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MLM Scams and “a Few Bad Apples”

June 14, 2020 by Lazy Man 3 Comments

This may not be the right time for this conversation. Many may say, “Don’t we have enough on our plates with COVID-19 and addressing centuries of racism.”

I wouldn’t argue that. That’s where our attention should be.

However, the topic of “a few bad apples” got surfaced as part of the racial injustice discussion. Rhis Chris Rock video below specifically addresses the problem of “a few bad apples” with regard to cops when reacting to people of color:

Chris Rock on the problem with a few bad apples. pic.twitter.com/x7k7xEmjcI

— Dave Pell (@davepell) June 6, 2020

That’s a clip from 2018, which shows that it wasn’t a George Floyd reaction. This isn’t new.

Clearly the conversation now (well way before now) should be about systemic racism. Chris Rock in the video above makes a great point that in some jobs (such as the police), you just can’t have any bad apples. Pilots from the video is great example.

In addition to that Vox Media addresses the “few bad apples” with regard to George Floyd. That’s a tremendous article and I recommend that everyone read it.

For this article, I’d like to focus on just this small somewhat insignificant paragraph:

Curiously, the people who recite this trope rarely reflect on the second half of the expression: “A few bad apples spoil the bunch.”

That’s where I’d like to transition this and apply it to MLM. I’m not trying to steal from this discussion. (I’m not sure a small blog as insignificant as mine can do that.) I simply know that if I don’t write about this now, I’ll forget about it. I have the attention span of a tsetse fly and the grit of a sloth.

There has been some discussion about a “few bad apples” for a long time in the MLM space. I’ve spent too much of my life addressing it in comments. I understand if MLMs aren’t your thing, or something you are particularly concerned about at this time. If that’s the case, please feel free to move on. I have broader personal finance content planned for later this week.

Imagine a career, like pilots, where there can’t be any bad apples. That’s one side of the spectrum where I think we can safely agree that success depends on being a good apple. If you are a bad apple, you probably aren’t going to be a pilot for long. (We just hope it ends safely, right?)

But let’s look at the career thing that an MLM distributor does. Since MLM is not a business it would be too much of a stretch to say it can qualify as a profession or career.

The MLM distributor is the opposite of the pilot. The most successful (in terms of making money) have recruited the biggest pyramid below them. The FTC doesn’t go after many MLMs, but when they do, the top distributors with the biggest pyramids are quick to go down too. You can often them in videos on YouTube making illegal business opportunity claims such as, “You too can make 6 figures”, when the truth is that it is mathematically impossible for that to be generally true.

MLM Distributors and Bad Apples

In the comments of my MLM articles, I always get the same excuse that Chris Rock mentioned… “it’s just a few bad apples.”

Here are some examples:

From my Beachbody Shakeology article:

“There is no denying there are really crappy, horrible MLM’s out there that are legitimate pyramid schemes. And it definitely sucks because the business model of MLM can be used for extortion and theft. But; so can regular businesses (Enron? etc.). There are bad apples in every bunch and they sour it for the rest of us. The danger is when you start painting with a broad brush without looking at intent.” (Source)

Note: It was soon obvious that Nick himself was a bad apple.

Next we have this from my DoTerra article:

“There may be many ‘bad apples’ in the network marketing business, but until doTERRA does ‘it’ whatever ‘it’ is, you can’t claim they are a scam or fraudulent. (Source)”

I had only mentioned the things that doTERRA had done and my opinions to the best of my knowledge. That included a warning letter from the FDA back in 2014. Additionally, just a couple of months ago, they were warned by the FTC for COVID-19 claims.

I think we can all agree that the FTC is calling doTerra out for having “bad apples.”

(I don’t even want to address how anyone using the term “network marketing” is a bad apple for trying to hide that it is MLM.)

Next we have this from my ASEA article:

“The Asea has done wonders to relieve chronic spasms in my entire back, making it possible for me to be on my feet for much longer than I’ve managed for years! I’m a real person, not being paid to do this, but want the real truth to be told about this product. It’s not a scam. It’s literally changed my life and has given me some life back. There are always bad apples in the mix with anything, sad but true. Always some that don’t do all of their homework or even try it for themselves or see what it can do for others around them.” (Source)

That sounds like a convincing testimonial, until you realize that ASEA was debunked in 2012 as being $70 salt water. The commenter may not have been a bad apple, but it’s easy enough to say, “Get the product approved for the medical condition if it works.” If there is anyone who isn’t taking the MLM company to task with that… they are a bad apple in my book. The company itself is a bad apple if they aren’t getting their product FDA medically-proven for back spasms (in this case). I hate to be the bearer of common sense here.

Finally we have this from my Visalus article:

I am looking for a unbiased article or blog and for me if you are totally down i.e. your summary is it’s all bad or it’s all good. There is something wrong, some kind of agenda. There are bad apples in everything banking, schooling, non-profits, government, hospitals, business in general. However, there are also good apples. (Source)

I’d love to read his review about domestic violence. I wonder if he’d say there’s some good in it? What about his view of pickpockets? It’s hard for me to see the positive side of pyramid schemes preying on the disadvantaged.

BTW, ViSalus imploded as well. In 2012 they were in the advanced stages of going public, but reports came out that they were a pyramid scheme.

I could probably go on citing commenters from many of my other articles such as Le-Vel Thrive, Plexus, It Works, and Shakeology.

Instead of boring with all that, the former Chairwoman of the FTC, Edith Ramirez made a blistering keynote at the 2016 MLM convention (misleadingly titled the Direct Seller Association, which doesn’t address the MLM aspect).

She goes into great detail about how bad the bad apples are in MLM. She cites that when the “business opportunity” to recruit people into Burnlounge was legally taken away, interest in the product “plummeted from over $475,000 to less than $11,000.”

Feel free to check my math, but it seems that the MLM consisted of 97% bad apples. From my reading it seemed that Edith Ramirez held that out to be a typical example.

Celebrity as MLM bad apples

It’s not just the distributors who are bad apples. Celebrities can be bad apples in sponsoring pyramid schemes. Here are some examples:

Jenny McCarthy pushed Vemma’s scam and the FTC took them down. Drew Brees pushed Advocare’s scam and the FTC took them down. Even my beloved Red Sox pushed Monavie’s scam and… it imploded before the FTC acted on it.

I give the celebrities a bit of a break. They probably don’t have the time to do all the research into these pyramid schemes. That’s why we need the FTC to actively investigate them instead of waiting 10-25 years and then acting… which unfortunately isn’t unusual.

Final thoughts about MLMs and a “few bad apples”

One may claim that the people who appear as “bad apples” just didn’t get the right training. I don’t believe that, but if I were to play Devil’s Advocate, that’s a systemic problem with MLM. MLM assumes that the person who recruited a distributor can train that person. The problem with that is that a bad apple spoils the barrel as the bad training spreads down the line. It’s like the children’s game of Telephone gone wrong – all the misinformation that can recruit people are spread like… well… to bring it into recent terms… COVID-19.

John Oliver did one of the best comedy routines about MLM, because it delivered real information. I’ve found it exhausting covering the “what about this one” of the 1000 out there. There are systemic problems in MLM scams and I covered them here.

I invite you to click on that link, but also enjoy the John Oliver video below.

Filed Under: MLM Tagged With: bad apples

FTC Declares that AdvoCare was a Pyramid Scheme

October 6, 2019 by Lazy Man 4 Comments

On Wednesday of last week, the FTC wrote “AdvoCare business model was pyramid scheme”. We kind of knew this was going on as AdvoCare said that the FTC forced them to end its MLM

Stop MLMBack in 2015, I was looking at many MLMs at the advice of readers. One of those happened to be AdvoCare. I asked if Advocare was a scam.

I concluded:

“If there’s ANY question at all that a business is a pyramid scheme, I’d stay as far away as possible. I vote with my dollars and my time to only work on businesses that are CLEARLY legitimate. If AdvoCare wants to claim legitimacy, I believe they should remove the questions of whether it is an illegal pyramid scheme. They can easily remove the multi-level compensation plan and pay everyone a straight commission for making sales.”

Of course most MLMs respond to something like that with an argument of the following, “We’ve been in business for 26 years [in the case of AdvoCare], so how can you think our business is illegal?”

That’s a fair argument, but we’re left with the hard reality that AdvoCare was running a pyramid scheme for 26 years according to law enforcement.

The obvious question becomes, “How can you know that ANY MLM company ISN’T and MLM?” After all, to my knowledge there’s never been an MLM company that the FTC declared is not a pyramid scheme.

Let’s go back to that FTC article that I mentioned at the beginning of this post. The very first paragraph from the FTC’s attorney Seena Gressin says:

“Are you thinking about joining a multi-level marketing business to earn extra money? Before investing your hard-earned cash, make sure you’re not dealing with a pyramid scheme – a scam that can cost you dearly.”

The FTC proceeds to give some tips on how to avoid pyramid schemes (mostly to avoid any company that focuses on recruiting).

I’m fine with consumer education. The problem is that you have to educated each and every consumer and make sure you don’t miss any. That’s too much to ask, especially because few consumers are reading the FTC’s website.

Here’s the part that rings hollow to me. Let’s look at it from a different perspective. AdvoCare fooled all the experts at the FTC for 26 years*. What chance does the average Joe consumer have?

If we are going to stop pyramid schemes, it isn’t going to happen by educating every consumer in the United States. It’s going to happen by shutting down the scammers… and not waiting 26 years to do it.

In the meantime, tell 5 friends that MLMs MUST be avoided… and ask them to tell 5 friends the same.

* In reality it’s a lot more complicated. The FTC has to sue MLM companies claiming they are pyramid schemes. That process can cost millions and millions of lawyer fees over several years. The FTC doesn’t have the money and manpower to shut down all the pyramid schemes. For more on this see this Bloomberg article (subscription required).

Filed Under: MLM Tagged With: AdvoCare

Did Advocare’s Lawsuit or the FTC Force it to End its Scam?

July 23, 2019 by Lazy Man 19 Comments

There’s so much politics in the news nowadays that some really important stories are falling under the radar. For example, the NXIVM alleged “sex cult” MLM involving celebrity actresses and heiresses is getting very little attention. That particular link is just the latest news that came out yesterday. Stuff like that has been streaming out for a year or two now.

For a long time, I covered MLM scams as a side project here. MLMs fit well within personal finance territory because they bill themselves as a entrepreneurial opportunity to make extra income. They even fall within the area of FIRE (Financial Independence/Retire Early) because they pitch the idea of working for yourself with just a few hours of week.

Stop MLM

Of course those claims are too good to be true and the real “opportunity” is to trap a dozen others in a money-losing pit to boost yourself out. Not only that, but MLMs are NOT businesses since they avoid many core basics of business.

After reviewing a few dozen MLMs on the site, I realized there was a pattern. Each one would say that their MLM is different or better, but except for minor inconsequential details, they were the same. In fact, there videos like this one (not made by me), that covers many of the basic ingredients:

Of course John Oliver does the job with a lot more humor making it hilarious to watch:

Because each MLM seemed so similar, I decided to posit a theory… that every MLM is a scam. I realized that this would be practically impossible to prove for two reasons:

  • We all have different opinions of what a scam is.
  • It would be exhausting to go through the 1000+ MLMs and convince 100% of the people above to hold that same opinion.

Despite this, no one has been able to meet the challenge of showing me a legitimate MLM. A few have tried with hilarious failings such as the ViSalus scam.

However, what I wanted to show with that article is how they all could be scams. My idea was based on the fact that MLMs contribute fiercely among themselves for distributors. This is done in secret much of the time, but it leaks out through lawsuits that companies poach other distributors. This is almost always done by targetting someone high up and getting their entire recruited pyramid of people – sometimes referred to as a downline in MLM.

My theory was that a legitimate company basing commissions on sales and not recruiting is at a competitive disadvantage. It’s an impossible sales pitch to tell someone with a big pyramid of recruits that they have to make money selling product by knocking on doors or setting up yard sales. Thus, I presumed the reason why no one can name a legitimate MLM company is because one doesn’t exist because it can’t exist in the competitive environment. Specifically:

If you are going to try to run a legitimate MLM organization, how can you draw people to your business and compete in an environment of illegal pyramid schemes? You can’t. If everyone is allowed to put a pile of aces up their sleeves in a poker tournament and you play an honest game, you aren’t going to be in the tournament very long.

Imagine if there were no drug testing in the NFL. It would be extraordinarily difficult for a clean linebacker to compete for a job against a group that are extensive steroids users.

FTC Forces Advocare to Leave MLM

I’ve often said that if any MLM wants to prove it is a legitimate company they can simply switch to single-level commission sales. Take the recruiting out of it. If your commissions structure is good enough, you don’t need to pay people to recruit people to it. There are lots of people who make a very good living on affiliate sales. If you’ve read personal finance blogs, you’ve seen them for hosting or financial management software*. Those programs are free to join and there’s no recruiting to them.

It’s such an easy solution to the pyramid scheme problem that MLMs face that no one has questioned it. The MLM supporters just have to change the subject, because if it doesn’t have the pyramid scheme recruiting aspect, they don’t count it. And they are right, the pyramid scheme recruiting aspect is the multi-level in MLM.

The big news is that Advocare has decided to do what seems to be exactly what I proposed… remove the pyramid scheme aspect of their compensation plan.

I applaud this decision because my analysis lead me to have the opinion that AdvoCare was a scam.

At the end of last week, Advocare released the official statement that it “gave notice to its more than 100,000 Distributors… [that] AdvoCare will revise the business model to a single-level distribution model, paying compensation based solely on sales to direct customers.”

The reason for this change isn’t that Advocare decided it was best to get away from what appeared to be a pyramid scheme. Instead it cited that it has been in “confidential talks with the Federal Trade Commission about the AdvoCare business model and how AdvoCare compensates its Distributors.” The CEO futher declared that “Based on recent discussions, it became clear that this change is the only viable option.”

While it would be great to have all the details of those discussions, it sounds to me that the FTC has finally started to regulate the MLM industry and is applying the same test I suggested.

It’s also important to note that there’s a federal lawsuit that alleges AdvoCare is a pyramid scheme. The suit uses AdvoCare’s own numbers to show that only 2000 of the 600,000 distributors make more than a minimum wage income. So you have about 0.33% (1 in 300) of doing better than any minimum wage job. So maybe it’s the lawsuit that is making things difficult for AdvoCare?

In the past when an MLM aspect has been terminated a company has become a shell of itself. The FTC specifically detailed the loss of business that Burnlounge experienced. The FTC similarly brought Vemma’s scam to an end by forcing it focus on sales and not recruiting.

Interestingly, a bunch of MLM people left one MLM to make another MLM called Yevo. Before that company got too far along with their $5 a serving oatmeal, they switched away from the MLM structure. I had received an email that the FTC was cracking on them, but I couldn’t verify its accuracy, despite it making the most logical sense to me. I don’t think the company is still in business.

Like the others, $40 juice or $5 oatmeal doesn’t seem to sell without a pyramid recruiting “business” opportunity.

What’s the Reaction of Advocare Leaving MLM

There are some websites that cover MLM in detail and give additional commentary such as this article. Many MLM distributors visit and comment freely. I don’t want to promote some of them, because I believe they profit by promoting the scams as a regular business. However, I will say that most of the discussion has some very UPSET distributors.

On one hand, it’s hard to blame them. They’ve been told that building a recruited pyramid is a good, legal business. Now they are being told that they’ll have actually sell products themselves instead of the recruiting.

On the other hand, if they had been doing selling products instead of pyramid recruiting there’s no change. There’s nothing to be upset about.

Final Thoughts on AdvoCare

It would be really interesting if AdvoCare was a publicly traded company with earnings that we could review. We might never hear how this impacted their business. My guess is that you’ll see dramatically lower cost products that can compete on their merits. Usually, MLM products are overpriced, because they’re used as an admission ticket to the pyramid recruiting building scheme.

This is an extremely big deal in the pyramid scheme/MLM world. If it can happen to Advocare, it can happen to anyone.

It’s also a reminder that it’s a bad idea to attempt to build a “business” on recruiting downlines or “teams” of recruiters. Not only are the odds of success extremely bad, but any kind of “success” means you put a bunch of others in a financial hole. And sometimes you wake up one morning and find that you never really had a business anyway.

For more analysis of MLMs I’ve covered in the past see:

  • Le-Vel Thrive
  • Youngevity
  • DoTerra
  • Kangen Water
  • Neroa (Nerium)
  • It Works
  • Pluxus
  • Beachbody Shakeology

* I have affiliate links for personal finance management software and blog hosting too, but I rarely include them in articles.

Filed Under: MLM Tagged With: AdvoCare

No, Your MLM Health Product Doesn’t “Work.”

April 14, 2019 by Lazy Man 101 Comments

This is an improved version of an article that I originally published on Feb 16, 2013 after years of researching MLM scams. The article received the attention of a group of doctors, scientists, and researchers and they asked if they could republish it on their website. One commenter said that this should be required reading and that I should bring this article back every year. Unfortunately, it’s been nearly 5 years since I pushed this to the top of the blog again.

I write today’s article in response to the thousands and thousands of comments that I’ve gotten from multi-level marketing (MLM) distributors for various products who make the claim that their products helped with such and such medical condition. Some of these include Le-Vel Thrive, DoTerra Essential Oils, It Works, Enagic Kangen Water, Youngevity, ASEA, Plexus, and Beachbody Shakeology. Those are just the companies/products that are still around.

Some of the popular MLMs that have disappeared are: MonaVie, Jusuru, Nerium, Vemma.

As you can tell, I wrote some in-depth reviews on all those companies/products. I think those are about half of the MLMs that I’ve cover in detail on this blog. Over the last 5 years I stopped covering MLMs for 4 reasons:

  1. They are all 99% the same – Health MLMs copy what makes sales from each other and below can be seen as their marketing blueprint. Once you debunked a 3 dozen of the same scams, it gets kind of boring.
  2. I had two wonderful boys who deserve my time.
  3. I got bored with winning defamation lawsuits. Four companies spent over 2 million dollars in lawyers and court fees. It creates a lot of work and time.
  4. Great organizations like Truth in Advertsing are now around to fill the need.

As Dr. Jonny Bowden has written:

“New Rules: No More Claiming Mona Vie Cures Cancer!

Nor, for that matter, AIDS. Nor lupus, GERD, acne, age spots, arthritis, a balding scalp or sagging libido.

Nope. Sorry.

And lest you think I’m picking on poor MonaVie, the same is true of Xango, Mangosteen, Xocai, Tahitian Noni, and all the other ridiculously overpriced and oversold juices promoted by scientifically illiterate multi-level marketing ‘distributors’ who repeat these claims with the sincerity and earnestness of a Kucinich volunteer.”

Dr. Bowden isn’t alone in citing that these testimonials are bunk. Neil DeGrasse Tyson, perhaps best known for the popular Cosmos show, says such testimonials are “the worst form of evidence that you could possibly bring forth.” The key quote begins around the 1:50 mark, but you should invest the 6 minutes to watch the whole video.



Having received thousands of testimonials like Dr. Bowden mentioned and documented them on this site, I think it is safe to say that the people making these claims are typically those who are scientifically illiterate. They don’t offer up the clinical trials that measure the efficacy of the products. The companies themselves never put together large-scale clinical trails to prove their products are safe and effective. They rely on the “worst form of evidence”, testimonies, because the scientific process in place would expose the products as ineffective.

Dr. Bowden wrote that article before the aforementioned Jusuru and Asea were around.

When you include the products that Bowden mentioned, we have 8 products that are all reportedly able to cure or aid with almost every condition known to mankind. I’ll add Xowii, Zrii, and Nopalea to round out to an even dozen. Though some of them have overlapping exotic ingredients like acai, there is no single ingredient common to all of them that could provide a reasonable explanation of healing benefits. Additionally other products with the same exotic ingredients such as Sambazon (which has organic acai) that are sold through traditional retailers have no reported healing benefits. These 12 products only have three things in common (that I can see): they are digested, they are all sold via MLM, they are all extremely expensive. In addition, each company (I think) has hired a doctor (or a scientific advisory board) to endorse their product, which is something you don’t find with Ocean Spray (a juice like MonaVie, Jusuru) or your standard multi-vitamin (similar to some Youngevity products).

Clearly the only logical conclusion is that selling a product via MLM bestows some magical properties allowing it to cure nearly anything or everything. Wait that isn’t logical, is it? Well I can’t think of any other reasons for the claims… or can I?

What’s Behind All These MLM Health Claims

There are a number of factors at play with these claims:

  • The Placebo Effect – This provides the most obvious answer as to why people feel these products help them. The American Cancer Society says that placebos have an effect in 1 of 3 people. Here’s a great 3-minute video illustrating The Strange Powers of the Placebo Effect. This alone explains why people report a product with no known therapeutic value “works”:



    Update: Actually I like this short video better:

    Need a little more convincing? Here’s Dove’s Real Beauty Patches campaign that has 20 million views:

    Note: It looks like Dove took down the original video at https://www.youtube.com/watch?v=EGDMXvdwN5c. Maybe the campaign ended, I found another version of the video here:

    While the product seemed to be effective to the women using it, it had no therapeutic ingredients at all. There’s not really a difference between an MLM miracle cure and this Dove patch. Both have testimonials of people swearing that it works. Neither has the large-scale clinical trials to convince the FDA that the product has a therapeutic effect.

    In Time’s review of the campaign, the author says: “I just can’t believe the thinly-veiled marketing ruse that there is a patch that can make us more beautiful. It makes women seem too gullible, too desperate, and overall helpless against the all-knowing master manipulators at Unilever.”

    Imagine what happens when the product is a juice or a pill and pitched for some internal medical condition. It’s much more believable than Dove’s patch, which gives you an understanding of the master manipulators of MLM.

    Some people try to claim that the placebo effect can’t possibly be a factor, because they didn’t believe it would help them. Research shows that even if you know you are taking a sugar pill with no active ingredients, it can make you feel better. So if you find yourself feeling better, you might just want to go to a local CVS and buy the cheapest you can find, maybe a low-dose of vitamin C.

    However, it’s worth understanding that it is well-known and well-researched that Vitamin Supplements Don’t Provide Health Benefits. Of course we knew that studies confirm that you shouldn’t waste money on vitamins for years.

    Need still more evidence of the placebo effect? It seems that 20% of people can “hear” this silent gif:

    Does anyone in visual perception know why you can hear this gif? pic.twitter.com/mcT22Lzfkp

    — Lisa DeBruine ???? (@lisadebruine) December 2, 2017

  • Spontaneous Improvement Regardless of Intervention – Sometimes things get better over time even without intervention. Many distributors are subject to drawing a causation between taking a product and the condition getting better when no such causation exists. The Latin for this fallacy is Post hoc ergo propter hoc, which means “after this, therefore because of this.” This is sometimes referred to as the “Rooster Syndrome”; “believing that the rooster’s crowing causes the sun to rise.”
  • Observer-Expectancy Effect – Since the products are usually pitched with the health claims, one taking the product may have this expectation.
  • Conscious Deception – Let’s call a spade a spade. It’s very difficult to convince people to buy $40 bottles of juice when they are used to spending $3 for juice. One of the easiest ways to close this gap is to pitch the product as an alternative to costlier medicines. I’m not saying that every MLM distributor is dishonest, but let’s agree that some are. What percentage? It’s impossible to say.
  • Price-Placebo Effect – As the Washington Post reported, people who were able to buy identical energy drinks at different prices showed very significant differences in unscrambling words. Even though the researchers made clear that the drinks were identical, those paying more had better performance. The researchers concluded, “The price-placebo effect comes from the fact that you form this global belief that low price equals low quality.” The article also showed, “A wine connoisseur who pays extra feels different from someone who pays less for the same bottle of wine, because the larger financial investment increases the motivation to be satisfied.”

    In addition, the LA Times reports ‘Expensive’ placebos work better than ‘cheap’ ones, study finds. An interesting quote:

    “Instead of testing a placebo against an actual drug, they pitted two placebos against each other. The only difference between the two sham treatments was their purported price.”

    So this study shows a direct correlation as to why even a non-salesman, product-user of MLM products could be convinced that the products “work” while even people using known “sham treatments” would report the same.

    Thus when I show that Youngevity products’ prices are 4 times Amazon’s for nearly equivalent nutrition, I get a response from distributors that they “feel” the difference. Let’s go back to the placebo video above (this one). It notes that paying more for a product makes the placebo effect stronger. That’s proof positive that there’s an additive effect to these points.

  • GroupThink – Unless you’ve taken a psychology class or two, you may never have heard this term before. Wikipedia explains it:

    “Groupthink is a psychological phenomenon that occurs within a group of people, in which the desire for harmony or conformity in the group results in an incorrect or deviant decision-making outcome. Group members try to minimize conflict and reach a consensus decision without critical evaluation of alternative ideas or viewpoints, and by isolating themselves from outside influences.

    Loyalty to the group requires individuals to avoid raising controversial issues or alternative solutions, and there is loss of individual creativity, uniqueness and independent thinking. The dysfunctional group dynamics of the ‘ingroup’ produces an ‘illusion of invulnerability’ (an inflated certainty that the right decision has been made). Thus the ‘ingroup’ significantly overrates their own abilities in decision-making, and significantly underrates the abilities of their opponents (the ‘outgroup’).”

    In addition Abraham Maslow’s Hierarchy of Needs, puts Belongingness amongst his 8 basic needs of humans.

    Both of these dynamics come into play with MLM as GroupThink inhibits the ability to analyze the opportunity. In fact, MLM proponents often suggest that people can “plug into the system” removing all individual creativity, uniqueness, and independent thinking. MonaVie has used GroupThink to send its distributors a message of “you are either with us or against us” and tell them to unfriend distributors from social networks who have moved on to other companies.

    I’m reminded of the Funny or Die demonstration of how students tricked into drinking nonalcoholic beer exhibited drunk behavior:

    Non-Alcoholic Keg Prank of 2002 (Princeton) – watch more funny videos

    Groupthink at its finest, right?

  • Social Proof From a Trusted Friend – Many of these products are introduced by a friend or family, who are often quite zealous about the product and the “business opportunity.” This enthusiasm coming from a trusted source creates an obvious motivation for wanting the product to “work.”
  • Cognitive dissonance – Cognitive dissonance can be thought of a person altering reality to fit his/her perception. Specifically, the Wikipedia article claims, “After someone has performed dissonant behavior, they may find external consonant elements. A snake oil salesman may find a justification for promoting falsehoods (e.g. large personal gain), but may otherwise need to change his views about the falsehoods themselves.”

    This is the same kind of phenomenon that is found in those predicting the world is going to end, except at least with those people there is a clear expiration on their erroneous belief… when the world doesn’t end. Unfortunately, with MLM health products, there is no clear and obvious end-result that can be pointed to.

Any of the above by themselves would explain the testimonials. However, when you combine them all together, the result of the testimonials is little surprise. We humans in general are an optimistic bunch and we all want to believe that these products are the solution to our health and financial security for not only us, but our friends (by sharing the “opportunity” with them). To use the Washington Post’s words, “our motivation to be satisfied” is significantly increased by the business opportunity and our desire to help our loved ones.

Let’s run some numbers. If the placebo effect is responsible for 1 in 3 people making a claim the MLM products work, what about all the above additional factors layered onto that? I’m going to speculate that pushes it to 60%, perhaps even higher. I admit this is speculation, but I don’t have a research lab and wouldn’t know how to really conduct an accurate experiment combining all these factors. If an MLM gets 10,000 people to try the product, that’s 6,000 people who are going to come away with a positive experience. The other 4,000 will move on with their lives and probably never mention the product again. A good percentage of the 6,000 will join the MLM to make money and spread the word that the products “work.” They explain away the 4,000 by saying something to the effect of “Everyone’s different and nothing works on everyone.” In actuality, the products haven’t been shown to work for anyone.

(And if my speculation of 60% (due to the factors above) is off, the placebo effect alone still counts for 3,333 people thinking it worked and another 6,667 that continued on with their life never thinking about the product again.)

Nonetheless that’s where you get thousands of testimonials for any number of unrelated medical conditions across any number of unrelated products that are all sold via the same MLM distribution method. Maybe it’s just me, but I find it a better explanation than, “Whenever a product is delivered via MLM the product gets bestowed with magical healing powers.”

For these reasons, it really is best to avoid the “Just Try Our ‘Product X!'” pitch when it comes to MLM products. You don’t have the time or the money to try all the health products in the world anyway.

It’s easy for distributors to ignore the fact that if any the products worked as promised, the companies would get their products approved as treatments for such medical conditions and make billions of dollars. Many MLM distributors falsely say that such claims can’t be about supplements, but when supplements work, the FDA allows claims to be made. You don’t have to look any further than calcium and vitamin D which have been shown to help with osteoporosis.

The Appeal to Good Health

Each of the companies that I mentioned makes an appeal that it will make you healthier. Since everyone has a vested interested in their own good health, it is an easy sales pitch to make. There are plenty of news reports citing promising supplement studies, which makes some of the products seem credible. The news rarely reports on the subsequent studies that show that the supplements don’t work. Something “not” working isn’t news and doesn’t bring in high ratings by giving people hope. This NY Times article covers this phenomenon well.

It turns out that there’s extensive evidence in studies involving millions of people that you shouldn’t waste your money on supplements. If you think this article is thorough, I implore you to read that one as I think it is just as thorough.

Still people seem to ignore it and go with anecdotal evidence instead. That kind of evidence can go both ways though. Here’s a Slate article from someone who grew up doing all the healthy things, but didn’t get vaccinated. The result was that she was sick all the time. The article even makes the point that it is anecdotal and decisions shouldn’t be based on it, yet that’s what people are doing with these MLM products all the time. If you took away the anecdotes from all the reasons above, you’d have a product that no one would buy at the exorbitant price points… unless as part of some kind of misleading business opportunity such as the MLM ones that the FTC describe here.

What is “working”?

You may have noticed I put “working” in quotes throughout this article. That’s because that’s the magic word distributors use when leaving comments on my site. “MonaVie works” and “Youngevity works”, etc. The interesting thing is that there is no consistent definition of what constitutes “working” with these products. I often ask them what clinical effectiveness research is behind the product, because as PubMed says:

“Clinical effectiveness research finds answers to the question ‘What works?’ in medical and health care.”

None of the products that I’ve mentioned have the clinical effectiveness research to say that it “works” for any medical condition.

But As Long As People Feel Better It’s All Good, Right?

A first glance this appears to make sense. Many supporters of MLMs have said, “Who cares as long as people feel better?”

There are at least three things wrong with this line of thinking:

  • The Economics – What about the people who are paying an expensive price who don’t experience anything special? They might be thinking that they are doing their health a great service, but aren’t. That money could be used for proven health improvements like healthier food or maybe a gym membership. What about the people who actually believe that the product represents a legitimate health breakthrough and invest a significant portion of their life savings in a “business opportunity” where it is extensively shown that 99% of people lose money.
  • Placebos are Dangerous – That article make the point pretty clear.
  • Self-Licensing Causes An Overall Decrease in Health – This Wikipedia article makes a point about study involving supplements:

    “A 2011 study published by researchers in Taiwan indicated that people who take multivitamin pills, especially those who believe that they are receiving significant health benefits from supplement use, are more prone to subsequently engage in unhealthy activities. Participants in the study were divided into two groups, both of which were given placebo pills; one group was correctly informed that the pills contained no active ingredients and the other group was told that the pills were multivitamin supplements. Survey results showed that participants who thought that they had received a multivitamin were predisposed to smoking more cigarettes and more likely to believe that they were invulnerable to harm, injury, and disease… Participants who believed they were given a multivitamin were also less likely to exercise and to choose healthier food, and had a higher desire to engage in ‘hedonic activities that involve instant gratification but pose long-term health hazards’, such as casual sex, sunbathing, wild parties, and excessive drinking… In the ‘multivitamin’ group, the more supplements a participant used, the less likely they were to exercise, and smoking was highest among participants who expressed a conscious belief that multivitamins increased health.”

In my MonaVie article, distributors had erroneously claimed that 2 ounces of MonaVie was equal to eating 13 fruits. They then said that this justified the $40 price for the bottle. As a result these people were making bad health decisions due to misinformation. That doesn’t even factor self-licensing in.

Are These Claims Even Legal?

It doesn’t seem as if they are. MLM distributors are typically not educated by the companies to follow the FTC guidelines on endorsements. That article states:

“Advertisers still must have adequate substantiation to support claims made through endorsements in the same way they’re required to if they had made the representation directly. In other words, advertisers may not convey through testimonials claims they could not otherwise prove with competent and reliable evidence. But one key revision of particular interest to electronic retailers is the new standard for endorsements that don’t represent the experience buyers can expect from using the advertised product themselves.

…

Despite the unequivocal requirement that the disclosures must be clear and conspicuous, some advertisers flouted this directive by cherry-picking their best case scenario, touting those results in banner headlines, and dropping an all-but-invisible footnote with the cryptic statement, ‘Results not typical’ or ‘Individual results may vary.’

No more. As the revised guidelines make clear, testimonials reporting specific results achieved by using the product or service generally will be interpreted to mean that the endorser’s experience is what others typically can expect to achieve. That leaves advertisers with two choices: 1) Have adequate proof to back up that claim, or 2) ‘Clearly and conspicuously disclose the generally expected performance in the depicted circumstances.'”

MLM distributors endorsing the products simply aren’t allowed to give a testimonial that they believe that the product helped with their arthritis… unless the MLM company has demonstrated significant scientific proof. As mentioned above, no MLM company has met the requirement to show the FDA that it works. I don’t know of an MLM company that has even tried.

Not only are these claims a violation of the FTC endorsement guidelines, they are a violation of The Dietary Supplement Health and Education Act of 1994 (DSHEA) where supplements can’t make claims to help with medical conditions with the notable exception of these well-studied claims such as vitamin D and calcium helping with osteoporosis.

As MonaVie CEO said to Newsweek in 2008 about keeping its million distributors (at the time) compliant with these laws, “It’s next to impossible, like herding cats.” Unfortunately, Newsweek didn’t pose the logical follow-up questions to him, “Why did you unleash the cats in the first place? Why don’t you just solve the problem by distributing through traditional means where there are no false claims?” The solution to the problem that MonaVie caused is obvious, it just doesn’t help sell $40 bottles of juice.

I’ve found that most often MLM companies will cover their ass in public with a blog post saying all the right things, but in private they coach distributors to use these illegal medical claims.

It’s not just a few bad eggs either. It’s commonplace. How common? Truth in Advertising extensively show as many as 97% of nutritional companies have these claims. Here are are some of their findings:

“TINA.org’s investigation found that out of 62 member companies selling nutritional supplements, 60 have distributors who are making (or have made) claims that their products can diagnose, treat, cure, prevent, alleviate the symptoms of, and/or reduce the risk of developing a multitude of diseases, which means they are making illegal disease-treatment claims.

TINA.org has catalogued well over a thousand such inappropriate health claims, ranging from cancer cures to disappearing gangrene.

…

TINA.org’s investigation found that out of 62 member companies selling nutritional supplements, 60 have distributors who are making (or have made) claims that their products can diagnose, treat, cure, prevent, alleviate the symptoms of, and/or reduce the risk of developing a multitude of diseases, which means they are making illegal disease-treatment claims.

TINA.org has catalogued well over a thousand such inappropriate health claims, ranging from cancer cures to disappearing gangrene.

Or as I like to put it, “How else are you going to sell $40 bottles of juice?” Perhaps that the reason why MonaVie collapsed. It was never the juice which was outed to be nothing more than “expensive flavored water” by its inventor.

What About Weight Loss Shakes?

A number of MLMs such as Herbalife, One 24, ViSalus and MonaVie sell some kind of weight-loss shake. These products “work” as expected. That is to say that their nutritional label is likely to be accurate. Beyond the label, there’s nothing that special. You can save a lot of money by going with Slim Fast or Carnation Instant Breakfast Essentials that has essentially the equivalent nutritional content at usually less than a 1/3rd the price.

Picking one weight loss shake over another isn’t going to make or break a diet. It’s everything else, eating well and exercising, that has been shown time and time again to work. People normally don’t stay on shakes their whole lives. Without a change of underlying diet and/or exercise habits the weight comes back. For this reason, I’m not a huge of fan of meal replacement shakes.

Final Thought

I’ll let you in on a little secret. When I create Lazymandium, a mix of garlic, tumeric, cacao, and chili powder, and sell it via MLM at a price of 30 pills for $50, it doesn’t “work.” I’m simply using known psychology to exploit you and make your wallet a little lighter for my own benefit.

Originally Published: Feb 16, 2013.

Filed Under: MLM Tagged With: Health, perception, scams

My Toddler Learned About MLM from this 2500 Year Old Fable

November 18, 2019 by Lazy Man 12 Comments

My oldest son (age 4) is on vacation this week which, of course, means that the world is exploding with catastrophes. Well, not the real world, and not real catastrophes, but just one annoying problem after another.

After putting out most of the fires, it was time for a little story time before nap. I found a book of fairy tales that my mother had bought him. I opened it up to a random page and came across The Fox and the Goat. It’s short enough to quote a couple of versions that I saw online here:

“By an unlucky chance a Fox fell into a deep well from which he could not get out. A Goat passed by shortly afterwards, and asked the Fox what he was doing down there.

‘Oh, have you not heard?’ said the Fox; ‘there is going to be a great drought, so I jumped down here in order to be sure to have water by me. Why don’t you come down too?’

The Goat thought well of this advice, and jumped down into the well. But the Fox immediately jumped on her back, and by putting his foot on her long horns managed to jump up to the edge of the well.

‘Good-bye, friend,’ said the Fox, ‘remember next time: Never trust the advice of a man in difficulties'”

Here’s another version I saw:

“A FOX one day fell into a deep well and could find no means of escape.

A Goat, overcome with thirst, came to the same well, and seeing the Fox, inquired if the water was good. Concealing his sad plight under a merry guise, the Fox indulged in a lavish praise of the water, saying it was excellent beyond measure, and encouraging him to descend.

The Goat, mindful only of his thirst, thoughtlessly jumped down, but just as he drank, the Fox informed him of the difficulty they were both in and suggested a scheme for their common escape.

‘If,’ said he, ‘you will place your forefeet upon the wall and bend your head, I will run up your back and escape, and will help you out afterwards.’

The Goat readily assented and the Fox leaped upon his back. Steadying himself with the Goat’s horns, he safely reached the mouth of the well and made off as fast as he could.

When the Goat upbraided him for breaking his promise, the fox turned around and cried out, ‘You foolish old fellow! If you had as many brains in your head as you have hairs in your beard, you would never have gone down before you had inspected the way up, nor have exposed yourself to dangers from which you had no means of escape.’

Look before you leap.”

And just to belabor the point, here’s a YouTube video:

Deconstructing MLM via The Fox and The Goat

Most people familiar with MLM should instantly recognize the relevancy of this fable. Nonetheless, I will explain it as clearly as I can for all potential goats.

It has been repeatedly shown that at least 99% of people in MLM lose money.

It has also been repeatedly shown that few people make any real money selling product. Usually the products are very, very expensive and don’t compete well with reasonably priced non-MLM products. Also, many of the products are generally available on Ebay for very cheap prices from former goats distributors.

Nearly everyone in MLM is “a man [person] in difficulties.” It’s mathematically shown to be true.

The way out of losing money in MLM is to be the fox. The fox needs to convince many goats that the MLM’s water (sometimes literally) is great and to come into the well. It is as if the fox needs to put together 20 goats to build a goat-ladder to get out. And since this is a fairy tale, we’ll pretend a magician turns each of those goats into foxes and puts them in their own wells. We repeat the process over and over until there are millions of foxes stuck in their wells.

In the world of MLM, there are many ways that foxes convince the goats to come into the well. They may show pictures of luxury cars, houses, or vacations. Even the FTC says this is misleading. Other times MLMs use illegal health claims like these to target goats. That’s why I’m against companies like Youngevity, DoTerra, and Le-Vel Thrive, just to name a few popular MLMs that I have written about in the past.

Moral of the Story

I am completely floored that Aesop so accurately described MLM more than 2500 years ago. As best I can tell recruiting/pyramid schemes didn’t even exist back then. I don’t know what’s beyond “floored”, but I love that he found a way to explain it so that even a 4 year old can understand it.

Moral: If you come across a fox in a well, don’t be the goat. Show the world that you are smarter than a goat or a 4-year old.

Instead of falling into the trap, give that fox a ladder by sending him/her an article like this one. To (not-so-accurately) paraphrase Smokey the Bear, “Only you can prevent foxes in wells.”

Filed Under: MLM Tagged With: scams

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