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7 Lies About Pyramid Schemes

Who tells the pyramid scheme lies and why? It might surprise you. Of course, pyramid schemes themselves tell lies about what they do and how they do it. Their LIE is their opportunity, lying is how they make money. However, there are other entities and people that lie about pyramid schemes. Who they are and the lies they tell will surprise you. First, what is a pyramid scheme? It's simply a financial opportunity whereby one invests money, recruits others to invest money, and then profits, eventually, from the investments of those at some "tipping point" in the scheme. Plus, it's illegal pretty much everywhere in the world.

The 4 features of a pyramid scheme are:

  1. The investment is just an investment for the right to participate in the scheme.You may get something for your money … some kind of product, service, or gift. But the "thing" is inconsequential to the investment … meaning you don’t want the thing, you only want to invest with the hopes of earning back your money plus a profit.
  2. Everyone in the scheme is motivated to recruit others into the scheme.That is the ONLY way you get your money back and earn a profit. It is this feature that creates a compounded growth of the participants (i.e. You-5-25-125-625-3,125-15,625 etc.).
  3. When you have compounded enough people under you in the pyramid you cash in.For example, if each person invested $1,000 as soon as you get 5 people who each get 5 people ($30,000 in revenue) you might earn $10,000. Then you reinvest and start over.
  4. Success is guaranteed. Everyone involved knows that the only way they get paid is if everyone recruits and keeps recruiting. So, they are encouraged by promising them if they recruit they will get paid. Their success is "guaranteed."

What is Network Marketing or Multilevel Marketing?

Network Marketing or MLM is a form of Direct Selling … where one person directly promotes and sells a product or service to someone else. The difference between the core concepts of Direct Selling and Network Marketing is how the sales force is created and how large a sales force is created. In traditional Direct Sales, the company itself or an appointed sales manager recruits the sales force. By virtue of the limitations of that approach, Direct Sales companies may have much smaller sales teams made up of more productive salespeople. They may be more full time and better trained on selling the product, because that is the ONLY way they earn income … by selling the product. In Network Marketing, the sales force is recruited by the sales force. Each salesperson MAY recruit other salespeople. In this way, the sales force may grow in a compounded way just like a pyramid scheme (You-4-16-64-256-1,024, etc.). And in Network Marketing, there are actually no 4-16-64 payouts. Recruiting in Network Marketing is random, organic, and totally at will. You don’t get paid based on how many people you recruit or the matrix of duplicating a specific number. You get paid on sales. Each person sells the product, is a customer themselves, can recruit others, and can build a sales team. Typically only 5% of the customers and salespeople ever build a team … but they all can. A Network Marketing company pursues their sales goals, in large part, by the size of the sales force as opposed to how much product each person sells like in Direct Sales. For example, in Direct Sales, a company may employ 200 salespeople each with a protected territory and a quota of $5,000 a month in sales. This achieves $1,000,000 a month in sales. A Network Marketing company does not require territories. The "quota" is at a small enough level that one can achieve it just by being a customer themselves. A Network Marketing company may recruit 5,000 salespeople each of whom use and sell $200total a month, creating the same $1,000,000 a month in sales. Income in Network Marketing is only EVER earned when consumers use the product. The residual income you may hear about in Network Marketing only ever happens when customers buy the product over and over again … for decades. Network Marketers are never directly paid to recruit. Yet the more people they recruit, the larger their sales organization may become and, as a result, the more sales they create. They are only paid on product sales. Being a customer is a critical component of Network Marketing sales. The participants are not professional salespeople. They are in fact raving fans and customers that are just recommending the product to other people. The authenticity of “being a customer” is important in the sales person’s ability to recommend the product with credibility and integrity. The largest and oldest Network Marketing companies in the world have millions of distributors and they produce billions of annual sales. The model has been an accepted, legitimate and totally legal method of growing a sales business since 1946. Yes, since 1946 there have been Network Marketing companies that have operated more like a pyramid scheme than a "selling a product" business. There have been, and continue to be, Network Marketing companies that were fraudulent and abusive, lying their way to success.
Lying about an opportunity ought to be a crime whether it is told by the opportunity or told by those not part of it.
It's powerful, influential peoplewho work for / represent highly visible and credible organizations that LIE about Network Marketing. Government agencies lie about the model, the media lies about it, consumer advocate groups lie about it. They lie about the business model to judges, juries, and the public. Why? Are they evil or have malintent? No, they just believe they understand the model when they don’t. They have conflated the legal and powerful features of a Network Marketing company with the illegal features of a pyramid scheme. And they know they are doing it thus painting and indicting the lives and occupations of millions of honest, legitimate entrepreneurs with those of their cousins, the criminals.

Here are their 7 Lies:

  1. Network Marketers pay an investment on which commissions are paid.This is illegal. We may buy products we love, samples we hand out but we do not invest money just so others may earn money. If buying products you intend to use, sell, or sample, it is not. Pyramid scheme.
  2. Network Marketers get paid to recruit. Again, this is illegal. This is a lie of omission. Network Marketers never get paid to recruit. We get paid on sales. The more people we recruit the more sales we get paid on. They know this and lie about it anyway.
  3. Network Marketing companies require monthly purchases that are akin to "inventory loading."Inventory loading can be deemed to be abusive and illegal. Network Marketing companies often require those earning commissions, and only those earning commissions, to be an active customer. Usually in the range of $100-$150 a month in consumable products … products people are using every month. The FTC has argued that buying $150 a month in energy drinks is illegal inventory loading. That would make every Starbucks customer a felon. I am on auto-ship for $150 a month in golf balls (yes I lose a lot of golf balls). I am not in a pyramid scheme. The liars know the difference. They don’t care. They lie anyway.
  4. If Network Marketing worked, everyone in the world would be recruited.Network Marketing has been working since 1946. There are over 100 million people in the world that participate … 95% of which are just customers. Amway has been recruiting salespeople for over 60 years. You and I are not an Amway distributor, and we are not ever going to be. Amway does $8 billion a year in sales of award-winning, stellar products. They are not a pyramid scheme, yet the lie continues.
  5. If you're focused on recruiting then you don’t care about product sales and you're a pyramid scheme.Recruiting is HOW we create more product sales, a quantum leap in product sales. This is is the biggest lie. Recruiting is not illegal. Focusing on recruiting is not illegal. It is a means to more customers. They know this but they hate it. They want everyone to earn a little bit of linear income like an employee. They don’t want people to leverage their efforts like a boss. They want us to be small. And they lie to that end.
  6. You must have more customers than distributors or you are a pyramid scheme. There is no law, regulation, or anything other than their opinion that says a Network Marketing company has to have a certain ratio of customers to distributors. Since every distributor IS a customer, any ratio does not apply. Every person in every individual Network Marketing company is or was a customer regardless of their role or title. It is a lie that not meeting an imaginary ration makes you a pyramid scheme.
  7. Encouraging people that they can succeed makes you a pyramid scheme. Showing examples of success, a road map to success, or income potentials is not illegal. It's not illegal as long as you show people the truth, odds, numbers of people that do and do not succeed so they have a fair picture. An Income Disclosure Statement can accomplish this fairness. Lying to a prospect about the possibilities is fraud. Lying about what is fraud is also fraud.
Every one of the parents who lie about Network Marketing would ironically encourage their children to pursue their own dreams with passion. None of them, as parents, would show an aspiring professional athlete that the odds are 1 out of 1,000; so they should just forget it. They would all ignore the odds, encourage their child, and spend tens of thousands of potential lost income on pursuing the dream. But ironically such encouragement is not allowed here. If you want to see a pyramid scheme in action watch this short video. If you want to learn how Network Marketing really works, read/listen to The Four Year Career®here. Oh, I know suggesting one could have a four-year career is lying. Read it and see for yourself. When you take the time to understand how Network Marketing really works, why it works, and why it may not workwhat you will find is an imperfect product distribution and income opportunity model that's has been growing since 1946. Why? Because, we tend to develop leading-edge products and we provide an incredible financial opportunity … and it is just that, an opportunity. It's not a job or a guarantee. As in most opportunities, the majority of people fail. That does not make it a lie or illegal. It actually makes it … American. Network Marketing … made in America.
P.S.Comment below!Tell us what you thought as you read this blog.

3 Responses



August 26, 2022
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November 01, 2021

So many times I have talked about these very realities and tried to wrap my mind around why people lie about it so much. Network Marketing has been an incredible career for me and for 8 years & counting has provided a truly amazing income. The vast majority of it, residual. With very high integrity as a person, doing or promoting anything remotely false or shady was not going to happen— and no amount of income would ever change that. I have been able to help people change their lives through what I do with just the products alone. Those that also wanted to earn an income, I have been able to help as well. The people who lie about network marketing really have a lot to lose by people believing in the credibility and possibility. So a hate campaign was begun and is thriving. I finally came to at least appreciate that their campaign will eventually have a backlash when people who prefer to think for themselves push the narrative away and go see for themselves. I welcome that because those are the people I want in my organization anyway.



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