for the opportunity to work for them.
Let's let's sit in that just for a second, or
think about it, everyone listening. Imagine your last job interview.
Let's see, went to the job interview and you're already
submitted your resume or something online. The management of the
company sits down with you and they say you're qualified.
(25:34):
As a matter of fact, you're not only qualified, you
are superb. You were the perfect person for this position,
and for seven hundred dollars, you can start today. And
you know, everybody's initial assumption would be, oh, holy smokes,
you're giving me seven dollars to start today. But no, no,
no, no no, no, no, no, no no, you are paying
(25:56):
this organization some amount of money in any other place
or time or organization or job opportunity, that would be
just ludicrous, that would be absolutely not I'm out of here, right,
And a multi level marketing strategy becomes an out and
out pyramid scheme when the bulk of the actual profit
(26:17):
you make comes not from selling your jelly beans. The
bulk of it comes from converting other people in your
social network to work for you, with the same carrot
extending for them that they have to actively recruit other people.
This business model has several deeply disturbing aspects. And first
(26:40):
there's that inherent bait and switch. You're not selling an
herbal supplement, and those are very common in the world
of multi level marketing. You're selling your friends, the idea
of them selling their friends on selling yet more friends.
You're selling a borderline and arguably exploitative type of munic ability. Right,
(27:02):
so we should pause to Matt and talk about herbal supplements. Yeah,
just for a little bit. Now, I know this is
controversial territory in many cases, and again, we don't want
to paint with a broad brush. We don't want to
paint with the wrong broad brush, which we'll get to.
But it's it's a common type or genre of product
(27:27):
in the world of multi level marketing. An herbal supplement
could mean anything from vitamin B twelve to a proprietary
mix of vitamins, to things that are supposed to help
certain medical conditions. These are not held to These claims.
(27:49):
Herbal supplement claims are not held to the same level
of rigor and research that out and out drugs are
held to by the f D a absolute at least
in theory the FDA is supposed to do that. We
have an episode about the opium epidemic coming up as well.
God alright, yeah, But so with an herbal supplement, the
(28:13):
legal restrictions on what you can and cannot claim about
any given thing, any pill or juice or paste, what
have you, Those legal restrictions are much looser, you know,
and you can you can have people come up and
say all sorts of anecdotes all the livelong day about
(28:35):
how it changed their life. But what they probably won't have,
what they're much less likely to have, is a peer reviewed,
reproducible study proving what they said is true. Absolutely. I've
recently watched one where a person said this specific herbal
supplement helped her to become pregnant when all these other
(28:56):
ways did not. She kept trying to get party about
this herbal suff element. Healter get there. This one person
was recovering from a cancer because of this herbal supplement.
And that's when you get into that territory of like,
how dangerous is this to allow this kind of thing
to occur. But you know, the rules are the rules,
(29:17):
and in a way they're following them. Yeah, as the
letter of the law, if not the spirit. Right. Often,
the hidden fees and the required by ends of these
various products put already financially disadvantaged people into some in
(29:38):
some cases, life ruining debt, not to mention the emotional
trauma might experience of discovering that your friend either purposely
deceived you or has misled both of you. You know
that's a painful thing. Yeah. Yeah. And one of the
(29:58):
biggest problems we see here with all of these people
trying to recruit everyone else to get into this thing,
whether they get hurt in it or not, is that
you run up on a math problem. Yes, that is true,
and you don't need a calculator for it. Let's do
the math. The math comes to us courtesy of a
fellow named Robert Fitzpatrick, a former business consultant and now
(30:19):
a prominent opponent of pyramid schemes and multi level marketing strategies,
which he pretty much equates. He says they're the same thing,
and it's a false dichotomy, and he explains the unsustainable
math in pretty simple terms. We have a quote from it.
The math is a distortion, a manipulation of what they
(30:42):
call exponential expansion. Exponential expansion is two times two times
two times two. And almost all of these schemes tell
you that you can make money by just recruiting three
or four or five. Let's let's say five. Then you
let the five do their five, and that gives you
twenty five. There you go. That's this is out the
(31:04):
side of the quote right now. Yeah, we've got our
twenty five people already. Right, let's get back into the
quote that right there is exponential expansion. That's the trick
of the whole thing. What they don't show you is
that you can only do that thirteen cycles, and and
then after that, he says, you would exceed the population
of the earth. So thirteen iterations of this sort of growth, well,
(31:30):
eventually reach a point of saturation such that there are
no living people who are not part of this scheme. Yes,
and most of them will be on the most bottom level,
right right, still required to buy in, depending on the
specific case, still required to purchase a product or make
(31:51):
some sort of initial investment. But at that point they
literally have no one to sell any of it. Too,
because everyone has a garage full of whatever it is.
In the most fundamental terms, this means that the business
model as it is explained to new recruits is not
meant to work. It literally cannot if everything goes well
(32:11):
and every single member of this thing, or even if
you know what, honestly, even if sixty of the people
who are who are entering this sort of this sort
of business, even even if sixty of them succeed, then
it still won't work over the long term. Additionally, there
(32:31):
are several other important points that new recruits are not told.
First is that, according to Fitzpatrick, uh something around the
order of at least more than investors or distributors don't
turn a profit full stop at all. I just won't
just won't happen. And additionally, there's no recognization that something
(32:57):
will go wrong, that the market will saturate, that it
will not forever grow unbound. And that's kind of the
problem we have with our economy in general, isn't it. Yeah, Arguably,
depending on which economic model we're talking about, just exponential
constant growth, nothing will ever stop. The factories must expand
(33:19):
you know what, let's start a planet Hollywood on Mars
Oh can we I don't know, I haven't. They're gonna
need one eventually, They're done. Every every planet will need
a planet Hollywood eventually, and it'll be all like Mars
based celebrities, right, and think of the food puns. Oh yeah,
(33:41):
we gotta get Jonathan on just to drop in some
food puns. That's Jonathan Strickland, the host of tech Stuff
and several other fascinating shows. He is also as an
active charity volunteer to be our complaint department. If ever
you feel that there's something that needs to be corrected
on the show, or if you have a complaint, please
(34:02):
do not hesitate right to Jonathan Dott Strickland at how
stuff works dot com. But you know, joking aside, this
shows us, uh, this shows us a little something about
the potential size of the problem. But what's the actual size? Well,
it's big and we're gonna get into it. After a
(34:22):
word from our completely not multi level marketing sponsor. Why
you that I can't help? But notice that japainting with
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(34:43):
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need to do? Why You've already done the most important part,
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(35:25):
set to go. My friend, Okay, I guess you know
I've been meaning to sell my home, so I could
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Um all right, Well, I guess let me go ahead
and sell my house and then I'll get back to you.
I guess no, no, no, listen, this is a tremendous
(35:47):
chance to change the course of your life and the
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(36:09):
the mansion. This message for broad Brushes International has been
brought to you by Illumination Global Unlimited, and we're back. Uh.
You know what, Matt, that last ad felt a little
(36:33):
bit I don't want to go out on a limb here.
That last ad felt a little bit like a a
multi level marketing thing. It was kind of pushy. I
noticed that in the end, the one guy really seemed
to want the other guy to do whatever you had
to do to sell those things. It's really you know,
(36:53):
it's eerily in line with what we're talking about, but
sometimes those strange coincidence has happened. I still have issues
with the size of the brushes the way they were described,
Like I don't understand. I feel like that's more industrial
strength brush situation. I'm not sure I did appreciate how
the other guy in the ad did ask how he
would possibly wield these. But you know, let us let
(37:18):
us know if you have experience with broad brushes, or
of course our returning sponsor, Illumination Global Unlimited, just let
us know how those how this product shake out, because look,
we're not gonna knock a brush a broad brush if
it works, right, Yeah, absolutely, Speaking of broad and expansive things,
(37:38):
what's the size of the problem when we're talking about
multi level marketing? Well, let's go back to Mr Fitzpatrick.
He has a book called False Prophets, Seeking Financial and
Spiritual Deliverance in Multi Level Marketing and Pyramid Schemes, And
in this book he speculates that the just the size,
the full scope of these various companies that make up
(38:01):
this industry of multi level marketing is currently unknown. They're
they're essentially there are so many functioning right now that
it may be impossible to know. And those entities certainly
wouldn't want you to know the full nature of their
financial transactions or their techniques. So, according to Fitzpatrick, this
(38:28):
goes back into just the sheer amount of money that
is involved. So in this quotation, he says made Off
Bernie made Off Conde a relatively small number of people
with investment money. Multi level marketing, he argues, is using
a different system. Instead of taking a million dollars from
ten people, you take ten dollars from a million people.
(38:50):
That is the way this system works. I'm just using
that as an analogy. But the numbers add up to
staggering amounts year upon year upon year. This leads Fitzpatrick
and other experts to believe the amount of money involved
in this industry overall ranks and the billions with a
b wow. And and here's the thing there are it's
(39:14):
not just the problem of setting up something like this
that ultimately benefits, you know, the person that started it,
Like at that, in all of these there's some group
or person at the very top that gets all of
the down line. Every single person sends money up to
that one person right, the founder, right right right, And
(39:34):
and in some cases there are allegations of these people
taking advantage just fully and knowingly taking advantage of everyone
working for them, so not making an honest mistake, not
not getting the accounting wrong, or uh, acting out of negligence. Yeah. Unfortunately,
(39:54):
there are numerous multiple cases in which founders are members
of these types of companies have been found guilty of fraud,
of conspiracy to commit various financial crimes, and more. For instance,
there was a guy named Paul Burke's here in the
US who was convicted of conspiracy and fraud during his
time heading up a company called Zeke Rewards, and in
(40:19):
the course of his trial it was characterized as one
of the largest Ponzi schemes in US history, bilking more
than one million investors across the world out of eight
hundred million dollars. Later that amounted to be about nine
million dollars. He was sentenced to around fifteen years in jail,
(40:41):
and he got off relatively easy because going into trial
his penalty could have been as much as sixty five
years in jail, and he's an older man, so fifteen
years even maybe a death sentence. But what they did
essentially was old school Ponzi schemes stuff. They made extravagant
promises and they got people to invest money with the
(41:03):
with the assumption that that money would later be paid
off as these as these schemes, this penny auction site
began to deliver the mail, deliver the goods, and for
a while, for the earlier investors, it seemed like this
was happening because of what they were doing is they
were taking the money that later investors put in and
(41:25):
using that to pay off their old investors. So it
just kept growing, passing the buck, passing the buck, and
then eventually it created under its own numerical success, not financial,
but just the sheer amount of people who bought in Dan.
So that was Zeke rewards. Zeke rewards. All right, I
need Yeah, that's the whole thing. I'm just gonna go
(41:46):
down that rabbit hole later. Thanks Ben, thank you. So
what what next? What's another example? Oh, another huge issue
that some of these founders have come into is tax evasion,
and that's specifically when these multi level marketing companies expand
into various countries. So like you're not just starting out
(42:08):
in the US or wherever else, Malaysia, maybe Australia. Now
you're in all of these countries and all these people
are paying money to you, but you're in one location
and now you've got a whole lot of taxes you've
gotta pay. And uh, this this one couple, Thomas E.
Mower and his former wife Leslie D. Mower, they founded
(42:30):
a company in what Springville I believe it was called
New Ways or Knee Ways an E W A Y S.
And uh, yeah, they didn't pay personal income tax h
to the tune of about three point two million dollars.
And it's it's money that they owed for their companies
(42:50):
for this new as company um in several in several
countries Malaysia, Australia, and in the United States. I mean,
that's that isn't necessarily a big problem specifically for multi
level marketing companies, like not paying taxes. That's just something
that this couple decided to do, right, That is not
(43:14):
a necessarily multi level marketing only crime. And we can
provide more examples you very well. Uh, fellow conspiracy realists
may have some examples of your own that that you remember,
and a simple cursory search online will turn up dozens
and dozens and dozens of things like this. But let's
(43:38):
you know, we we should also mention that the inner
workings of these organizations can also get very weird. We
talked a little bit about the psychological manipulation involved in
making people feel obligated to do something, which is not
restricted to time shares or am Way or anything like that.
(44:00):
A lot of advertising is built on the idea that
it is possible to make people feel obligated to do
something that they have to do it right. Not your
life will be better, but your life depends on it. It
It depends on this. Yeah, and we did a video
that you and I were thinking about off air as
(44:20):
we were working on this episode. We did a video
that had some eerie parallels. It's our old YouTube video
about the techniques that colts use. So there's isolation, there
are long speeches and you're forced to listen to There's
a lot of jargon, right, A specific type of lexicon
(44:41):
terminology arises such that only you can talk about this
with other people that know what you're talking about, or
else it's just gobbledegook coming out of your mouth. You
can find this, for instance, in the ranks or the
names that are given to levels. Right. There may be
there may be a high archy of sales or position
(45:02):
in the pyramid that is described by any number of
imaginative phrases. Uh. Specifically, I think we're both thinking of
a company called Youngevity, Yes, that has levels based on
precious stones. Yeah, it's pretty awesome. But some of the
(45:22):
other ones are even more abstract and strange than that,
and you you just kind of gotta look through them.
There was one in that John Oliver UH episode that
we played where this guy is discussing it's it's specifics
about how you get paid for people on your down
line and the things the requirements you have to meet
(45:45):
on your upline, and just just it made my brain
want to explode. Yeah, it's something along the well, maybe
saying along the lines as a poor phrase here, but
it's something to the tune of uh. A vertical series
of dots labeled A two G going down. And then
(46:08):
the guy is attempting to or appears to be attempting
to helpfully explain how one actually gets cash in your
pockets or in your wallet or your purse or the
empty mannai'se jar in your backyard by the body, you know,
like wherever you store money. What he does is the following.
He says, Okay, you're a so let's say that B
(46:30):
buys four thousand points at forty two percent value point levels,
and that goes that would go up to count as
your qualified commission, but it's under it's an encumbered line.
And that's remember you need one thousand unencumbered value points,
right and uh, this this may again to be completely fair.
(46:56):
This maybe that specific organization's best good faith attempt to
simplify the distribution process. It sure does not sound like it.
It sounds arcane. And that's just one example. Well, yeah,
and and one of the like we said, one of
(47:16):
the effects of having something like that, is that you
have a more insular group, right right, they're outsiders and insiders,
and just like some some cults, you know it's a
sensitive word, but just like some cults, you're you may
also be taught that you have a mission beyond a
(47:39):
financial goal. You have a mission to free people that
you care about or to save them with this supplement.
They need this. So not only are you helping yourself
out financially, you are helping these other people out medically.
You're helping them out by providing them opportunity because you
care about them. And if they won't join up, then
(48:01):
there's something wrong with them. What gives what gives? Right,
So we're being a little dramatic, but there there is
a lot of truth in those statements. Here are some
examples of companies currently being accused of functioning as pyramid schemes.
Amway probably all heard about Amway was big and what
(48:21):
the eighties, maybe, and my only encounter with it was
hearing it referenced in comedy, and for a long time
as a Yeah, for a long time as a kid,
I think I confused Amway and Amtrak, and I kept wondering,
why are people making fun of Amtrak for things I
don't understand? Is Amtrak so broke that the people have
(48:44):
to also sell like dish detergent? It's been around for
so long that I honestly don't even know what Amway sells.
Do they? It's like bath embody stuff, beauty products, oh,
and nutrition. So this is like activated water. This is
a shipping company essentially, it's like an Amazon, but it's
(49:05):
an MLM. Yeah, this is so now. Again, neither of
us and Paul and Noll also none of us have
actively participated in this stuff. So it is quite possible
that there's something to it, you know, that we have missed.
But these are the facts, These are the legal cases
(49:27):
we found, and these companies are for their part um.
They say that they're very transparent with the claims they're
making and they are pretty pretty responsive, you know if
mass media reaches out to him and stuff, But that
doesn't mean problem still all occur. Next to Amway, another
(49:47):
really popular or well known UH company employing the strategy
would be Urban Life. Yes, this is herbal Life the supplements, right,
like Herbal Life almost, but it's about life. In seventeen,
they were forced by the FTC to pay nearly three
hundred and fifty thousand people back some amount of money,
(50:12):
and the final settlement that they came to was Herbal
Life had to pay two hundred million dollars and then
not just pay that fine, which is generally what happens
with a company. You get your hand slapped, you pay
a fine, it becomes a cost of business. Well, in
this case, UH, they had to fundamentally this is a quote,
fundamentally restructure its business. Right, that's a quote from the
(50:35):
FTC itself, specifically from Jessica Rich, who at the time
was the director of the agency's Bureau of Consumer Protection,
And that sounds like a good thing, and so the
company continues. Uh. The company, for their own parts, said
that they had not done anything wrong and that they
(50:55):
didn't need to make any substantial business change. And then
also some people who said that this company was being
unfairly targeted from from some other entity or individual who
had an ax to grind. So you'll hear from both sides.
Will hear the government side, and you'll hear the company's side,
(51:18):
and those those sides just aren't gonna agree. Yeah, it's
really it's up to you to decide what what you
think is the the straight poop, the genuine article. Uh.
There's also a von that's one of the more famous ones. Right. Uh.
There's also Youngevity, Yes, Youngevity. One of the companies that
(51:40):
I was gonna say pedals. They sorry, that's not right.
They sell products that will help people feel and look younger.
There there. That's another big theme that occurs in a
lot of these and in each of these cases, the
organizations mentioned will typically prefer a different description. They don't
want to just be called MLM s. They certainly don't
(52:02):
want to be called pyramid schemes. Who prefer a term
like direct sales. There's something similar to what you said
at the top of the show. And you know, Avon
has been around long enough for the idea of the
Avon Lady quote unquote to be a cultural trope, you know.
And that means that on some level people have succeeded
(52:24):
working with or for Avon. Same thing with Tupperware. So
we can't say that in every case this has been
terrible for people. Yeah, it's not all bad, and you
could be really good at it. If you're an amazing salesperson,
then maybe this is the you know, a way for
you to make some money. I guess it just all
depends on when you get in at the pyramid, right. Uh.
(52:45):
And despite the massive controversies and the various convictions for
conspiracy literally for conspiracy. Uh, these companies, many of them
thrive in the modern day. For people who are opponent
of these practices or techniques, the biggest question is this,
why is this still legal? How? According to Fitzpatrick, we
(53:09):
have no law in the US explicitly defining a pyramid
scheme or explicitly defining multi level marketing. They didn't as often.
But there is there is one thing that might help
us out, and it is an article from Skeptoid. According
to Brian Dunning over at Skeptoid, always love reading what
(53:32):
he has to say about these topics. According to him,
he says that network marketing plans, which is another euphemism
or synonym for this uh, they differ from illegal pyramid
schemes in one important way. Commissions can only legally be
paid on sales of a physical product. If commissions are
(53:53):
offered on recruitment of new distributors, then it's defined as
an illegal pyramid scheme. But the out now, illegal plans
are pretty rare, according to Dunning. Instead, most companies are
smart enough to stay just on the right side of
the law, literally on the edge, living on the edge
of the law. There we go. Yeah, and uh, he's
(54:21):
got some really interesting statistics about this stuff too. It's
it's illuminating, it's not particularly inspiring. According to the rather
poultry financial records that have been released. UH Newsweek, for instance,
found that fewer than one percent of distributors for an
outfit called Mona Vie ever qualified for any commission at
(54:41):
all unless than one and one thousand recovered the cost
of their required monthly purchases. I wish you put that in.
It's not a one time purchase. Yeah you gotta keep buying. Yeah,
you gotta keep buying because you gotta keep selling. That's
the whole point. And again, like I said, if you're
a great salesperson and somehow you're just unloading mona vie,
then you or that one that one in And so
(55:04):
the FTC is still working to create policy or business
guidance concerning these m l m s as as we record,
and you can find their various fact sheets. They have
a they have a great thing available on tips and tricks. Well,
(55:26):
I don't want to say tricks, tips and advice for
mL m s. And if you're considering one, we do
we do ask you to read that in conclusion. For us,
at least, if something sounds too good to be true,
well there's a reason we call them cliches. And the
(55:47):
reason you've heard that phrase so many times is because
if something sounds too good to be true, there is
usually something hidden behind the curtain. And this isn't to
say that these MLMs have not ever worked or anyone
it's just in most cases, the majority of people lose
much more money than they make, and they lose much
(56:07):
more than they were led to believe was possible. Yeah,
but they made so many friends in a whole new
family while they were doing it. No, boy, were You're
saving that one. And the people who make the cat
the most cash, overwhelmingly are going to be the same
people who founded the company. So please, please, please be
(56:28):
extremely careful when you are approached by mlm s and
when you hear a pitch from your friends, family, or
innocent strangers, remember there's probably something that company doesn't want
you to know, and it's probably something that they don't
want the person who's talking to you to know either,
or the people you're talking to, the people you are
(56:48):
talking to, or the people that you convinced to talk
to other people. Kind goes on. It's like two mirrors
facing each other. Yeah, if you're if you are facing
one of those mirrors and you find yourself in that ash,
and all we can say is we hope you get
out if you can. If it's a problem, if you're
in some kind of debt due to this and it
(57:09):
becomes a cycle, there are places you can go online
to start getting some help and hopefully maybe you can,
you know, go the way of the Herbal Life lawsuit
and get your money back at some point. Just knowing
that that that lawsuit occurred in or at lease was
finalized in that gives I think should give everyone hope.
(57:30):
And if you have an example of a positive experience
that you have had with one of these companies where
these types of entities, we would like to hear that too.
We want to see um we we want to see
provable positive stuff. Absolutely. In the meantime, we are going
to head out. It looks like we've been game blown
(57:52):
up with emails from this broad brush LLC act now folks,
I know, I can't believe they're coming it already. We
just put this episode out right right. It's illumination Global
Unlimited works in mysterious ways, just like the rules of cricket. Yep,
(58:13):
that's terrible. I should just try to learn how cricket
works yet of lamenting it. If you if you know
how cricket works, you can find us on Facebook and
Twitter where we're conspiracy Stuff on Instagram or Conspiracy Stuff Show.
You can call our number right now. Stop what you're doing,
pull over, call one eight three three st d w
(58:33):
y t K. Tell us a story about anything. We
want to hear it. We just want to hear your voice,
and our compatriot Noel will be returning. He's fun and
adventure a lot of us where many different hats and
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the Americans, except we don't work for the KGB. No,
(58:53):
we work for Illumination Global Unlimited. So if you don't
want to do any of those things, are on a
wait wait. If the Americans didn't work for the KGB,
necessarily they work for the USSR. But did they though?
But did they? I don't know. Let us know, let
us know. We want to hear your thoughts. Uh, and
(59:15):
let us know. If you are interested in investing in
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com
From UFOs to psychic powers and government conspiracies. History is
riddled with unexplained events. You can turn back now or
learn the stuff they don't want you to know. M
(00:24):
welcome back to the show. My name is Matt. They
called me Ben. We are joined with our super producer,
Mr Paul Act now decand and of course you are
you friends and neighbors, and that makes this stuff they
don't want you to know. Matt, Matt, Matt, Matt. This,
this is something that's been on our mutual minds for
(00:45):
some time. Is that correct? Yeah. I've always wanted to,
you know, start my own business, really get out there
and just be my own boss. Yeah. Yeah, to bid
a due to the endless drudgery of working for some
other schmow or a company and become finally the captain
of your own fate, the master of your own soul
too paraphrase Invictus, which is a great poem, it really is.
(01:09):
So in in light of that, let's um, let's see,
I think somebody has an offer for us. So let's
let's cut to him and let's see what he's got
to say. Shout, come on, man, the dreams you told
me about. We can actually do them. Now, we don't
have to wait. Man, it worked, and I'm doing it,
and I want to help you do it because it's
(01:30):
so good. This is amazing. We can we can have
vacations and sailboats, and we can have modible homes, and
you can give your wife the jewelry that she deserves.
Then you're gonna be a hero. Come on, now, let's
do it. Get up, down, get up before it's to
let get up. Wow, Joe is getting the hard sell. Yeah,
(01:53):
he really is. Um. The part you can't see from
that is that this man is on stage in front
of hundreds of people, maybe a thousand people, and he's
yelling at a tombstone of this gentleman, a tombstone that
reads Joe nobody poorn in what something like that. So
(02:14):
the voice you just heard is the one of the
spokespeople for what's called a m l M or multi
level marketing based company, a direct sales company, and in
his performance, which is quite theatrical, he is gesticulating wildly
in front of this styrofoam tombstone and begging this tombstone
(02:39):
or the implied uh dead worthless person beneath it, to
rise up through the power of multi level marketing and
discover his dreams. He named several things boats, multiple homes. Yeah,
all the jewelry your spouse or loved one could ever want, right,
because of course every spouse to find six us through jewelry,
(03:01):
of course. But before we get to too critical, we
we played this clip which which I think we we
all thoroughly enjoyed, and we ask you if you have
time to, you can check it out on YouTube. I
think it's been featured in a number of places, one
of which was last week Tonight. Yes, last week Tonight
(03:24):
with John Oliver. There's an entire thirty five minute episode
or thirty one minute episode, however long it was, on
this topic in particular, right because it's a gigantic industry,
and today we're going to learn just how enormous this
industry is, how much of it is transparent, how much
(03:44):
of it is hidden from the public, from the civilians
as well as from the adherents. Dare I say, the
disciples or the recruits of these organizations. And the best
way to start off is, of course, with the American Dream.
But this guy is doing when he's yelling at Joe,
nobody is tapping into this concept that's familiar to anyone
(04:08):
across the planet. You don't have to be one of
our listeners based in the US to realize this. I
think everybody recognizes the idea two point five kids, a
summer home, and then you know a non summer home,
a boat, uh, and your own businesses and a Mercedes
of course, uh, an extra slow Mercedes because you don't
(04:30):
have to hurry, right, not at all. So this is
an enormously appealing, if intimidating opportunity, the idea of going
out there on your own, without a safety net and
becoming your own means of income. There are a multitude
of various programs, organizations, and institutions in the United States
(04:50):
today that claim to assist people in pursuit of this dream. Uh.
Some maybe government supported, such as government loan program ms
that happen with would be small business owners or even
incubators for certain types of companies. There might also be
tax breaks, right. Yeah. You can even get nonprofit consultation
(05:13):
services or even private companies that will just provide assistance
in some other form. Yeah, right, some assistance. So will
it will help you out? And today's episode centers on
a genre of company in that private sphere. Today's episode
is examining one of the more controversial types of phenomena
(05:35):
in the world of entrepreneurship, the practice known as multi
level marketing. It's got some other names, direct sales. A
lot of times comes into it, UM trying to think
there's one big one. It's uh, it's like triangle shaped, um,
triangle plan, triangle. Yeah, that's a triangle scheme. Is Sasa
(05:56):
Lese strategy? Yeah, something something to that effects. Oh, come on, man,
people are on the edge of their seats. Are what
are we really talking about, Matt. We're talking about currently
legally functioning pyramid schemes, It's true, also sometimes called Ponzi schemes.
You might recognize them if you tuned into the television
or the radio during the Made Off scandal. Uh, you
(06:20):
may recognize various forms of con jobs that have existed
in the past, in recent history and in older history.
And you may wonder, what's what's the difference between these
multi level marketing things and these pyramid schemes? Are they
all the same? To answer that question, first, we have
(06:42):
to ask ourselves what multi level marketing or m l M.
So that Matt and I don't kill ourselves trying to
always pronounce that tricky phrase. We have to ask what
these things are, how do we define them? So here
are the facts. Yeah, So, a multi level marketing company
or an entity that functions in that way. It's it's
(07:04):
really a general term, and it describes the strategies for
marketing that these companies use, and they use these non
salaried human beings. Their their workforce is all nonsalaried, and
they sell a product or service whatever the company is
pedaling while the earnings of the participants are derived from
a commission system that like, most of the money that
(07:26):
the people working for the company are not drive from
the sales, they're drived from the commission that you get
from the sales. Yeah. Yeah, this is where you hear
the allegations that's something that's a pyramid scheme. So specifically,
a direct sale company might use this strategy to encourage
existing distributors to recruit new distributors into this network, into
(07:48):
this hierarchy, just like you had established, Matt. So let's say,
let's let's read the room. We're gonna throw a look
over at Paul. Paul, may we use you as an
example in this hypothetical. Okay, he's he's noding a little bit,
just barely. Yep, there it is. Okay, he's he's so
tired of these reindeer cakes. Alright, So let's say Paul
act now decand is an existing distributor for we can
(08:12):
make up any company. How about vintage jelly beans? Yes, there,
aged vintage jelly beans. Are you tired of new jelly yeah?
These are the these are the ones you remember. So
let's say that Paul is pitched on this idea of
(08:34):
joining the Vintage Jelly Bean LLC or whatever it calls itself.
So we can buy product then from vintage jelly beans
from their factory and sell these jelly beans to our
hearts content. Paul can do that, and he can make
a profit of some sort based on the volume of sales. Okay,
(08:57):
so how much he sale, how much he sells, he
gets an like a little piece, right, he gets a bean.
And Paul is also told that he doesn't just have
to sell jelly beans. He can make additional income and
possibly quite a bit, by recruiting his friends, his family members,
his coworkers, and anyone else he can find, making them
(09:20):
distributors of jelly beans as well. So they do the
same thing that Paul is doing, but in the sense
they work for him because in addition to the small
cut of every bean sale that he makes, he also
gets a cut of every jelly bean sale that his
people make. WHOA okay, so that okay, So that means
(09:41):
the people, as you're going down, if distributors are getting
money and getting money and getting money and getting money
on the way up that Oh, this is already feeling
like a pyramid scheme. Guys, I don't know, because if
Paul recruits us in this story, then he stands to
make more money than us, for sure. Yeah. But then
we recruit somebody and we get a little bit of
(10:02):
their peace. But then Paul still gets a piece of
our piece. Yeah, yep, And so it does, it does
go up. You are right about the cognitive geometry, Okay.
So that's called a down line, right down, the down line,
not the down low, the down line. And the incentive
here is that once you or Paul or anyone has
(10:26):
the new recruits hooked and working to sell these beans,
you are making money not just off them, but off
of everybody they recruit. As each of the distributors. Under
you recruit more people under them, you get a percentage
of those people's sales as well. And as those people
recruit new people, you get Do you see how this is?
This is exponentially growing. Oh yeah, the the exponential growth
(10:48):
is pretty apparent, and it feels like it could be
quite a bit of cash coming into me if I'm
at the top, or at least if I start in
somewhere and get enough people below me. And let's pause
here just for a second. I I wanted to ask
you this on air, Matt. Have you ever been approached
by something some entity like this or do you know
someone who has? I would say most people, and this
(11:12):
is conjecture, but I would say most people who are
on Facebook probably have at least one friend that has
maybe either approached you or is consistently putting out feelers
to be like anybody anyone? Oh wow, Paul's nodding too.
I got this essential oil. You gotta get this essential oil.
(11:33):
Work from home, change your life? Are you? Are you
an active parent on the go and you don't have
time to be locked down in a nine to five?
Check out my Mary Kay products St. John's wort. You
know what I mean various supplements. So you have seen
it on Facebook that and uh, I have the dubious
(11:58):
benefit of at times in my college days being approached
by people with a shore fire idea. And the weird
thing was these would be people at career fairs, so
they would be they would have you know, they would
have a table or a booth right next to say
Coca Cola or something like that. There's an amway except right,
(12:22):
and I'm not I don't know for sure whether that
continues in the modern day on college campuses, but I
know we would like to hear from you listeners right
in a conspiracy at how stuff works dot com and
let us know if you have had direct experience with
these organizations. Wait a minute, is that how how stuff works?
(12:44):
Is that how you got picked up? Because the whole
thing here is that if you come on and you
start a podcast, then you get three other people to
start podcasts, and then you get That's how it works here,
right for our down line? Right? Yeah, yeah, thankfully that
is not the case so far as you're maybe we're
not far enough up in the pyramid though. Imagine, just
(13:05):
like the Dark Tower, what if there's a room at
the very top. We've got to climb this upline. We
have to climb this upline. Man, We've got to convert people,
proselytize and have them convert people, and then have those
people convert people. What could go wrong? Yeah, there's definitely
stuff they could go wrong, and we'll hear about it
right after a quick word from our sponsor. Here's where
(13:32):
it gets crazy. So much stuff can go wrong, plenty
of stuff. A cartoonish amount of stuff can and does
go wrong. So much so, in fact, that things going
wrong becomes more of the rule than the exception in
this industry, despite what its advocates may want you to believe. Again,
it's very very important. We are not saying that all
of these things are bad. Multi Level marketing itself is
(13:56):
a strategy employed by a company, right yeah, and it
really is marketing. I mean it's in the name multi
level marketing. You're marketing your product by getting people to
talk about it, mostly on social media. And it doesn't
matter what you're selling. That's the other thing. It's it's
product agnostic. It can be vintage jelly beans, it can
(14:17):
be Adidas wind suits, skin care products. Skin care products
is by far the most realistic thing on this list
at this point. So the place where it gets sticky
is the definition between m l A multi level marketing
versus what you mentioned earlier, a pyramid scheme, or, as
(14:38):
it's been known in pejorative terms, a Ponzi scheme. So
m l M multi level marketing as a strategy, a
technique grit approach, is not, in and of itself inherently illegal.
In fact, there are some companies that practice strategies like
this that juqua well and are fairly reputable. Tupperware for instance, Right,
(15:04):
they sell they tend to sell products through parties. Invite
somebody over for a Tupperware party. Very American thing, right.
I don't know anyone who has gone to a Tupperware party,
but I'm reasonably certainly exist. Yeah, they do exist. Have
you seen that show F is for Family? I have
the Bill Burr Show. There's a whole this is just
(15:26):
my I'm channeling NOL for this. There's a there's a
whole side story where um, the main character spouse joins
a group like that that sells tupperware specifically, and it's
this way in her garage is just filled with tupperware. Oh,
I'm so glad you mentioned garages. Oh we have, Yes,
we have to get to that. So this strategy, while
(15:48):
not inherently illegal or dishonest, becomes disingenuous at the very
least when new recruits are promised scads of money only
to find that there are hidden expenses that they are
required to buy in as an investor, for instance, or
(16:08):
that they are required to purchase x amount of these
products these jelly beans, skincare products, health supplements, what was
Adidas track suits? When suits whatever? And then they're also
extremely convoluted rules about what you have to do in
order to get the money that you're allocated from all
(16:29):
your other you know people, your down line or whatever.
It's it gets pretty crazy and it goes case by case. Yes,
it is purposefully up to well, maybe it's maybe it
is unfair. Maybe we are using a broad brush to
paint these things. Maybe the people who have built these
(16:50):
very elaborate rules for the distribution of money or products
on the down line or the upline, maybe they feel
that they have sound the most efficient and most transparent
way and perhaps the most fair way to distribute the money.
Maybe maybe that is clearly not true. In every case,
(17:11):
but maybe you have to give people the benefit of
the doubt, right. So an additional issue with this is
that let's say you're required to buy a hundred pounds
vintage jelly beans, or you know, X amount of cases
cases h x amount of cases of a miracle water
(17:36):
or a skin rejuvenator wrinkle remover. What you may find
is that the price you have to buy it at
is going to be higher than it would have been
if you went and bought X amount of cases at
Target or at a supermarket. Right, and it may not
be available in stores. That's another big thing. There's a
(17:56):
lot of proprietary branding. But then additionally, you might find
doubt these products are not what they're cracked up to be.
They they're not quality, they break, or the health claims,
if they exist, are wildly optimistic and not research, not
(18:17):
proven by anything other than long anecdotes. The Better Business
Bureau describes several red flags that you may find when
you initially begin conversations with one of these entities. Yeah,
the first one should be a red flag for anyone
at any time, and that's anytime someone is promising you, yes,
you high earnings, especially without having to do much at all,
(18:40):
just very little effort, very little time spent, or any
real serious commitment money wise or other. The money just
makes itself. It just rules it. Yeah, I mean, come on,
why do you think I do this? You did the
majority of the work you needed to do when you
took this leap of faith, when you recognize this opperat tunity, Ben,
(19:01):
have you ever thought about you could I think you
could recruit a lot of people. I think that I
think that you and Paul and Nolan could all do
an equally good job. What if we work together? This
is dangerous territory. This is dangerous territory, especially because, as
(19:22):
people will find out, we are ourselves already involved in
a type of m l M. But it's not, it's not.
So let's get to the second thing. So the second
thing is where you're gonna do this. You're gonna make
money super easy. You're not gonna have to do much.
But the one thing you do have to do. You know,
it takes money to make money. You gotta purchase a
(19:44):
whole hell of a lot of inventory, a lot of stuff.
You gotta buy it. That's just how you get started.
You gotta have that in your possession, so you can
sell all the stuff and got a prime. The pump
can't sell what you don't have, right. Oh yeah, and
we're also here's the thing. Look, you're you're doing the
you're gonna make all this money. The one thing we
can't do is guarantee that will buy back any unsold
(20:04):
products that you have. Okay, we're just gonna you know, well,
we might buy it back for like a percentage of
what you bought it for if we have to, like
a restocking fee. Sure, but we're you know, we can't
just we have faith in you as a distributor and
we we don't think we need to worry about it.
We also don't take checks. That's going to be another
(20:26):
red flag. The money you're required to uh invest that's
the term we like to use just to get started. Yeah,
that money must be paid in cash or a wire
transfer or a money order. Those are three red flags
when yeah, when you see them waving. The consensus from
(20:50):
most financial experts is to run, to leave, to remove
yourself from the situation. And you would you know, it's
easy for us now, all of us, all of us
listening today and for us exploring this in the safety
of a yeah, and the same they have headphones in
(21:11):
our Swell podcast studio. It's easy for us to say, well,
I would immediately leave. I don't fall for that sort
of flim flam, right, But as we will learn, there
are tried and true techniques that are used to make
people feel obligated through some sort of uh psychological manipulation
(21:33):
to buy into these things. It's similar to the way
that somebody might win a vacation. I know, I Matt Paul,
I know you guys have both probably received those mailers
that say, oh, it's a chance to win a vacation. Dude, No,
you already want to cruise. That's what it is. You've
already won. All you have to do is travel thet
(21:55):
Boco Braton or something like that. And what you what
happens is that you arrive at these places only to
find that I did win the cruise. But first we
want to give you a tour of these condos. Ye,
And you know, in the market today, real estate is
the best investment. It really is. And can you imagine
(22:15):
look here at the Windham Resort in Boca Raton. I've
actually been on one of those recently. Yep, A cruise
or one of those switch try to see if I
can do this the right way. Um, some family members
that I was with on a small vacation. I saw
(22:37):
that there was at this mall an opportunity to have
dinner paid for for our entire family. All we had
to do is take a trip over to this condo
and hang out for a while. Answer some questions, talk
to some people, watch some videos. We did it. We
had to like sit for a long time with somebody,
(22:59):
and they split us up into groups, into uh, like
husband and wife groups and like my wife and I
just had to calmly say, no, we we really don't
think we can afford it right now. Oh but what
if you know, we could give you this platinum package
and I'm sorry we can't. Oh but well the double
platinum I think you can really afford and it's an
(23:20):
investment for your future. And it went on and on
and on until we finally got to leave with our
visa check card. Oh wow, so did you ultimately get aid?
We got dinner, but it was like two hours out
of our day. And if you calculate the money for
all of that, you go, wait a second, are you
sure we should have done. This guy's like, yeah, we
do this all the time, and they all said no, No,
(23:40):
they loved it because they some members of my family
do that kind of thing a lot. Okay, I've never
heard this story. Kudos to you for resisting the psychological
pressure that might apply. Right, Well, I mean, how are
they going to apply pressure if there's no money in
my accounts? That now I'm picturing the internet meme where
(24:03):
the guys leaning in and touching his temple with his
pointer figure. So it's true. What what can happen is
that maybe you were invited to a seminar for an
MLM and you hear these very theatrical, very motivational speeches, right,
and it's difficult to leave. It's sort of like standing
(24:24):
up in the middle of church if you're religious and
walking up the social pressure alone. Yeah, it's not a
good look, right, and this becomes doubly powerful at the
very least when you are there with a family member
who is already active in this organization. You don't, I mean,
who wants to disappoint Aunt Linda or uncle Greg? Right? Yeah,
(24:49):
your mother in law? Oh man, that air I gotta
follow up on this. Uh So, another thing you find
is that this all means, in the case of multi
level marketing or pyramid schemes, that initial recruits are essentially
(25:09):
paying an organization for the opportunity to work for them.
Let's let's sit in that just for a second, or
think about it, everyone listening. Imagine your last job interview.
Let's see, went to the job interview and you're already
submitted your resume or something online. The management of the
company sits down with you and they say you're qualified.
(25:34):
As a matter of fact, you're not only qualified, you
are superb. You were the perfect person for this position,
and for seven hundred dollars, you can start today. And
you know, everybody's initial assumption would be, oh, holy smokes,
you're giving me seven dollars to start today. But no, no,
no, no no, no, no, no, no no, you are paying
(25:56):
this organization some amount of money in any other place
or time or organization or job opportunity, that would be
just ludicrous, that would be absolutely not I'm out of here, right,
And a multi level marketing strategy becomes an out and
out pyramid scheme when the bulk of the actual profit
(26:17):
you make comes not from selling your jelly beans. The
bulk of it comes from converting other people in your
social network to work for you, with the same carrot
extending for them that they have to actively recruit other people.
This business model has several deeply disturbing aspects. And first
(26:40):
there's that inherent bait and switch. You're not selling an
herbal supplement, and those are very common in the world
of multi level marketing. You're selling your friends, the idea
of them selling their friends on selling yet more friends.
You're selling a borderline and arguably exploitative type of munic ability. Right,
(27:02):
so we should pause to Matt and talk about herbal supplements. Yeah,
just for a little bit. Now, I know this is
controversial territory in many cases, and again, we don't want
to paint with a broad brush. We don't want to
paint with the wrong broad brush, which we'll get to.
But it's it's a common type or genre of product
(27:27):
in the world of multi level marketing. An herbal supplement
could mean anything from vitamin B twelve to a proprietary
mix of vitamins, to things that are supposed to help
certain medical conditions. These are not held to These claims.
(27:49):
Herbal supplement claims are not held to the same level
of rigor and research that out and out drugs are
held to by the f D a absolute at least
in theory the FDA is supposed to do that. We
have an episode about the opium epidemic coming up as well.
God alright, yeah, But so with an herbal supplement, the
(28:13):
legal restrictions on what you can and cannot claim about
any given thing, any pill or juice or paste, what
have you, Those legal restrictions are much looser, you know,
and you can you can have people come up and
say all sorts of anecdotes all the livelong day about
(28:35):
how it changed their life. But what they probably won't have,
what they're much less likely to have, is a peer reviewed,
reproducible study proving what they said is true. Absolutely. I've
recently watched one where a person said this specific herbal
supplement helped her to become pregnant when all these other
(28:56):
ways did not. She kept trying to get party about
this herbal suff element. Healter get there. This one person
was recovering from a cancer because of this herbal supplement.
And that's when you get into that territory of like,
how dangerous is this to allow this kind of thing
to occur. But you know, the rules are the rules,
(29:17):
and in a way they're following them. Yeah, as the
letter of the law, if not the spirit. Right. Often,
the hidden fees and the required by ends of these
various products put already financially disadvantaged people into some in
(29:38):
some cases, life ruining debt, not to mention the emotional
trauma might experience of discovering that your friend either purposely
deceived you or has misled both of you. You know
that's a painful thing. Yeah. Yeah. And one of the
(29:58):
biggest problems we see here with all of these people
trying to recruit everyone else to get into this thing,
whether they get hurt in it or not, is that
you run up on a math problem. Yes, that is true,
and you don't need a calculator for it. Let's do
the math. The math comes to us courtesy of a
fellow named Robert Fitzpatrick, a former business consultant and now
(30:19):
a prominent opponent of pyramid schemes and multi level marketing strategies,
which he pretty much equates. He says they're the same thing,
and it's a false dichotomy, and he explains the unsustainable
math in pretty simple terms. We have a quote from it.
The math is a distortion, a manipulation of what they
(30:42):
call exponential expansion. Exponential expansion is two times two times
two times two. And almost all of these schemes tell
you that you can make money by just recruiting three
or four or five. Let's let's say five. Then you
let the five do their five, and that gives you
twenty five. There you go. That's this is out the
(31:04):
side of the quote right now. Yeah, we've got our
twenty five people already. Right, let's get back into the
quote that right there is exponential expansion. That's the trick
of the whole thing. What they don't show you is
that you can only do that thirteen cycles, and and
then after that, he says, you would exceed the population
of the earth. So thirteen iterations of this sort of growth, well,
(31:30):
eventually reach a point of saturation such that there are
no living people who are not part of this scheme. Yes,
and most of them will be on the most bottom level,
right right, still required to buy in, depending on the
specific case, still required to purchase a product or make
(31:51):
some sort of initial investment. But at that point they
literally have no one to sell any of it. Too,
because everyone has a garage full of whatever it is.
In the most fundamental terms, this means that the business
model as it is explained to new recruits is not
meant to work. It literally cannot if everything goes well
(32:11):
and every single member of this thing, or even if
you know what, honestly, even if sixty of the people
who are who are entering this sort of this sort
of business, even even if sixty of them succeed, then
it still won't work over the long term. Additionally, there
(32:31):
are several other important points that new recruits are not told.
First is that, according to Fitzpatrick, uh something around the
order of at least more than investors or distributors don't
turn a profit full stop at all. I just won't
just won't happen. And additionally, there's no recognization that something
(32:57):
will go wrong, that the market will saturate, that it
will not forever grow unbound. And that's kind of the
problem we have with our economy in general, isn't it. Yeah, Arguably,
depending on which economic model we're talking about, just exponential
constant growth, nothing will ever stop. The factories must expand
(33:19):
you know what, let's start a planet Hollywood on Mars
Oh can we I don't know, I haven't. They're gonna
need one eventually, They're done. Every every planet will need
a planet Hollywood eventually, and it'll be all like Mars
based celebrities, right, and think of the food puns. Oh yeah,
(33:41):
we gotta get Jonathan on just to drop in some
food puns. That's Jonathan Strickland, the host of tech Stuff
and several other fascinating shows. He is also as an
active charity volunteer to be our complaint department. If ever
you feel that there's something that needs to be corrected
on the show, or if you have a complaint, please
(34:02):
do not hesitate right to Jonathan Dott Strickland at how
stuff works dot com. But you know, joking aside, this
shows us, uh, this shows us a little something about
the potential size of the problem. But what's the actual size? Well,
it's big and we're gonna get into it. After a
(34:22):
word from our completely not multi level marketing sponsor. Why
you that I can't help? But notice that japainting with
us skimpy brush, Well, this is the only brush I had.
I've got to do the fence and then the wall,
and I just have so much to do. Don't waste
time like I'm in macaroon rotting on this one. My friend,
(34:43):
what you need is a better brush. I'll bigger brush,
I'll broad up brush. A broader brush really would get
this done faster and I could just paint the whole
thing in one go. Maybe why simply buy broad brushes
when you can sell them? Why simply sell them when
you can have your friends, neighbors, loved ones, and naive
strange is on the streets sell the broadest of brushes
for you. This sounds like a plan. What do I
(35:04):
need to do? Why You've already done the most important part,
which has opened your eyes to a new world of
economic opportunity. Your next steps are relatively small, easily handled,
and we can take care of them today. Oh we'll
need is a slight seed money investment. And of course
you can't sell what you don't have, So with a
minimum purchase of sixty eight broad brushes, you will be
(35:25):
set to go. My friend, Okay, I guess you know
I've been meaning to sell my home, so I could
do that. I'm not sure where I'll put the broad
brushes are They probably need a lot of space, don't they?
Um all right, Well, I guess let me go ahead
and sell my house and then I'll get back to you.
I guess no, no, no, listen, this is a tremendous
(35:47):
chance to change the course of your life and the
life of all your loved ones forever. All you need
to do is imagine yourself ten years from now. Would
you rather be living in a sumptuous, opulent mansion or
will you be a wash and mounting final notice bills,
rotting in this dump, lamenting the chance you could have
taken to save your own life. I guess I'll take
(36:09):
the mansion. This message for broad Brushes International has been
brought to you by Illumination Global Unlimited, and we're back. Uh.
You know what, Matt, that last ad felt a little
(36:33):
bit I don't want to go out on a limb here.
That last ad felt a little bit like a a
multi level marketing thing. It was kind of pushy. I
noticed that in the end, the one guy really seemed
to want the other guy to do whatever you had
to do to sell those things. It's really you know,
(36:53):
it's eerily in line with what we're talking about, but
sometimes those strange coincidence has happened. I still have issues
with the size of the brushes the way they were described,
Like I don't understand. I feel like that's more industrial
strength brush situation. I'm not sure I did appreciate how
the other guy in the ad did ask how he
would possibly wield these. But you know, let us let
(37:18):
us know if you have experience with broad brushes, or
of course our returning sponsor, Illumination Global Unlimited, just let
us know how those how this product shake out, because look,
we're not gonna knock a brush a broad brush if
it works, right, Yeah, absolutely, Speaking of broad and expansive things,
(37:38):
what's the size of the problem when we're talking about
multi level marketing? Well, let's go back to Mr Fitzpatrick.
He has a book called False Prophets, Seeking Financial and
Spiritual Deliverance in Multi Level Marketing and Pyramid Schemes, And
in this book he speculates that the just the size,
the full scope of these various companies that make up
(38:01):
this industry of multi level marketing is currently unknown. They're
they're essentially there are so many functioning right now that
it may be impossible to know. And those entities certainly
wouldn't want you to know the full nature of their
financial transactions or their techniques. So, according to Fitzpatrick, this
(38:28):
goes back into just the sheer amount of money that
is involved. So in this quotation, he says made Off
Bernie made Off Conde a relatively small number of people
with investment money. Multi level marketing, he argues, is using
a different system. Instead of taking a million dollars from
ten people, you take ten dollars from a million people.
(38:50):
That is the way this system works. I'm just using
that as an analogy. But the numbers add up to
staggering amounts year upon year upon year. This leads Fitzpatrick
and other experts to believe the amount of money involved
in this industry overall ranks and the billions with a
b wow. And and here's the thing there are it's
(39:14):
not just the problem of setting up something like this
that ultimately benefits, you know, the person that started it,
Like at that, in all of these there's some group
or person at the very top that gets all of
the down line. Every single person sends money up to
that one person right, the founder, right right right, And
(39:34):
and in some cases there are allegations of these people
taking advantage just fully and knowingly taking advantage of everyone
working for them, so not making an honest mistake, not
not getting the accounting wrong, or uh, acting out of negligence. Yeah. Unfortunately,
(39:54):
there are numerous multiple cases in which founders are members
of these types of companies have been found guilty of fraud,
of conspiracy to commit various financial crimes, and more. For instance,
there was a guy named Paul Burke's here in the
US who was convicted of conspiracy and fraud during his
time heading up a company called Zeke Rewards, and in
(40:19):
the course of his trial it was characterized as one
of the largest Ponzi schemes in US history, bilking more
than one million investors across the world out of eight
hundred million dollars. Later that amounted to be about nine
million dollars. He was sentenced to around fifteen years in jail,
(40:41):
and he got off relatively easy because going into trial
his penalty could have been as much as sixty five
years in jail, and he's an older man, so fifteen
years even maybe a death sentence. But what they did
essentially was old school Ponzi schemes stuff. They made extravagant
promises and they got people to invest money with the
(41:03):
with the assumption that that money would later be paid
off as these as these schemes, this penny auction site
began to deliver the mail, deliver the goods, and for
a while, for the earlier investors, it seemed like this
was happening because of what they were doing is they
were taking the money that later investors put in and
(41:25):
using that to pay off their old investors. So it
just kept growing, passing the buck, passing the buck, and
then eventually it created under its own numerical success, not financial,
but just the sheer amount of people who bought in Dan.
So that was Zeke rewards. Zeke rewards. All right, I
need Yeah, that's the whole thing. I'm just gonna go
(41:46):
down that rabbit hole later. Thanks Ben, thank you. So
what what next? What's another example? Oh, another huge issue
that some of these founders have come into is tax evasion,
and that's specifically when these multi level marketing companies expand
into various countries. So like you're not just starting out
(42:08):
in the US or wherever else, Malaysia, maybe Australia. Now
you're in all of these countries and all these people
are paying money to you, but you're in one location
and now you've got a whole lot of taxes you've
gotta pay. And uh, this this one couple, Thomas E.
Mower and his former wife Leslie D. Mower, they founded
(42:30):
a company in what Springville I believe it was called
New Ways or Knee Ways an E W A Y S.
And uh, yeah, they didn't pay personal income tax h
to the tune of about three point two million dollars.
And it's it's money that they owed for their companies
(42:50):
for this new as company um in several in several
countries Malaysia, Australia, and in the United States. I mean,
that's that isn't necessarily a big problem specifically for multi
level marketing companies, like not paying taxes. That's just something
that this couple decided to do, right, That is not
(43:14):
a necessarily multi level marketing only crime. And we can
provide more examples you very well. Uh, fellow conspiracy realists
may have some examples of your own that that you remember,
and a simple cursory search online will turn up dozens
and dozens and dozens of things like this. But let's
(43:38):
you know, we we should also mention that the inner
workings of these organizations can also get very weird. We
talked a little bit about the psychological manipulation involved in
making people feel obligated to do something, which is not
restricted to time shares or am Way or anything like that.
(44:00):
A lot of advertising is built on the idea that
it is possible to make people feel obligated to do
something that they have to do it right. Not your
life will be better, but your life depends on it. It
It depends on this. Yeah, and we did a video
that you and I were thinking about off air as
(44:20):
we were working on this episode. We did a video
that had some eerie parallels. It's our old YouTube video
about the techniques that colts use. So there's isolation, there
are long speeches and you're forced to listen to There's
a lot of jargon, right, A specific type of lexicon
(44:41):
terminology arises such that only you can talk about this
with other people that know what you're talking about, or
else it's just gobbledegook coming out of your mouth. You
can find this, for instance, in the ranks or the
names that are given to levels. Right. There may be
there may be a high archy of sales or position
(45:02):
in the pyramid that is described by any number of
imaginative phrases. Uh. Specifically, I think we're both thinking of
a company called Youngevity, Yes, that has levels based on
precious stones. Yeah, it's pretty awesome. But some of the
(45:22):
other ones are even more abstract and strange than that,
and you you just kind of gotta look through them.
There was one in that John Oliver UH episode that
we played where this guy is discussing it's it's specifics
about how you get paid for people on your down
line and the things the requirements you have to meet
(45:45):
on your upline, and just just it made my brain
want to explode. Yeah, it's something along the well, maybe
saying along the lines as a poor phrase here, but
it's something to the tune of uh. A vertical series
of dots labeled A two G going down. And then
(46:08):
the guy is attempting to or appears to be attempting
to helpfully explain how one actually gets cash in your
pockets or in your wallet or your purse or the
empty mannai'se jar in your backyard by the body, you know,
like wherever you store money. What he does is the following.
He says, Okay, you're a so let's say that B
(46:30):
buys four thousand points at forty two percent value point levels,
and that goes that would go up to count as
your qualified commission, but it's under it's an encumbered line.
And that's remember you need one thousand unencumbered value points,
right and uh, this this may again to be completely fair.
(46:56):
This maybe that specific organization's best good faith attempt to
simplify the distribution process. It sure does not sound like it.
It sounds arcane. And that's just one example. Well, yeah,
and and one of the like we said, one of
(47:16):
the effects of having something like that, is that you
have a more insular group, right right, they're outsiders and insiders,
and just like some some cults, you know it's a
sensitive word, but just like some cults, you're you may
also be taught that you have a mission beyond a
(47:39):
financial goal. You have a mission to free people that
you care about or to save them with this supplement.
They need this. So not only are you helping yourself
out financially, you are helping these other people out medically.
You're helping them out by providing them opportunity because you
care about them. And if they won't join up, then
(48:01):
there's something wrong with them. What gives what gives? Right,
So we're being a little dramatic, but there there is
a lot of truth in those statements. Here are some
examples of companies currently being accused of functioning as pyramid schemes.
Amway probably all heard about Amway was big and what
(48:21):
the eighties, maybe, and my only encounter with it was
hearing it referenced in comedy, and for a long time
as a Yeah, for a long time as a kid,
I think I confused Amway and Amtrak, and I kept wondering,
why are people making fun of Amtrak for things I
don't understand? Is Amtrak so broke that the people have
(48:44):
to also sell like dish detergent? It's been around for
so long that I honestly don't even know what Amway sells.
Do they? It's like bath embody stuff, beauty products, oh,
and nutrition. So this is like activated water. This is
a shipping company essentially, it's like an Amazon, but it's
(49:05):
an MLM. Yeah, this is so now. Again, neither of
us and Paul and Noll also none of us have
actively participated in this stuff. So it is quite possible
that there's something to it, you know, that we have missed.
But these are the facts, These are the legal cases
(49:27):
we found, and these companies are for their part um.
They say that they're very transparent with the claims they're
making and they are pretty pretty responsive, you know if
mass media reaches out to him and stuff, But that
doesn't mean problem still all occur. Next to Amway, another
(49:47):
really popular or well known UH company employing the strategy
would be Urban Life. Yes, this is herbal Life the supplements, right,
like Herbal Life almost, but it's about life. In seventeen,
they were forced by the FTC to pay nearly three
hundred and fifty thousand people back some amount of money,
(50:12):
and the final settlement that they came to was Herbal
Life had to pay two hundred million dollars and then
not just pay that fine, which is generally what happens
with a company. You get your hand slapped, you pay
a fine, it becomes a cost of business. Well, in
this case, UH, they had to fundamentally this is a quote,
fundamentally restructure its business. Right, that's a quote from the
(50:35):
FTC itself, specifically from Jessica Rich, who at the time
was the director of the agency's Bureau of Consumer Protection,
And that sounds like a good thing, and so the
company continues. Uh. The company, for their own parts, said
that they had not done anything wrong and that they
(50:55):
didn't need to make any substantial business change. And then
also some people who said that this company was being
unfairly targeted from from some other entity or individual who
had an ax to grind. So you'll hear from both sides.
Will hear the government side, and you'll hear the company's side,
(51:18):
and those those sides just aren't gonna agree. Yeah, it's
really it's up to you to decide what what you
think is the the straight poop, the genuine article. Uh.
There's also a von that's one of the more famous ones. Right. Uh.
There's also Youngevity, Yes, Youngevity. One of the companies that
(51:40):
I was gonna say pedals. They sorry, that's not right.
They sell products that will help people feel and look younger.
There there. That's another big theme that occurs in a
lot of these and in each of these cases, the
organizations mentioned will typically prefer a different description. They don't
want to just be called MLM s. They certainly don't
(52:02):
want to be called pyramid schemes. Who prefer a term
like direct sales. There's something similar to what you said
at the top of the show. And you know, Avon
has been around long enough for the idea of the
Avon Lady quote unquote to be a cultural trope, you know.
And that means that on some level people have succeeded
(52:24):
working with or for Avon. Same thing with Tupperware. So
we can't say that in every case this has been
terrible for people. Yeah, it's not all bad, and you
could be really good at it. If you're an amazing salesperson,
then maybe this is the you know, a way for
you to make some money. I guess it just all
depends on when you get in at the pyramid, right. Uh.
(52:45):
And despite the massive controversies and the various convictions for
conspiracy literally for conspiracy. Uh, these companies, many of them
thrive in the modern day. For people who are opponent
of these practices or techniques, the biggest question is this,
why is this still legal? How? According to Fitzpatrick, we
(53:09):
have no law in the US explicitly defining a pyramid
scheme or explicitly defining multi level marketing. They didn't as often.
But there is there is one thing that might help
us out, and it is an article from Skeptoid. According
to Brian Dunning over at Skeptoid, always love reading what
(53:32):
he has to say about these topics. According to him,
he says that network marketing plans, which is another euphemism
or synonym for this uh, they differ from illegal pyramid
schemes in one important way. Commissions can only legally be
paid on sales of a physical product. If commissions are
(53:53):
offered on recruitment of new distributors, then it's defined as
an illegal pyramid scheme. But the out now, illegal plans
are pretty rare, according to Dunning. Instead, most companies are
smart enough to stay just on the right side of
the law, literally on the edge, living on the edge
of the law. There we go. Yeah, and uh, he's
(54:21):
got some really interesting statistics about this stuff too. It's
it's illuminating, it's not particularly inspiring. According to the rather
poultry financial records that have been released. UH Newsweek, for instance,
found that fewer than one percent of distributors for an
outfit called Mona Vie ever qualified for any commission at
(54:41):
all unless than one and one thousand recovered the cost
of their required monthly purchases. I wish you put that in.
It's not a one time purchase. Yeah you gotta keep buying. Yeah,
you gotta keep buying because you gotta keep selling. That's
the whole point. And again, like I said, if you're
a great salesperson and somehow you're just unloading mona vie,
then you or that one that one in And so
(55:04):
the FTC is still working to create policy or business
guidance concerning these m l m s as as we record,
and you can find their various fact sheets. They have
a they have a great thing available on tips and tricks. Well,
(55:26):
I don't want to say tricks, tips and advice for
mL m s. And if you're considering one, we do
we do ask you to read that in conclusion. For us,
at least, if something sounds too good to be true,
well there's a reason we call them cliches. And the
(55:47):
reason you've heard that phrase so many times is because
if something sounds too good to be true, there is
usually something hidden behind the curtain. And this isn't to
say that these MLMs have not ever worked or anyone
it's just in most cases, the majority of people lose
much more money than they make, and they lose much
(56:07):
more than they were led to believe was possible. Yeah,
but they made so many friends in a whole new
family while they were doing it. No, boy, were You're
saving that one. And the people who make the cat
the most cash, overwhelmingly are going to be the same
people who founded the company. So please, please, please be
(56:28):
extremely careful when you are approached by mlm s and
when you hear a pitch from your friends, family, or
innocent strangers, remember there's probably something that company doesn't want
you to know, and it's probably something that they don't
want the person who's talking to you to know either,
or the people you're talking to, the people you are
(56:48):
talking to, or the people that you convinced to talk
to other people. Kind goes on. It's like two mirrors
facing each other. Yeah, if you're if you are facing
one of those mirrors and you find yourself in that ash,
and all we can say is we hope you get
out if you can. If it's a problem, if you're
in some kind of debt due to this and it
(57:09):
becomes a cycle, there are places you can go online
to start getting some help and hopefully maybe you can,
you know, go the way of the Herbal Life lawsuit
and get your money back at some point. Just knowing
that that that lawsuit occurred in or at lease was
finalized in that gives I think should give everyone hope.
(57:30):
And if you have an example of a positive experience
that you have had with one of these companies where
these types of entities, we would like to hear that too.
We want to see um we we want to see
provable positive stuff. Absolutely. In the meantime, we are going
to head out. It looks like we've been game blown
(57:52):
up with emails from this broad brush LLC act now folks,
I know, I can't believe they're coming it already. We
just put this episode out right right. It's illumination Global
Unlimited works in mysterious ways, just like the rules of cricket. Yep,
(58:13):
that's terrible. I should just try to learn how cricket
works yet of lamenting it. If you if you know
how cricket works, you can find us on Facebook and
Twitter where we're conspiracy Stuff on Instagram or Conspiracy Stuff Show.
You can call our number right now. Stop what you're doing,
pull over, call one eight three three st d w
(58:33):
y t K. Tell us a story about anything. We
want to hear it. We just want to hear your voice,
and our compatriot Noel will be returning. He's fun and
adventure a lot of us where many different hats and
disguises were kind of like the people in that show
the Americans, except we don't work for the KGB. No,
(58:53):
we work for Illumination Global Unlimited. So if you don't
want to do any of those things, are on a
wait wait. If the Americans didn't work for the KGB,
necessarily they work for the USSR. But did they though?
But did they? I don't know. Let us know, let
us know. We want to hear your thoughts. Uh, and
(59:15):
let us know. If you are interested in investing in
our new amazing opportunity to sell broad brushes and to
sell people on selling broad brushes, you can write to
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