MLM, a Pyramid Scheme? To Join or Not to Join?

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Dec 25 2008
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Traffic was heavy almost everywhere today since everyone was celebrating the last festive season of the year – Christmas. So, wishing all FinanceTwitter readers a very Merry Christmas *I know it’s a little bit too late but still*. The sight of terrible jam with thousands of cars fighting to enter MidValley car-parks and the huge crowds at KLCC automatically put me off to these destinations. I thought I would give Curve a try and with IKEA or IKANO ample car-parks around I should not have problem with parking. I was terribly wrong because not only Curve’s parking was full; IKEA and even Tesco were filled up with shoppers so much so that I’ve been spending almost an hour driving around helplessly looking for that piece of parking lot. There were even disgruntled motorists who argued with the guards for putting barriers preventing cars from entering IKEA as well as Curve.

Surprisingly the entry into Curve’s parking on the other side of the building was opened and there were actually many free parking lots inside so I’m not sure why those guards were guarding the entry as it if was a military fortress. Anyway you would not believe that recession has reached the country judging from the number of shoppers packing the shopping malls. Maybe they’re just doing window shopping since its Malaysia Saving Sale period now. Furthermore this could be the last sale on the calendar before the coming Chinese New Year 2009 in January. Who said people are not spending and worry about current global recession *grin*? Well, as long as unemployment has not started I suppose it will be business as usual.

The speculation of automakers merger has not only circulating in United States but now Japan is mooting the same approach if situation worsen. Already vehicle production in Japan tumbled 20.4 percent in November compared to the same month a year ago – steepest drop in 40 years. U.S. Commerce Department reported consumer spending dropped by 0.6 percent in Nov while the Labor Department announced unemployment benefits claim rose to highest level in 26 years. It appears shoppers were switching to store brands and discounters such as Wal-Mart during current holiday season to save every single penny they could. Consumers are still worry about jobs and thus holding back their spending spree.

MLM Pyramid SystemIf you’re wondering if there would be window dressing in the stock market with couple of days left in the current calendar, don’t bother. While the stock markets looked gloomy there’re other sectors that is doing well and will flourish during recession. There’s a trend that whenever recession hit the MLM (multi-level-marketing) or popularly known as direct-sales will amazingly do well. With an estimated 700+ MLM licenses issued you can do the calculation of how many of us has been approached by this scheme in one way or another. Even one of the ruling government top officials has recently urged the jobless to enter the MLM industry although personally I think that is an irresponsible thing to do without educating the public.

Like it or not almost all MLM companies possessed pyramid system characteristic simply because you cannot deny the fact that only the pioneers will make the fortune, well, most of them. Of course there are small cases of couple of generations down the “line” who make it to the top. Hence you can’t say that you cannot make money in MLM else they won’t have these “top earners” showing off their cheques with photos published inside their magazines, would there? It was the job of the members to convince you that their system works and your path to become millionaire depends on your commitment to sign on the dots. If only this world is so perfect and simple.

MLM CartoonDuring the last economic downturn MLM was booming with products ranging from magnetic and negative ion mattress selling for thousands of ringgit to Tahitian juices. It’s amazing how these people were so innovative and creative to apply MLM system on such products and make millions of dollars from it. In such members get members system (what other ways to grow the system?) it’s simple to understand that you’ll be rewarded from the money “invested” by generations below you and the cycle continues. So as long as you’re not at the bottom of the chain you’ve the chance to recoup your investment, unless you stop developing your lines. Basically it’s like musical chair game and as long as the music continues playing with new players joining the system, it will not collapse.

It can be argue that there’re Ponzi characteristics in MLM systems as well. If you can think logically of how the members derive their extraordinary income then you should know how the game is being played. Money does not fall from the sky so someone has to pay for it. Of course there’re groups of “Old Birds” within MLM sectors who somehow command huge followers and these God-Fathers make the most money because they’re the early birds who after joined a MLM company will instruct their close buddies to build the lines (happens to be the same members from the previous MLM systems). These God-Fathers will jump from one MLM company to another and sometimes they would have arranged the “positions” beforehand so that a nice flawless pyramid structure was built before they joined a new MLM company. Instantly they make tens or even hundreds of thousands of profit and become the top earners *applause* and this serve like a magnet and attracts the newbies. When the game saturated, it’s time to migrate to another game.

MLM CartoonThat’s the fact of this MLM business. Although the system might differ from one to another the basic fundamentals are still the same. Be there as the pioneers and (hopefully) if you’ve an army of zombies you’re the millionaire. And of course the chairman of the MLM companies are Dato’ or Datuk who has the influence to ensure licenses are being issued and renewed. If you’re lucky the MLM companies might last a couple of years but if you’re not then it would be closed (or rather collapsed) before your next birthday. If you’re all fired up after the motivation training and talks and believe you’re found the Holy Grail to the lifestyle of the rich and famous, think again. You need more than hard-work to be the 5 percent who make 90 percent of the money in such pyramid system. You need all the lucky stars you can count to have your lines or generations to suddenly explode and generate the money automatically for you. But just like the economy bubble it will burst sooner or later.

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I love your site.. I will have to keep my eye on your site..
thanks drop by one of mine when you have time.

thanks Carol

Agree that MLM really sucks!!

hello carol … you’ve quite a number of blogs out there … thanx for visiting …


you’re clearly not every educated on how MLM works… new people still earn incomes even in 50 year old companies, and success is never a matter of luck.

hello dmitriy,

i didn’t say newcomers could not make money (read the article again please) but the percentage of them making it big compared to the pioneers is relatively small simply because the market has already crowded or matured …

again, it depends on the MLM company’s product the system …

sorry but i’ve been in the MLM long enough to know the tricks … and if you think luck does not play a role then you’ve not make 6-figures per-month in MLM before …

cheers …

MLM is tricky because regardless of how well you do personally, your success is not always determined by just your efficiency. Just like any other profession though, if you keep at it success will come. Over time top performers will emerge and it can be a beautiful thing. I know some who have and some who haven’t succeeded with it.

[…] MLM, a Pyramid Scheme? To Join or Not to Join? […]

Man u don’t even know what u are talking about. Next time u write a post get your facts straight.

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