But wants to know more, this video is going to be for you, hello, everyone and welcome back to the channel. If this is your first time here, my name is Blair or the Illuminati, and today I’m super excited to talk about the subject that made me make this video.
We’re talking about the complete history of MLM or multi-level marketing. I’ve, never been a fan of these types of companies and I often feel bad for the people who get suckered into these schemes. But today I wanted to take a deep dive into where these kinds of companies came from and take a look at the history and development of what eventually became the steady stream of new MLM schemes.
Before we dig into the history of MLM s and how such a thing could really even exist, I wanted to make a simple and easy explanation in some comments under my own MLM videos every once in a while. I receive a comment asking me: what exactly an MLM is, and I usually define it as a marketing or business strategy that sits in the gray area, between a traditional direct marketing sales model and a pyramid scheme.
If you ask Wikipedia it says, an MLM is called pyramid, selling, network marketing and referral marketing. And if you ask Urban Dictionary, it says it’s, a scheme in which a person as a seller buys a certain amount of product from a distributor and then sells for a profit.
The seller must then kick back some of his profit to his distributor. So let ‘ S continue identifying what an MLM is. If you’ve had a friend message you on Facebook Instagram or send you a message texting you asking.
If you want to host a party or buy items from companies such as sensi, lularoe, Herbalife or a bunch of other companies like these, you’ve, already been subjected to initial contact with an MLM. I think most of us know them now, as the ever endearing term of a hun bot or sellers that try to get you to buy products or try to recruit you into peddling the same crap.
They sell. We like to call them hun BOTS, because usually they’ll, start out their message by saying, hey or hi hon, or something like that, but it’s always the same. If not an extremely similar message, therefore calling them a hon, but but these companies didn’t all pop up overnight.
They all started from somewhere, but where did they come from? Well, it turns out it’s, pretty hard to determine the exact point where MLMs broke off into more sinister sales and manipulation tactics, but to understand where this really came from.
We need to take a look at a very important business model. The pyramid scam model. This model is the crucial backbone in creating and defining some of the greatest financial scams and it’s in the details of this model that allows these MLMs to ride the line between scam and legitimate business front.
A pyramid scheme takes the obvious design of a pyramid or a triangle here’s, the basic idea of how its formed you have one person, let’s say a man named Benson Benson begins to sell dietary supplements and he recruits two People let’s, call them Loren and Karen to sell these supplements for him and they get a cut of the sale.
Then each of these people recruit two more people and so on and so forth. How do you recruit these people? Well? Try to focus on college kids or insecure middle-aged moms, young adults. Don’t have a lot of money, but there’s more than enough enthusiasm to drive and succeed, and with the middle-aged, moms or adults there’s insecurities and a need to feel financially independent.
Tell them there’s $ 150 sign up to get the selling kit, and then they can recruit their friends, family acquaintances and even college roommates to either purchase those supplements or sell using you as a referral.
If this sounds pretty similar to you, this example wasn’t accidental. This is a real case study about a company called Vemma. They were formed in 2004 by a man named Benson, Borya Co. He created this company that sold dietary supplements.
His two right-hand ladies Lauren and Karin rounded out the top of their pyramid Vemma, had an 11-year run before being shut down in 2015 by the FTC. The company is waiting for the outcome of yesterday’s.
Hearing with the FTC Cronkite news, reporter Devin Conley was in court as a company tried to prove it’s, not running a pyramid scheme. They were investigated for operating an illegal pyramid scheme and was placed under an injunction in December of 2016 Vemma agreed to pay a 138 million dollar settlement which also banned the company CEO and its top distributors from recruitment, focused business ventures, deceptive income claims and unsubstantiated health Claims a subsection of pyramid schemes is a very particular scheme, known as a Ponzi scheme.
It would be almost irresponsible to talk about the history of MLM s without mentioning a Ponzi scheme. But what is a Ponzi scheme exactly well? It’s defined by the SEC or the Securities Exchange Commission, as the following.
A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organisers often solicit new investors by promising to invest funds and opportunities claimed to generate high returns with little or no risk.
In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier stage investors to create the false appearance that investors are profiting from a legitimate business.
In simple terms, you promise someone to invest into something with the guarantee that you’re, going to make more money than you put in. You could tell someone that if they invest $ 100, they’ll get 120 dollars back.
This scheme is named after the man who started this. All Charles Ponzi Ponzi created a new form of investment fraud, promising higher return rates on money in a short period of time. He had proposed initial investors, a 50 % return on their investments in 90 days and initially he did do it, but those investors reinvested that money thus growing the overall pot.
So how did he get that 50 percent increase from new investors? These schemes collapse when they don’t have new investors to funnel money into the overall pot. By the time Charles Ponzi scheme collapsed, it cost all his investors over 20 million dollars in the 1920s.
In today’s, cash that’s over 225 million dollars, but becoming a seller for Herbalife doesn’t, make you a sucker in a Ponzi scheme. So why even mention it? Because these are the initial roots where the rest of these scams come from.
Every single MLM borrows elements from the original Ponzi scheme and takes from the basic structure of a pyramid scheme. Now that we have taken a brief look at the foundation of what makes an MLM let’s, try to look at the direct line of MLM s, one of the earliest MLM or what we consider currently to be an MLM started.
All the way back in 1934 is a company called nutrilite for some time perspective about how far back we are going here’s. What also happened in 1934, the average cost of a house was five thousand nine hundred seventy dollars.
Average monthly income was a hundred and thirty three dollars and a gallon of gas was ten cents. Also in 1934, Adolf Hitler declared himself as the new Fuhrer of Germany, Bonnie and Clyde are killed in a police shootout and the famous surgeons photograph of the Loch Ness monster was taken.
All of this happened the same year. The first MLM was born. Neutrally was a company based around directly selling vitamins by 1945. The company realized it could sell more product by turning their own customers into distributors.
It was easy to promote and sell the products to other people, and the company claimed their supplements were effective in treating a wide variety of ailments from depression, heart attacks and even cancer.
Obviously the FDA soon found out and investigated the company and it could not substantiate these almost magical claims. In 1945, Earl Tupper created a line of plastic, flexible, storing containers, its Tupperware guys, but he realized his products would sell better.
If there was a demonstration, he linked up with brownie wise, a Stanley home products show ad and they created the Tupperware party plan, which demonstrated the true effectiveness behind in-home product demonstration and sales.
Mary Kay was founded in 1963 and by 1996, the company made over two billion dollars in sales in 1972 to high school friends, rich DeVoe and ray Van Andel leave the company Nutrilite after working as distributors there and found the company and way, which is now one Of the most notorious MLMs and from this point, other entrepreneurs were starting to get the idea of what an MLM is and more and more began to pop up like weeds in the grass.
Until we get to the problem, we’re having today, oh and interestingly enough. This brief timeline of MLMs doesn’t include any of the major lawsuits filed throughout the years want to know why. The main reason is that the list is too long.
There have been so many lawsuits and judgments handed down throughout the years that I could make a separate video on that alone and its really initially boring most of these MLM sprout and grow and very similar, if not identical, fashions and litigation is boring.
There is no real fun or excitement in an MLM scheme, since they are all the same over time, but here’s. What I’ll, give you a list of instead. As I said, there are an insane amount of similarities between the companies and the way they tend to operate, because of that their lawsuits look fairly similar as well.
Here are some of the common components of MLM lawsuits. This list is by no means binding or definitive. As I’m sure, these companies will try to get more creative as time goes by, but let’s. Take a look at a few legal claims against MLMs have included the following similarity to illegal pyramid schemes, price-fixing of products or services, collusion and racketeering; emphasis on recruitment over initial sales, false product claims, cult-like techniques, which some groups use to enhance their members, enthusiasm and devotion To the brand, oh – and you might be wondering hey now, that’s, two companies, you’ve mentioned that are both considered MLMs and they both revolve around vitamins and health supplements.
Isn’t that a strange coincidence. No, it’s actually not, but I’m glad. You brought that up. Why do MLM take advantage of the vitamins and supplements market? Let’s. Take a look at what the supplement market is like and how it’s actually regulated in 1994.
The dietary supplement health and education act defined dietary supplements as a category of food which puts them in a different regulation than drugs. The FDA considers drugs to be dangerous until proven safe via multiple test studies spanning years supplements under their current classifications are considered safe until proven dangerous.
What does this mean for an MLM company like it works? It means until someone is seriously injured or dies from using their product and that product is perfectly fine to market and sell as a supplement.
It’s, a horrendous way for these MLM companies to suck money from their sellers through their up lines, get uninformed, ignorant or easily manipulated buyers to use products that may be harmful to them, and the company can do this virtually forever or at least Until someone dies, when you buy an MLM product that is dietary or supplemental in nature, you are accepting the risk that it may kill you, and your name will simply become the title of a new law that will be put in place to regulate this in the Future that’s, pretty terrifying, and if that doesn’t cause concern.
You just hear me out on this. According to the FDA, there are only two ways to get rid of a potentially dangerous supplement. The first is to prove that the product is adulterated or proving that the product is unsafe, and the second way is if you can prove that the product is misbranded, that the labeling is false or misleading.
This does not implicitly state that the seller, misrepresenting. The item is enough to cause concern when your local, crazy, doTERRA lady is claiming her oils can cure autism that’s, not a problem according to the FDA, but if the bottle printed by doTERRA itself were to say, this special blend will cure your Anti VAX, kids measles, then, yes, you would have a case to bring to the FDA, and these companies are very well aware of this and carefully word their products.
To avoid that, additionally, every consultant is listed as an independent consultant and that’s, how they like to brand themselves under the guise of being a hashtag boss, babe or a small business owner.
They believe that since they file a 1099 form at the end of the year and have business write offs, that there are small business, this independent contractor situation is mainly established to protect the company.
If your local hon bot is spewing misrepresentations about a product and gets in trouble from it, the legal ramifications will fall on the seller, not the larger company that’s, one of the biggest reasons they will always be listed as independent contractors.
But besides the very manipulative and shady dealings of companies working in the supplement market as an MLM, what about these other companies like lularoe and Cutco? There is one uniting factor like a string that is laced in every single product.
Any MLM sells, and that is this. There is a better, more accessible version sold by a reputable store made by a reputable company. Every single product there is no product in MLM sells that has been revolutionary or truly life-changing in the marketplace.
Leggings have existed long before this company came around Cutco knives. Do I really need to elaborate on that one? So what is the big draw? Why do MLMs keep popping up with such ferocious and gullible fan bases if their products are subpar at best and are already on the market, because the real backbone of any good MLM is people? And when I say that I don’t mean it in a cute unifying girl-power way.
It’s, a manipulative enterprise that preys on insecurities of others to achieve profit. The product they sell, doesn’t need to be revolutionary or new, because an item being sold is the only thing these companies can hide behind to say that they do not fit into the traditional mold of a pyramid scheme.
A lot of MLMs have been noted as being cult-like. Many Han bots, who begin selling and get sucked down the rabbit hole, will lose support from friends and family and may even permanently end. Those relationships, MLMs, have broken up marriages over debt and excessive spending and dumping money into buying more product than that person can ever sell.
These sellers become more isolated from their original friend groups and tend to focus on the company and being more and more entranced and indoctrinated by the possibility of being successful in making it in the company when, in reality, that company is draining every last drop of that Person’s, financial well-being, personality and vitality.
There is one more type of group that operates in this methodology. Cults coats usually tend to follow a social indoctrination process known as the bite model. The bite model is a psychological model to gain control of an individual and place them in a mindless, cooperating herd of yes, men or boss babes.
The bite model consists of four different but equally effective components to create a conducive and successful transformation of a free-thinking, independent person into a lifeless follower when we think about cults.
We think of things like Heaven’s, Gate or Jonestown, but an MLM is a more corporate version of the same thing. Instead of a new religious belief, it’s, oils or leggings or diet pills, but regardless, if it’s, a cult or an MLM, the following components are used very effectively to create these shoddy MLM empires.
The first is behavior control. This deals with controlling finances and associations, as you become loyal to your specific MLM, you may find yourself thinking about the product using the product and constantly needing to tell people you sell the product, and you would want to spend more money to showcase the newest collection Or variation of your product, you would find that people who oppose you are just negative people or people who don ‘
T understand your desire to succeed in selling and spreading the good word about the features of this product and how it will make someone else’s, life, better information control generally deals with how information is passed, using the information as a power source to solidify control.
You would be discouraged to listen to people who tell you it’s, a scam, because your upline showed you a chart or a graph about how it doesn’t, even look like a pyramid or that you’re selling. A product, not people there’s, no way it’s, a scam.
This would be where a seller may attend special conferences or receive exclusive newsletters or go to special parties. Only for other boss fades selling this product groupthink is extremely toxic, and in these situations, it can really fester and spread and create solidarity amongst new sellers to further encourage their involvement with the MLM thought-control is when you begin to change your own mental identity or the Way, you think about yourself and align the nature of your existence with the product you represent.
This would be the stage where those friends or family members who opposed your business opportunity, are just easier to block and get rid of them versus constantly hearing their negativity. You may begin to align yourself with being an oily mom or get those details on your car and become a walking billboard for this MLM us vs.
them. The mentality has become popular around this point, and this is generally where many friendships are permanently lost. Additionally, you would be so invested in the success of your product that you would outright reject facts that could harm your beliefs or show you that you could possibly be wrong for supporting this company and working for them.
Finally, we have emotional control. Emotional control is what is most commonly seen as a typical cult activity, but there is such a massive build-up to this point. As I have been showing you as a seller enters this stage, you may begin to feel lonely or upset that you may have lost friends or family, and you may consult with your upline or other sellers for advice, as you have no one else to turn to.
Since you’ve pushed them away these yes thinkers for the brands, you all sell, will continually encourage you to focus on the product and selling and block out those negative emotions. This is also where social pressures about remaining unified.
With your group becomes extremely important, you’ve, built this reputation of being a boss babe. So if you leave and quit selling, then you’re, no longer cool, independent, a small business owner, or anything you become normal again, and why would you want to be normal when you have these new friends with their oils or leggings or whatever the Product might be if someone goes through this cycle of manipulation and abuse, and then leaves the company and stop selling.
It can be a big to assimilate into your old lifestyle. These sellers have most likely alienated their close friends and family. The support system they have built over years was destroyed in months because of knives body wraps or nail polish.
And what do you really have to show for it when you support an MLM, you support a larger company, manipulating and exploiting its sellers and buyers, and in return, you as the consumer get to overpay for a subpar product, possibly with dangerous and life-altering effects.
Sellers are emotionally and financially manipulated until they are no longer a viable resource to the company and then a fresh batch of a boss, babes are ready to replace them and the vicious cycle continues and continues and continues until someone is going to be severely hurt or killed By one of these products, or if they are sued for being a pyramid scheme, but the problem is I don’t believe MLM will go away at least not anytime soon.
There are too many loopholes in our current laws and regulations that will allow these types of businesses to operate, manipulating the American free spirit and the way of thinking to make vulnerable, stay-at-home moms broke, college, kids, and others feel like they can be successful when in reality, Most, if not almost all, will fail and lose money in the process is horrible and sad.
I wish there was a way to stop these companies at a more formal level, but for now, I believe the best way to combat them is with information knowing and understanding these companies, and learning to avoid them is the best way to stop them.
They need new sellers to continue profiting, so stopping their flow of new sellers is one of the only ways to slow these monsters. Scam companies down, if you have friends or family, who have expressed interest in one of these MLMs, try to give them the facts.
Show them videos give them the knowledge to make an informed decision on what they are really stepping into and as a consumer do just a tiny bit of research with the products you’re looking to buy our / anti-MLM has a fantastic master Post on the front of their page called, is it an MLM or something like that with a huge list of companies that have been identified as MLMs, and I encourage you not to buy those products or support those sellers? There are reputable companies that hold their products to higher standards in this selling the same crappy products do not support a company that preys off their vulnerable audience and sellers.
Well, thank you for making it all the way. Through the end of this video, I hope you enjoyed it. I had a lot of fun researching for this video. I understand this is not a conclusive video by any means, but, as you all know, by now, I’m, not a fan of MLMs, and I wanted to make more scripted research, video expressing my views on that.
I have included a Pastebin in the description box that cites all the sources I used for this video. If you want to dig into some of the material I was reading to make this video there’s, a lot of information out there, so I wanted to make a small video to piece some of it together.
If you enjoyed today’s, video make sure to give this video a thumbs up, and if you’re new to the channel don’t forget to subscribe before you leave, I really enjoy making these longer more research type.
Videos, it does take me quite a bit of time to do the work to create them, but I like the final product I’ve created, and I hope you do too again a big thanks for watching and I’ll see you In the next video bye,