by Robert L. FitzPatrick
For many years, I addressed questions about why so many people, especially younger people, fall into MLM with a simple answer: deception. MLM is a utopian, almost irresistible proposition, a fraud, deviously disguised as a legitimate business. I added that the deceptive lure is bolstered by the authorities’ failure to enforce anti-fraud laws. The truth of MLM and the painful experience of millions are overwhelmed by the Big Lie and tacit support of “authorities.” The antidote, accordingly, was truth, and calling out regulators to do their jobs.
“Authorities” have still not directly addressed MLM, but in recent years the public itself produced the needed information and made it widely available. This includes anti-MLM Redditt posts, podcasts, documentaries, news investigations, books, websites, and civil lawsuits. Victims are no longer silent. Media articles no longer misleadingly feature “winners” but true horror stories of loss and cultism.
Yet, millions are still enrolling, mostly young and mostly female. The loss rates remain, as they must, at the same devastating levels. To understand today what continues to push and draw millions into the MLM trap, the needs and vulnerable mindset of the victims themselves must be addressed. Forces larger than MLM’s Big Lie and complicit regulators have grown in recent decades and drive many into MLM’s false promises. The pressing needs of victims more than seductive promises of recruiters account for tragic sign ups. The delusions of the MLM model are now more prevalent in the larger economy, normalizing MLM’s scam proposition
Ponzinomics Replaces Economics
MLM is part of what I have termed “Ponzinomics”, a delusional economic belief system that has spread in America and abroad, making everyone more susceptible to false promises based on the pyramid scheme. Followers of Ponzinomics are persuaded to stake their last remaining resources and lifetime social connections for promises of extraordinary returns. The basis of the “returns” is continuous expansion or ever-rising values, which cannot occur. Belief, confidence, and positive thinking are said to make due diligence unnecessary, even detrimental to success.
On a 40-year foundation laid down by MLM, indoctrinating millions in the Ponzinomics model, other “leveraging” schemes have sprung up in recent decades. They include penny stocks, day trading of stocks, real estate flipping and hopping, high return ponzi “investments”, lotteries, sports betting, and most recently, Forex trading, crypto “currency” and NFTs. All are based on gaining money from the future investments of others and involve “leveraging” personal resources and precarious debt to gain elusive “returns” in markets that are said to always expand.
What has given rise to the doomed investments and irrational faith in MLM and other financial leveraging schemes are the deteriorating real-life circumstances and lost hopes of millions, especially younger people. Most still believe in the American Dream but have lost confidence in traditional long-term pathways – jobs, trades, higher education, corporate ladder, civil service, small business. The ladder up has been pulled away, they conclude. They see themselves stuck on a descending stairway. The basic wealth foundation of home ownership is no longer in their reach. They see only a leased future with rents rising faster than income. Wages enable only survival.
MLM is just one of the routes that millions take, desperately seeking alternatives to what they view are financially closed doors, dead-end work, and unpromising future. Tragically, the Ponzinomics routes only accelerate and steepen the downward path. Their promises of “equity” and “annuity” income are a cruel parody of actual wealth building.
MLM, as one form of Ponzinomics, is to income opportunity what homelessness is in the housing sector. As housing becomes scarcer and less affordable, more and more people become homeless, including 3 million people now living in vans, tents and camping trailers.
MLM victims are not those falling into homelessness. But, in expectations of higher income and hope for challenging work, they are the homeless and the van-lifers. In work status and aspirations, they have moved into the basements of relatives and suffered “foreclosure.”
Seen from the wider economy or even from those struggling to get by themselves but see through MLM’s fraudulence, MLM believers are living under bridges. Jumping from MLM to MLM, they are vocationally traveling around in old vans. Hitting up friends, families and colleagues, their recruiting propositions are treated like panhandling.
The MLM “industry” is part of a “leverage” paradigm and belief system that now deludes legions of people facing declining opportunity. Whether as MLM or some other pyramid or ponzi scheme, the pot of gold said to be available to all who “invest” is always just the participants’ own funds transferred from many to a few.
The growth of MLM, the Ponzinomics pioneer, tracks in perfect inverse to declining economic fates of large population sectors. It first took root in smaller towns and among blue collar workers just when trades, small business and small towns were destroyed by big box retail and franchising, and as communities were ravaged by the loss of manufacturing jobs shipped overseas. MLM expanded rapidly as corporate “downsizing”, automation and the transfer of white-collar work to other countries accelerated.
Today, as economic conditions worsen – wages fall far behind rising costs, decent jobs get replaced by part-time and “contract” work, and education, housing and health costs rise to new heights – MLMs are joined by other Ponzinomics schemes to find new victims among professionals, immigrants, seniors, and students. The conditions driving millions to MLM and other such scams have outpaced the increased warnings, facts, and testimony of anti-MLM volunteers.
Women Bear the Brunt
The brunt of these economic downturns and closed doors is felt most directly by younger women who enter a demanding, but low paying and unstable workplace while still bearing the burden of child rearing and home-making. The pressing financial needs of women are specifically targeted by MLM with cruel promises of sustainable income “from home,” and “SheEO” and “Bossbabe” empowerment.
The macro-economic conditions that are drawing and pushing so many into the MLM morass may be beyond the ability of others to change. However, the Ponzinomics belief system that sustains MLM and other ponzi and pyramid scams can be exposed and combated. Truth-telling and testimony reveal, even to those losing hope, that MLM and similar schemes are not an “opportunity,” and there is no “equity”. Leveraging of scarce reserves and social connections and taking on more debt for a promise of “unlimited” income to be gained from future investors is not a pathway to the American Dream.
Recognizing that fundamental needs, economic despair and fear for the future are driving people into MLM and related scams should also evoke empathy, not scorn. As in walking past those living in tents, we should remember we are not immune to the conditions that put them on the street.