Lazy Man and Money

MLM Scams and “a Few Bad Apples”

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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:

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.