DVD's Analysis of Multi-Level Marketing (Part 3)

Part 1 here
Part 2 here

III. Morality and Ethics: A Problem of Greed

Moral Riddle: What is Ever Present but Universally Condemned?

While issues of morality and ethics can be tricky to discuss, materialism and greed are universally condemned by every major religion, and even by most of the irreligious. This does not mean people are not materialistic or greedy; in fact, the common ethical call to not be so is strong evidence that we are.

For most people, this means if we are going to be materialistic or greedy, we would rather not be obvious about it. Thus, Madison Avenue has subtle, highly polished ways of appealing to these vices without being heavy handed. We don't mind so much... as long as it is "veiled." This hypocrisy, while sad, is the status quo. So, Madison Avenue is trying to be ever more subtle in appearing not to be manipulating our immoral "bent" towards greed and materialism.

A Blatant Appeal to Materialism and Greed

Not so with the MLM crowd. Pick up any brochure or videotape for an MLM and you are more than likely to see a cheesy, obvious, and blatant appeal to greed and materialism. This is offensive to everyone, even die-hard materialists. Typical is an appeal to "the American dream." Usually there will be a mood shot of a large new home, a luxury car, a boat, perhaps a beautiful couple boarding a Lear jet, and so on.

While this need not necessarily be part of the MLM approach, it usually is.

Such a transparent appeal should make people suspicious. "Why the bait?" "Are they trying to 'get my juices going' so that my brain turns off?" "Couldn't they show people doing more wholesome things with the money they make?" "If this is really a legitimate opportunity, why not focus on the market, product, or service instead of people reveling in lavish materialism?"

But we have reason enough to know, having read this far, why the distraction is needed. Unbridled greed suspends good judgment. When the eyes gloss over in a materialistic glaze, common sense is a stranger.

Besides being cheesy and offensive to our sensibilities, this is not a big deal for participants, right? But consider that all companies must have control over the way they are presented to the public. Thus, an MLM has the right and obligation to dictate what material is used. Otherwise any agent could say whatever he or she liked about the nature of the company, causing obvious problems. Again, it would take too much time to audit and approve each individual's idea for a presentation where the goal is mass marketing. Using "boilerplate" presentations affords the added benefit of consistency. This is basic "information quality control."

The net effect is that the MLM rep is "stuck" with the company-approved video, brochure, and presentation outline.

"Not Me, I Would Never Stoop That Low!"

In 1991, some distributors in the MLM FUND AMERICA began to produce their own, improved recruitment material. They were summarily fired, which did not please them since many of them were founding members who had "gotten in early."

Later the same year, by the way, the founder of FUND AMERICA was arrested for having generated some 90% of revenues selling "distributorships" versus product... making it clear that this particular MLM was little more than a pyramid scheme.

Job Opening: Salesperson of Sin!

Do you want to be involved in the blatant promotion of values contrary to your belief system?

In most MLMs you will have no choice. You are going to have to sit through meeting after meeting after meeting after meeting. You are going to be "motivated" to coerce your friends and family to hear "the pitch." This is the way the "dream" is planted and fertilized. Get used to it.

If you are a materialist, you only have to get over the cheekiness of the presentation. But if you do not wish to promote such ideas, if you consider them sinful, then this puts you at the focal point of a moral dilemma. Do you wish to be a salesperson for materialism?

Lack of Information Quality Control: An MLM Incentive?

On the flip-side of the issue of being stuck with the recruitment "pitch" is the fact that the MLM organization is otherwise loose, to say the least. This is part of the appeal to many, to "be your own boss."

But in practice this leads to loony product claims, many of which are deceptive and some of which can be positively dangerous.

Hyperbole is a given in an MLM. When inexperienced salespeople are turned loose to sell on full commission without supervision or accountability, what else could happen?

Since MLM organizations are notoriously flash-in-the-pan, one has to wonder why any new company would choose this flawed marketing technique. Perhaps one of the things to consider is that the MLM organization can effectively skirt the Federal Trade Commission by using word-of-mouth testimonials, supposed "studies" done by scientists, fabricated endorsements, rumors and other misrepresentations that would never be allowed to see the light of day in the real world of product promotion, shady as it is.

Thus, MLM has evolved into a "niche": it can be used to sell products that could not be sold any other way. An MLM is a way to get undue credibility by exploiting people's personal friendships and relationships via "networking." This is an intrinsic moral difficulty with MLMs that will be expanded in the last section.

MLM Sales Technique: Rumors, Slander, Defamation

Hyperbole is not limited merely to product claims, however. When MLMers turn to their competitors it can get ugly indeed. Some of the most outlandish rumors of modern history can be traced to MLMs. In recent years, for example, the international rumor that the president of a major real-world corporation was a Satanist, and that the logo of his company contained occult symbols, turned out to have a commercial motive and was traced to specific Amway distributors. These were successfully sued in 1991, but the rumor persists. And how much else of the MLM negative "sales pitch" is fabrication or outright lie? Not all the negative selling claims are as scandalous or widespread as the previous example, but the MLM culture produces so much of this stuff it would be hard to prosecute it all.

Again, what else could be expected from inexperienced salespeople thrown into an oversaturated sales market on full commission and no accountability?

Negative selling is not unique to MLMs, but MLMs have a legacy of fostering a culture of credulity, of bizarre "gossip-as-fact." After all, this is a friend telling me this!

Telling lies about people or groups is slander. Systemic and malicious slander is illegal in most civilized countries. Slander is a sin listed next to murder and adultery in Biblical texts. But how will you know when you become the slanderer by repeating what you heard in an MLM meeting?

Great Men?

Another morally questionable practice that is not intrinsic to MLMs, but seems axiomatic, is the pent-up idolatry of the leaders.

In FUND AMERICA, the "approved materials" showed what a great man the founder was, depicted the depth of his management experience, showed him in mood shots, etc. It is easy to swoon in admiration of such a powerful, visionary man, dedicated to bringing this wonderful opportunity to common Americans like us.

It turned out he was a criminal fugitive from Australia, where he had been run out of town for doing the same.

But you would never guess it from the company material. A great man.

There are more than a few MLM "executives" like this who will pop up tomorrow in the MLM du jour. MLM exploitation can be very profitable and the jail sentences light. Let the MLM "dream" buyer beware.

I have been taken to task for making this point too strongly--and do not wish to imply that all MLM leaders have criminal records--but it does pay to do some research here. Are the idols you are being asked to worship in MLM worthy of respect, or contempt? Have they been prosecuted or sued for exploiting people in the past? Have they done prison time?

Do not expect to hear the full truth in the MLM video.

Pride and the Secret Closet: Vanity and the Way MLMs Grow

"Mr. Prospect, now you aren't required to buy more than three product units, but why bother joining unless you plan to succeed? Besides, all of our products are 100% money back guaranteed."

"Hmmm... To ask for a refund, then, is to admit defeat. Others appear to be doing O.K. at this. I'm no failure! Perhaps I should go to another motivational seminar or strong-arm and alienate one more friend to join. I wasn't fooled! I'm no failure!"

So, the "inventory" and "recruitment kits," never viable, collect dust. They become a pile in the back closet or attic, a trophy to pride being unable to admit that greed seized the moment.

Back to the Pyramids: Innovative Marketing or Organized Crime?

It is generally agreed that to mislead people in order to get their money is morally reprehensible. It is labeled "theft" or "fraud," and those who do it should be punished. No one is naive enough to suggest that you can't make money at it. Crime can pay, at least temporarily.

Pyramid schemes are illegal. They are illegal because they are exploitative and dishonest. They exploit the most vulnerable of people: the desperate, the out-of-work, the ignorant. Those who start and practice such fraud, should, and increasingly are, being punished for their crimes.

But add a product for cover, and call it an MLM, and people are willing to swallow its legality. Is this true? Really? Who says so?

The Feds versus the MLM Gang: The Other Side of the Story

It is a fact that a few large MLMs have survived against the best efforts of law enforcement officials to shut them down, spending millions of dollars to protect, lobby, and insulate themselves. But the same could be said for any organized crime. It is difficult to stop once it becomes so large.

And MLMs look so legitimate to the public, so decent. So many nice people are involved. Surely, it can't be illegal! The people lower down may even defend the very organization that is robbing them, hoping that they might get their chance to make "the big money" later.

But if it looks like a duck, walks like a duck, and quacks like a duck, it probably is a duck. Unless it is an MLM, and then it is NOT a pyramid.

The Feds generally see it differently... when the ML (multi-level) aspect begins to eclipse the M (marketing) of products or services.

People can make money in an MLM, undeniably. The moral issue is: Where is the money coming from? Selling product? Then why not sell the same product in the "real world"?

But everyone knows that the real incentive is the pyramid aspect, and the product just the excuse to make it legal, or at least the MLM promoter would like you to believe it is legal.

The Mob and the MLM: A Stretched Analogy?

Talk to a mobster, and he will tell you that he is "merely misunderstood in his benevolent intentions." "We are just trying to 'build our business.'" "It's all a conspiracy to make us look bad." "The Feds are out to get us because they are jealous or afraid of our new way of life." "Why, look at all the good we do!" "We are looking more legitimate every day." "Here's a statement from a famous DA that the Mob is really a good organization and no harm ever comes from it." "We've even got a minister to endorse us now!"

Propaganda and MLM Expansion

The MLMers of the new millennium are starting to sound a lot like the gangsters of yesteryear. In an era where management science and the law generally condemn MLM, they've "got their own experts," from academia or law, who are "on the payroll." Confidence, remember, is key.

Regardless of all the vehement denials, MLMs are all to some extent pyramid schemes, and pyramid schemes are illegal. Sure, some are "getting away with it," but so did the Mafia for decades. It is hard to stop a juggernaut, especially one that has taken such pains to look legitimate and misunderstood, that is highly organized, and that has so much money from its victims to propagandize, lobby, and defend itself. And so the exploitation goes on.

If these guys show up in your neighborhood, you are either "in" or "out," family or target, friend or foe. Suspicion rules the day; everyone has an "angle"; greed supplants innocence. The "neighborhood" is turned into a marketplace, and may never recover from the blow.

The ethical questions remain: Are MLMs a morally acceptable way to make money? Are they--and will they continue to be--legitimate?

MLM Proselytizing: Beneath Begging?

If money is needed that badly, why not simply ask friends and family for help rather than taking money from them under false pretenses--and also selling them a bill of goods? By "sponsoring" them, you have not only conned them and profited at their expense, you have made them feel like losers, since they are not able to make a success of the hopeless MLM concept.

Once seen, only the morally blind, or consciously criminal, could continue in such a "business."

But wait, perhaps you could recruit... your mother!

Moral Inventory

By way of review, the prospective MLM initiate has to face and resolve these ethical issues:

1. Do I want to be involved in encouraging people to be more materialistic?

2. Do I want to sell a product that perhaps couldn't be sold any other way?

3. Do I want to be a part of an enterprise famous for slander, libel, and rumor?

4. Do I want to be a part of a company that may employ criminals as marketing experts?

5. Do I want to make money off my ability to convince people that an unworkable marketing system is viable?

6. Do I want to be known among my friends and family as a person who tried to con people with a thinly veiled pyramid scheme?

If you can answer these questions "yes," training is available... But remember that God is watching, even if you never get "successful" enough for the Feds to notice you.

Part 4 here