AYESHA RASCOE, HOST:
This kind of pitch is hard for many to resist.
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UNIDENTIFIED NARRATOR: Imagine turning life's moments of I can't into I can. What will your I can story be?
RASCOE: Improve your life and your bank account by becoming a salesperson or distributor for Mary Kay cosmetics or any number of other multi-level marketers.
BRIDGET READ: Amway is the biggest one. Amway sells everything - energy drinks, makeup, cleaning products, household products. Herbalife sells nutrition supplements and shakes. Cutco sells knives. LuLaRoe sold and sells leggings. Young Living and doTERRA sell essential oils.
RASCOE: But what kind of opportunity is this, really? Journalist Bridget Read goes deep into the answer in her new book, "Little Bosses Everywhere" with the history and tactics of MLMs.
READ: Multi-level marketing supposedly works like this. You can buy products at a discount and sell them at a higher price to make a profit. But what you can also do is recruit people under you on your team, which is called your down line. You're the up line, and you can also make money on what they're buying and selling and build a team of hundreds, even thousands of people under you, so that you're making a lot of money rather than just on what you alone can buy or sell.
RASCOE: How does it compare to a pyramid scheme?
READ: A pyramid scheme - instead of really making money on buying or selling any products, you're just making money on people investing into the scheme, robbing Peter to pay Paul. Once the expansion stops, the people that got in early - they've made a lot of money on the people below them. The people that got in late tend to lose. The difference between multi-level marketing and pyramid schemes - that's much harder to parse. My book really argues that there's a lot of evidence that there isn't a difference.
RASCOE: How is this legal? - because it seems like what you're describing is a bit predatory.
READ: How is this legal is, like, the million-dollar MLM question. And the rules that were established in 1979 - those rules are really the only small regulatory oversight over the MLM industry. They involve having a minimum amount of retail customers. You're supposed to prove that you've sold the products that you buy before you can re-up and buy again. But MLMs use hundreds of thousands of independent contractors every day selling these products. The oversight is, I think, nearly impossible. And so what ends up happening is it's really easy to flout the rules.
RASCOE: Well, why is it so hard to regulate?
READ: En masse, MLM participants tend to not be powerful people themselves. You know, many of them are women. Many of them are housewives. It's a kind of demographic that I think it's, unfortunately, easy to ignore. And so the combination of that has meant that the regulation is really much more of a gray area. So it's not that even MLMs are, quote, like, "legal" in a way where there's been a law passed or something that legalizes them. It's more like the loophole, the gray area, the Wild West that they exist in, has never had to be kind of reined in.
RASCOE: Well, I mean, this book also follows kind of the ebbs and flows of MLMs, and their life cycles do seem to follow kind of political and economic cycles. Tell us about some of those trends. And I mean, Mary Kay's been around for a long time, but then you'll see, like, an Herbalife or a LuLaRoe or something like that, and things just start popping up.
READ: Since the beginning, MLMs have offered themselves as a low-cost, low-entry path to entrepreneurship, which, of course, is a pitch that flourishes in an economic downturn. So the moment MLMs were invented was the post-war moment in the United States where, you know, we had won the war, but we had yet to kind of enter the Eisenhower, golden era of prosperity. So there was a lot of economic anxiety, so that's a moment they were born out of, and that trend has just continued.
So MLMs really exploded in the 1970s because of the stagflation that was impacting the economy and because of, you know, really high unemployment, dot-com boom and then bust. A lot of MLMs changed their pitch to call themselves sort of digital, at-home businesses when the internet was first becoming, you know, widely used, right? They do the same thing again in the great recession when they're offering, you know, a lot of white-collar professionals who lost their jobs.
Rather than door-to-door selling, this is a home-based, network marketing business, so making it sound much more managerial, and then they did it again in the pandemic. Same thing - you know, encouraging people to use their stimulus checks, especially women who were, you know, sent home at a higher rate than men - they were doing child care - to invest those checks in their, you know, quote, "small businesses."
So that's a common trend. And unfortunately, it means that even as MLMs kind of are declining in terms of popularity and membership - a long, slow decline over the last 20 to 30 years - every so often, they get a little boom in new membership because people who've never heard of them, or maybe even people who've tried them before and think they'll work this time, are feeling desperate.
RASCOE: MLMs - like Amway, like Mary Kay, like LuLaRoe - they will point to people in their organizations who do make some money. Is the argument that this just doesn't work for most people? - 'cause some people may get in there, and they may make some money.
READ: A tiny fraction of people are successful in that they're actually making a living wage, not even a lot of money, in one of these companies. And what the rhetoric of the companies themselves is that they're just better at it than you or me if we tried and failed. There's a real, very strong culture of personal responsibility and work ethic and that if you didn't do well, you just didn't hustle hard enough.
RASCOE: So after all this research and reporting, what's your biggest advice for anyone who's getting approached by a friend or a friend of a friend, you know, or someone at church or, you know, someone who you like or someone who seems nice enough, and they're pitching this opportunity to make money selling products in this way?
READ: I mean, the No. 1 thing is really to not join. A lot of people sign up under their friends and family because they feel kind of guilty or feel bad. But what you're actually doing is kind of giving somebody a burst of early sales and recruiting that is very hard to replicate. You know, resist as much as you can because you're only prolonging the loss that they're very likely going to experience if they keep up with trying to make it.
RASCOE: That's Bridget Read. Her book "Little Bosses Everywhere" is out now. Thank you so much for joining us.
READ: Thank you so much for having me.
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