Many of us are looking for another source of income. You might try to look for a side gig to start a new full-time business. One way that many people use to make money is multilevel marketing (MLM).
However, an MLM might not be your best option when it comes to a source of income. In fact, many of the MLM companies out there are more like pyramid schemes than anything else.
Consumer advocate and MLM expert Brian MacFarland from Lazy Man And Money joins us to talk about MLM companies and the reality of trying to use them to make money. We are also joined partway through the show by Lauren Greutman, who shares her story of going deep into debt as a Mary Kay consultant and a driver of a pink Cadillac.
ANNOUNCER: Welcome to the Money Mastermind Show. Let’s Talk Money.
[0:00:18] GC: Have you ever been approached to take part in a Multi-Level Marketing business, there’s just way too many M’s and L’s there for me to get my head around that. Anyway, they tend to be presented in such a way that you’re going to get riches and you’re going to do quite well but is that really the case? Tonight we have Brian of Lazymanandmoney.com and he’s here to help us understand MLM’s. Welcome to our show Brian.
[0:00:51] B: Thanks for having me.
[0:00:54] GC: The members of the Money Mastermind Show are Miranda Marquit of Planting Money Seeds, Peter Andersen of Bible Money Matters, Kyle Prevost of Youngandthrifty.ca and Tom Drake of the Canadian Finance Blog and I am Glenn Craig of Free from broke, your moderator tonight. If you are watching live and you have any questions, head over to our event page, there is an app there where you can ask questions of us and we’d be happy to answer them for you.
Let’s start. MLM’s, Multi-level marketing businesses. Brian, can you help our audience out and understand what those really are, to think we sort of maybe, every one of us has probably heard of one or two of them but maybe they didn’t understand what they were?
[0:01:44] B: They’ve actually change over time. Many people are familiar with Tupperware or Avon or Mary Kay. Those names have been around for a number of years, Amway is another common MLM. They typically involve recruiting independent sales people into a business where they sell products and you make money by selling product and also from something called your down line which is the people you’ve recruited into the system and their selling of products.
That’s kind of like a short explanation. It gets to be very complicated very quickly. That’s sort of a brief introduction. I think most people kind of understand the idea of Tupperware party or a Mary Kay party where someone will host something and invite some friends and family together
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and show them some makeup or Tupperware products and say, “Here’s what these products can do for you and improve your life and you want to buy them?”
[0:02:57] GC: Yeah, there’s other ones like candles and maybe scrap booking and there’s probably a ton of them out there right?
[0:03:04] B: Yeah, pretty much for almost anything you can think of except for things like electronics or appliances and things that people would only make big purchases once, you won’t find a car MLM because people aren’t going to make a car buying decision on a party.
[0:03:24] GC: Not in your living room. That would be interesting if it did happen that way. It sounds like, I think we’ve all like you said heard of Avon and Tupperware, it sounds pretty benign but that’s always the case is it?
[0:03:37] B: No, and it’s actually become — it’s changed over time. There is a ruling in the 1970’s, 1979 when the FTC took Amway to court saying that it was a pyramid scheme. Essentially stating that the idea was that Amway was recruiting more people into it, into a business opportunity to sell Amway products in which they themselves had to purchase the products to be in the business opportunity and there was really no selling going on to other people. It was just join the opportunity and buy the products and just keep on recruiting other people to join the opportunity and buy the products.
The person at the bottom ended up having no one left to recruit because the whole system was saturated and when they didn’t make money, they quit and then the people on the next level up were not making money from the people below them quit and it becomes a very unstable situation where the people at the bottom of this pyramid or multi-level marketing system, hierarchy or whatever you want to call it, the people at the bottom, when they don’t’ make money, they end up quitting typically because there’s nothing in it for them. If the money is dependent on recruiting then most of the people will leave every year and the people at the top have to keep on recruiting more people in and creating a massive churn rate.
[0:05:14] GC: In some cases it sounds like the real way to get in to it is you have to buy in to it. You’re stuck with a product one way or another?
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[0:05:23] B: Yes. I first learned about this when someone approached my wife to buy a $45 bottle of juice called MonaVie and we’re all personal finance bloggers here. Who’s going to spend $45 for a bottle for 25 ounces of juice? That’s just insane.
[0:05:45] GC: Unless it’s magic juice.
[0:05:48] MM: I’m sure it’s magic juice, it’s got to be magic juice. [0:05:50] KP: Juice filled with steroids or something, yeah. [0:05:56] MM: It better give me a magical life for $45 a bottle.
[0:06:03] B: That started to become the problem because people realize they couldn’t sell that $45 bottle of juice as a bottle of juice unless it did have the magical power of curing cancer and autism and Alzheimer’s and any other disease that you can think of.
[0:06:19] MM: See you called it Glen, it is magic juice.
[0:06:23] GC: I’m intrigued, where could I get this stuff?
[0:06:27] KP: From a snake, cause it’s called snake venom.
[0:06:31] GC: I take it that it doesn’t quite live up to that sort of reputation then?
[0:06:37] B: It does not. In fact, the inventor was brought into court and he said that it was nothing but flavored water and that anything else that people are saying was just not accurate. He had a more colorful word for it but I’m going to go with the PG version of it.
[0:06:59] GC: Is that something that themselves promoted or just something that became a sort of myth from outside or why would that build up that reputation?
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[0:07:14] B: It’s kind of a combination of both. The company did say that it was equal to eating 13 fruits and what they did is they took a scientific way of figuring out what a quantity of a fruit, vitamins are in a fruit and then kind of trying to extrapolate that. It was a very misleading situation. It’s almost like a game of telephone in high school where someone will say something and then it gets distorted as it goes down the line of distributors.
It just gets more and more distorted and when someone says, “Oh well the president drinks this,” that’s what it ends up with. Originally it was the president of like some small club of four people but in the end it’s the president of the United States.
[0:08:11] GC: I was going to say, it seems like there are all these claims that maybe the company didn’t do a lot to fight those claims then or to say that that wasn’t the case I guess?
[0:08:25] B: Yeah, they kind of draw a legal line between what they are as a company and then say, we have these independent distributors that have their own companies that are independent entities. Almost sometimes like how Uber says that Uber makes the app but everybody else driving cars are independent drivers that do their own thing.
They can kind of separate and legally play this game of we can incentivize the people to make money from them but we in some ways have some legal protection and don’t have to pay these independent distributors benefits or minimum wage or anything like that. It’s really a great business model for the companies themselves.
[0:09:16] MM: I was just going to say, “We’re not saying that it’s curing cancer, that’s just a claim the distributor is making.”
[0:09:24] GC: It seems like there’s a strong incentive for somebody who has, maybe they have a case of this stuff sitting in their basement to do whatever they can to kind of push it off to other people.
[0:09:34] PA: I was gonna say there’s a built in incentive for these companies and the executives and people that are high up in this companies to not squash those things because they’re the ones that are really making all the money, isn’t that part of the problem that these
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people at the bottom, they’re all buying cases of this stuff so they can resell it to their friends and other people and then they’re getting stuck with it when people don’t want to buy $45 bottle of juice.
[0:10:00] B: That’s a lot of it but one thing that happened with MonaVie is that they also had this thing that in order to make money in the commission structure, you had to buy around $200 worth of juice a month. You had to buy four bottles of juice yourself and you can drink about one bottle a week. In theory, you didn’t have to sell any juice at all, you just had to buy your own juice and drink it yourself and keep on recruiting other people. You’d making money from the people down below that had been recruited...
[0:10:36] MM: To buy their own juice.
[0:10:38] B: ...to buy their own juice that they needed to qualify to make commissions or to
make commissions on those lower sales. [0:10:47] MM: That’s magical right there.
[0:10:49] B: you didn’t just sell any product at all. You could just buy it, drink it yourself and then tell other people there’s this great business opportunity where you buy this juice and drink it yourself.
[0:11:01] PA: What point does this all become illegal and it became a pyramid scheme versus an actual legal MLM that is not going to get pursued by the government?
[0:11:15] MM: That’s an interesting line because my mom did Avon when I was growing up. She sold to other people and she liked doing it because she got the discount on the Avon products. So she got to buy it at a discount but she also sold to other people and like Avon is perfectly legit, right?
[0:11:32] B: Right?
[0:11:34] GC: Don’t crush her childhood Brian.
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[0:11:37] MM: Don’t crush my childhood memories.
[0:11:42] B: That’s actually a really interesting point because back in the 70’s as I said or even 80’s and 90’s. That was sort of a common thing that happened and multi-level marketing and for the most part, that’s okay. Then companies realize that they could do the kind of things that MonaVie was doing and not get persecuted for it by the FTC. It’s a lot easier to recruit people into a business opportunity than it is to sell these products.
[0:12:11] MM: Actually sell something?
[0:12:12] B: Yeah, that they actually sell things. You can sell it on the side if you wanted to, no one’s going to stop you if you had this bottle of juice and someone says, “Yeah, I want to pay for your $45 for it.” Yeah. You could do both and even Avon has gone more towards the recruiting system over time. They started to go down that line and recently a couple of years ago, they said, “We’re disassociating ourselves with the main trade group that covers most multi-level marketing companies because we think they look like pyramid schemes.” And Tupperware said the same thing. Tupperware joined in and said, “We want no part of this new age of what’s going on in MLM.”
[0:12:58] MM: Yeah, I just remember like my mom was like, she didn’t do a whole lot to market the stuff, it was pretty much just around the neighborhood, she’s just like, “Hey ladies around the neighborhood, come get some stuff from Avon,” but she always knew that if she really put the time in and really did her own marketing and really kind of did a little bit more then yeah, she could actually sell more stuff.
So I think too, it depends on, I like what you were talking about, what’s the main goal here? I mean is there a product that people can actually afford to buy that they can buy or do you always had to be recruiting somebody?
[0:13:38] KP: I feel like social media sort of jump started or I don’t know, exponentially grown this whole thing. I don’t know. My Facebook feed is filled up with so much all natural crap. There’s nothing natural left in the world because it’s being sold to me on Facebook and they
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want me to help them sell it and it’s doing great and here’s the before and after picture. I have good friends that are trapped in this crap.
[0:14:03] MM: I lived in Utah for nine years. Utah is literally the MLM capital of the world. [0:14:15] KP: Oh eally?
[0:14:16] MM: Right Brian?
[0:14:17] B: Yes, at least 80% of them are in Utah.
[0:14:24] PA: Is that just favorable court law treatment Brian or why is that? [0:14:29] MM: Why don’t I tell you about it later, not on this show? [0:14:33] KP: Okay.
[0:14:34] MM: Where I can really get myself in trouble.
[0:14:37] B: I’d like to hear more about this myself. Law treatment.
[0:14:42] GC: This is the episode where we learn why Miranda needs to keep a sword on her
[0:14:49] MM: That’s right! “They’re coming for me. They’re coming for me.”
[0:14:52] KP: Does anyone else notice this though, the insanely — start your own business like a lot of people who are the partner and relationship that stays at home maybe isn’t the bread winner? I’ve seen just an explosion of these things.
[0:15:05] PA: Facebook parties, they’re everywhere. Come to my Facebook party.
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[0:15:10] GC: It seems like it’s just made it easier to try to recruit people, you don’t have to go door to door and try to find a personal network anymore.
[0:15:19] KP: What a great deal for these MLM. You want social proof, you’ve got all these people coming, you’re a trusted source and you’re saying, “Here’s my product,” like it doesn’t get any better than that from a business marketing perspective.
[0:15:34] GC: Yeah. Just to be clear, what we’re talking about here as far as the pyramid scheme aspect of it is not so much, I think you said it’s not so much selling the product but that when you could recruit more people, you’re getting a piece of kind of their action right? You’re getting a commission from them and then when they recruit people, you’re still getting sort of a piece of it. If you build up enough people under you, you really almost don’t even have to do anything anymore, is that pretty correct?
[0:16:01] B: Yeah. There’s a little bit more to it too, we talked about Avon a little bit but someone else have been done of Mary Kay which is pretty much a similar thing, it’s just a different makeup company from a guy’s point of view, I’m sure they’re probably very different but.
[0:16:20] GC: Is that the one that’s pink?
[0:16:22] B: Yes, the pink Cadillac’s and things like that. It turns out, some 250,000 people, women churn out of there every year which means 250,000 quit and 250,000 new ones come in. They don’t ever grow, it’s just the bottom of the pyramid shifts when the people lose money and the people at the top are promoting, “Here’s this great business opportunity, I made so much last year. You can do this too.
People on the bottom are leaving, the new people coming in, they don’t see that, they don’t have the education or the resource to see that that’s what’s really going on, that this churn is going on at Mary Kay and hoppers magazine did a great expose on them a couple of years back.
[0:17:14] MM: Yeah, I read that.
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MMS 72 Transcript [0:17:17] B: Wow, I thought I was the only one.
[0:17:19] MM: No, I did. Because I know people who do Mary Kay.
[0:17:27] B: What they found out, or what the journalist realized is that the company makes money from distributors more than they do, distributors make money from their business. Mary Kay, at least according to this journalist, Mary Kay focused on selling products to distributors, telling them that they had to have every product in the line and then they could discontinue some products and create new products that distributors had to buy more of to have the current line available and then it was just like a situation where distributors are the ones that are losing money to Mary Kay itself and not making the money themselves.
[0:18:16] GC: They’re just sort of pawns to the bigger scheme.
[0:18:21] PA: I was reading actually somewhere online today that one of these large MLM companies, they acknowledge that only about I think it was like 15 to 20% of their sales were made to non-distributors. Just think about that number. 85% of their sales are to their distributors. It’s huge.
[0:18:41] B: That’s really interesting because if it’s not 70%, the FTC says that is a pyramid scheme. That’s one of the guidelines that they have to at least be, they have to have 70% to non-distributors or else it really falls into the guideline of being a pyramid scheme. They’re almost they’re pyramid scheme.
[0:19:03] PA: That may be one of the ones that went out of business. I don’t know. [0:19:08] MM: Maybe it was MonaVie.
[0:19:11] GC: Just to clarify. What’s the difference between it being an MLM or a Pyramid scheme or whatever and just being a wholesaler?
[0:19:21] B: That’s kind of the difficult thing. It’s a kind of a sliding scale where there’s no bright line definition. The FTC has said that if you make more of your money from your down line, from
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the recruitment than you do versus sales then it’s a pyramid scheme. You should make more money selling the product to people outside the company than you do from your down line.
Based on that definition, every multi-level marketing company I’ve ever seen is really running a pyramid scheme because you can look at the people at the top and there’s a person at the top who is making two or million dollars a year and they’re not selling an equivalent amount of product to people outside the scheme. They’re just getting all the point value from the people, from the whole organization that they have built and getting paid off of that.
[0:20:22] GC: As we were talking about it, I was also thinking, how is that different from maybe a franchise but based on what you’re saying is, a franchise would be, you buy into something but you’re really just selling the product and even if you’re building more franchises, you’re still selling the product to a consumer, your job is not to get other people to buy franchises.
[0:20:39] B: Yeah, there’s no recruiting in franchises. A lot of people say, “Oh yeah, multi-level marketing is just like a franchise.” Well, there’s no recruiting component and it’s 100% sales.
[0:20:51] GC: When you all walk into a McDonalds, nobody’s trying to tell you to buy McDonalds, you’re just getting their burger.
[0:20:56] B: Yes, exactly.
[0:20:58] KP: That would be awesome actually. Would you like fries with your new building? [0:21:03] GC: Yeah, instead of it being the dollar deal it’s like the $250 million deal.
[0:21:09] B: That brings up another point that if they were to do that, how many McDonalds are you going to have at one city before it’s saturated? That’s the good thing with franchises, they limit the competition to match the supply and demand. Multilevel marketing, there’s now match between supply and demand, they will create as many sellers as anyone wants to sign up even if there’s no demand for the product. You could have 12 million people selling MonaVie juice and no one interested in buying it.
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[0:21:46] PA: We can have one heck of a lot of people selling plants and workout plans and Facebook feed.
[0:21:52] MM: That’s the thing though, I’ve even bought some of the stuff to help friends of mine, I buy Scentsy from people that sell Scentsy. I went ahead and bought the 21 day fix. I did that. Brian is just like, I’m so ashamed. I’m ashamed for you.
[0:22:15] B: No, that was just an itch.
[0:22:19] MM: I’ve done some of that stuff that my friends are selling because it’s there and you’re just like, help them out, we’re in this personal finance where we’re like yeah, help him out it’s like an affiliate sale, right?
[0:22:39] B: I was going to say, is an affiliate sale? That’s a legitimate question, is it like an affiliate sale? That’s one of the things I say about multilevel marketing is that it’s not a single level affiliate sale which is clearly not a pyramid scheme, it’s multilevel part of it that becomes the pyramid. People say, “Well multilevel marketing is just a way to make money using word of mouth. I say, why not just go with an affiliate commission program because that clearly works and it’s clearly legal and no one’s going to confuse it with the pyramid scheme. So you can do something that’s clearly legitimate but yet you’re going to choose to kind of go swimming in murky legal waters.
[0:23:25]GC: What’s the angle right? Is the angle to say that again, a product to a consumer’s hands or is the end goal to get more people to sign up more people underneath you?
[0:23:37] B: Yeah.
[0:23:39] GC: We have a question from a long time listener it seems. Mr. Tom Drake. Tom could make our show tonight, he was a little under the weather but he’s asking, what are some other MLM’s that might be somewhat suspicious besides MonaVie that people might want to be cautious of?
[0:24:05] B: Frankly, pretty much all of them.
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[0:24:09] GC: Even like the Avon’s and Tupperware’s and such?
[0:24:15] B: Okay, the ones that are — there are some that are called party plans and that’s sort of the view of the Tupperware that we’re just having, we’re inviting friends and family to buy some kind of microwave dish or something like that. That’s more or less legitimate. If it’s going to be a party planned multilevel marketing but those are starting to become fewer and farther in between and I don’t typically look into those that much, not because I’m trying to avoid them or anything. What really catches my attention is when someone says, “Take this pill or this juice because it’s going to cure your cancer.” That to me is really the dangerous ones and I write about those quite a bit. I started to get into some of the wrinkle cream ones.
[0:25:07] MM: Yes, you did one in Rodan and Fields.
[0:25:12] B: Yes. Another personal finance blogger, Jenny Penny Pincher had written an article about Rodan and Fields and one of my readers was another personal finance blogger sent me an email and said, “Hey, isn’t Rodan and Fields a multilevel marketing company? Have you heard about them?” And so I went through the claims that was on that personal finance blog because I don’t see personal finance bloggers usually promoting multilevel marketing.
I did some more research on it, I spent like a week coming up with stuff on Rodan and Fields. There was a prominent blog out there that’s now been deleted and a prominent Reddit threat that’s now been the person that had written most of the stuff, it was is it? Like IMI Reddit or ask me anything?
[0:26:12] MM: Oh AMA, yeah.
[0:26:14] B: Yeah, AMA. The person that was doing the AMA deleted all her stuff. That’s one of the things that happens when you start to become a blogger against this multilevel marketing companies is you get legal threats and things of that nature that force you to delete things when you may not want to because their lawyers have a lot of money.
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[0:26:39] MM: Well and that happened to you though too right? You’ve got lawsuits up the wazoo.
[0:26:46] B: Well, I’ve been threatened about eight times and I had one follow through with it and I’ve got another one which is not related to multilevel marketing oddly. Yeah, I guess in eight threats, one legitimate one or one following through with the lawsuit isn’t so bad.
[0:27:06] GC: But a lawsuit in itself, that’s pretty scary and you have to have some either really good legal friends or some real cash in order to really fight that off wouldn’t you?
[0:27:19] B: I got lucky. I found a lawyer who was willing to take it on a basis it’s called an anti- slap, which basically says that this is a nuisance lawsuit that this company is trying to silence your freedom of speech and he took it on that basis. The idea is that if you can prove that then he gets his court fees which is pretty good for a lawyer to get all those fees but he’s taking a risk that if he can’t prove it, he gets nothing and he just waste lots of his time.
[0:27:54] GC: That’s their intimidation factor right there too. That most people don’t have that access to a lawyer that can do that. Rather than try to go in to court and fight that, they just roll over and delete whatever they’ve been requested to delete.
[0:28:09] MM: I think it says something though that you’ve found a lawyer who thinks that your position is one of integrity and that you’re out there fighting the good fight and he’s willing to put it on the line, it’s nice.
[0:28:25] B: Yes, it was very nice.
[0:28:29] GC: So I guess that goes back to the original question, there really aren’t in your
opinion many MLM’s that are worthwhile for people to go into?
[0:28:38] B: Yeah, it kind of goes back to what I was saying earlier that if there was a good MLM, I think it wouldn’t be an MLM. It wouldn’t try to play in the world of pyramid schemes, they would play in the world of just single level commissions and it would be like an Amazon affiliate program or Commission Junction affiliate program which I’m sure, us as bloggers are familiar
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with them. I don’t know if your viewers are but there’s a way of just doing commission sales that’s legitimate that doesn’t play in the world of pyramid schemes.
[0:29:13] GC: That’s still something closer to being a wholesaler than it is to being an MLM type of deal. Because the goal is you’re still in touch with the consumer about the product, it’s not so much about you including somebody else to sell it.
[0:29:33] B: Yes, that’s what I’m saying is that that’s a good relationship, that such companies, if you’re going to try to sell a product, that should be the relationship that you go with and not the multi-level marketing company where, I mean if you even think about it, you’re incentivizing people who are seven steps ahead, who have never met the person who is making the sale at the bottom. And the person with seven steps all the way up the line is getting such a huge amount of the money. It’s just crazy that that person way up there is getting all the money when they’re not even really involved in making the sale in any way, any tangible way.
[0:30:16] GC: Yeah, that’s pretty interesting. We also have a comment here, Lauren Greutman of Iamthatlady.com is telling us that she used to drive a pink Cadillac with Mary Kay, which is interesting but she’s also saying that she thinks that all MLM’s are terrible. Their first customer’s the consult, which means the consultant always loses. I wish we could just grab her and put her on the show right now and discuss that with her.
It’s interesting, there was a time when, I don’t know if this counts as MLM but I was considering to going to stock brokering right? It was one person who brought me in and it was, I had to work for him and if I got him enough leads then the company would take me on, the brokerage would take me on and then if I did enough sales then I’d be able to build up my team and then if they got enough leads, they could build up a team. It almost sounds like the same type of a pyramid deal but this was like a stock brokerage.
[0:31:24] MM: That’s amazing.
[0:31:26] KP: Was there like free cocaine involved in this too? [0:31:29] MM: Were they like in a boiler room?
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[0:31:33] GC: I didn’t get that far. It didn’t smell right to me off that first day so I just kind of ran away from it at that point. That made me think, we can’t even trust the stocks that are being sold to us because all these strange incentivized reasons that a broker might try to call you and try to sell it to you.
[0:31:57] KP: Absolutely.
[0:31:59] GC: It’s one thing to buy some Tupperware but it’s pretty scary when we have our market maybe even running on some small portion of this. Are there ways that people legitimately can do well without being slimy, it doesn’t seem like that’s the case is it?
[0:32:21] B: I don’t’ see how, simply because the most multilevel marketing things that exist today to make the big money does come from recruiting. One can still do the Avon thing like Miranda’s mother did and that sort of party business, that’s going to be reliant on how many family and friends you have and being able to make repeat sales to those people and maybe I’m just showing my lack of a social circle here but I’m not sure if I’m going to make a full income making $5 here and there on a cream or a Tupperware dish or makeup to friends and family like that.
[0:33:10] GC: So why do people do it? I think everybody here maybe know somebody or know somebody that knows someone that has done this in some way, shape or form. Somebody’s doing decent enough on it?
[0:33:23] B: Well there’s always the people at the top that are doing decent enough on it. They’re live examples of, “Hey, I made a million dollars last year with this,” and they show the big flashy checks and all that sort of things, pink Cadillac’s and such.
[0:33:41] MM: Lauren’s on. [0:33:44] L Hello.
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[0:33:44] GC: That’s the magic of internet, we do have Lauren here to give an opinion on her experiences.
[0:33:51] MM: On the pink Cadillac.
[0:33:52] LG: Yeah, so sorry I don’t have headphones, you guys just caught me while I’m like sitting in my living room. I have to tell Mark to turn off — yeah Mark, you have to turn off the computer now. Mark is like watching a show next to me.
[0:34:06] MM: Why isn’t he watching our show?
[0:34:07] LG: No he’s not, he’s watching some like, I don’t even know, some tech show or something, I don’t know. Yeah, so I drove a pink Cadillac with Mary Kay, that’s like not a lot of people know that about me.
[0:34:20] GC: What does that mean to drive the pink Cadillac exactly? That sounds like a kind of strange euphemism.
[0:34:27] LG: Yeah, it’s a real pink car that you drive but this is the catch. So Mary Kay is very elite. If you become a pink Cadillac driver, you’re in the top 2% of the company so they say. It’s really important, everybody wants to be a pink Cadillac driver and I actually won my Cadillac in 10 months from when I started to when I got the car.
[0:34:58] GC: That’s yours to keep or you just drive it around?
[0:35:00] LG: No, this is the thing that people don’t tell you. You think it’s all cool, like, “Oh you won a car,” but it’s actually a company lease and if you don’t make a certain amount of production, you have to pay a ridiculous amount of money to keep that status. For the car, for me, if I didn’t make $100,000 in sales, me and my team within a six month period, I had to start paying $900 a month to drive the car.
[0:35:33] MM: Oh wow.
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MMS 72 Transcript [0:35:34] LG: That’s like.
[0:35:36] GC: Basically you have to pay for the lease? [0:35:39] B: The lease is in your name right?
[0:35:41] LG: The lease is in your name, right. If you default on it, you’re defaulting and you’re hurting your credit report.
[0:35:48] GC: You’re going through all this to get a lease for a pink Cadillac. [0:35:52] LG: Right.
[0:35:54] GC: Where you could have just picked any car you wanted and leased it. [0:35:58] MM: That’s the thing though.
[0:35:59] KP: Or just paint your own car pink. To hell with it.
[0:36:02] LG: I know right? It’s a pink Cadillac. Sorry, I’m trying to find headphones, we found
some, okay, good.
[0:36:08] GC: You don’t really win that then? It’s just some sort of like, if you can maintain a certain level of sales, they’ll kind of cover it for you for a while?
[0:36:17] LG: Exactly. You don’t really win anything anyway because if you win a prize, they send you a 1099, you have to claim it on your taxes.
[0:36:28] PA: It sounds like they’re basically selling you on this big dream of this lifestyle and you’re going to be wealthy and driving a Cadillac when reality, it’s not so simple.
[0:36:40] LG: Exactly, is that better now? Can you hear me better?
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MMS 72 Transcript
[0:36:42] KP: It’s perfect though, it really is the perfect sort of elite symbolism to drive. I’m assuming, I’m going out on a limb here and seeing it’s a lot of highly self-motivated, A type young women who are selling Mary Kay and it’s like the perfect carrot to dangle, everyone recognize you as being the best.
[0:36:59] LG: Yeah. They’re very careful. All MLM’s kind of train their people on how to prey on certain personality types. You know that one person is really motivated by prizes, then you dangle that carrot in front of her face and then you know that one person’s really motivated by security for their family so then you dangle the security. You’re trained very early on in all of this MLM’s to read people, make them take personality tests and then use that against them to get them to buy more products.
[0:37:37] GC: To be fair, is this something that comes straight from the company or is this something from the person who is maybe the seller above you?
[0:37:48] LG: I can only speak for Mary Kay because that’s the one that I was in. A lot of the training for that thing came from the company. That was coming straight from — I went to Texas when I became a director in Mary Kay because you have to be a director. I recruited like over 300 women in a 10 month period, you have to be a director so they send you out to Texas and you go through everything, there’s a million pink Cadillac’s in Dallas Texas.
They teach you everything and that was one of the things that they teach you. Learn your people, learn how to read people and then help them in a way that they need to be helped. Not necessarily saying dangle the carrot in front of their face but help them in the way that they want to be helped and essentially meaning...
[0:38:55] MM: How do you feel about yourself now Lauren?
[0:38:59] LG: I feel great that I quit and I stood up for myself. This was, goodness almost nine years ago. I was young, I was 24 when I joined and I got the pink Cadillac when I was 25. I was also one of the youngest people to win it in the company but I actually, I have a whole chapter in my book that’s coming out next year about the night that I won my pink Cadillac and all that it
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took to win it and how stressful it was and how crazy it was and I have since gone back and apologized to everybody that I recruited and they’re all friends now.
[0:39:41] MM: It sounds like this 12 step program.
[0:39:43] LG: It is.
[0:39:45] PA: Part of what makes a lot of these schemes really that’s so awful is because you’re basically taking advantage of a lot of personal relationships that you have with other people and you’re trying to basically monetize people in some ways.
[0:40:02] LG: Yeah but at the same time, you don’t realize that you’re being monetized.
[0:40:07] GC: When this is done, be it MonaVie, Avon or whatever, I’m willing to bet that the people who were being maybe recruited, and Lauren you can certain speak to this, is it done with the expectation that yes, you’re going to be a person who is going to need to recruit this many people? Or do you go into a thinking, maybe I’m just going to sell some products to my friends but then you start doing that and all of a sudden you’re down the rabbit hole and all these different expectations come onto you?
[0:40:38] LG: Well Mary Kay, when you sign up with them, the first thing that they hit you with is that you should buy inventory. The inventory packages start at $600 and they go all the way up to $4,800 and there’s a lot of training that goes into getting people to buy those higher level packages. For me, this is one of my benefits and my downfalls is I’m an all or nothing person. So I’m like, “Hey, sign me up for the $3,600 package. I’ll sell it, no big deal.” So all of a sudden I start at $3,600 in debt and now I have to sell it and I have to recruit to pay that money back.
That’s kind of what’s my experience and watching a lot of other people kind of go through the same thing was, I watched so many people do the same exact thing that they have all these products in their house and now they have to sell it and now they have to recruit people because they can’t pay the bill to the credit card company and then you get just wrapped up in the whole mentality of it.
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MMS 72 Transcript
[0:41:36] GC: It almost sounds like you maybe get desperate and get stuck there and now you’re in this vicious cycle.
[0:41:43] KP: Brian, do a lot of people come to you as like an authority or someone who is maybe visible on the Internet about this stuff? Do you hear a lot of similar stories to that one?
[0:41:53] B: They do and I hear so many stories like that. I call it the multilevel marketing quicksand where you’re falling down and the only way to get out is to grab on to 10 other people and bring them in with you. And then those 10 other people have to grab on to 10 other people and bring them down which is kind of what Lauren was just describing there where you need to recruit that $3,600 that you spent, so you need to recruit other people and then they do the same thing and then it’s just this cycle that keeps on spawning out through everything and the money just goes in to the people at the top that get the majority of all the recruiting. And Mary Kay, a multilevel marketing company itself from all those sales, people saying, “I’ll put in $3,600 to try to make this business work.”
[0:42:48] MM: What are some of the reasons Brian that you see people getting into it? Why do people, what are some of those reasons that people really start getting into it.
[0:43:00] B: I’d say desperation. They lose their job sometimes so they’re looking for any kind of income opportunity which only exasperates the problem worse or the situation worse sometimes. Sometimes they just don’t have the education, it sounds like it’s a good idea, they’re maybe not the brightest bulb on the Christmas tree.
[0:43:34] GC: Present company excluded. [0:43:35] MM: Other than Lauren of course.
[0:43:40] B: Sometimes they’re young. A lot of the times they don’t have experience. Yeah, don’t have life experience. Nine years ago, the Internet didn’t quite have all the information. You couldn’t find some of the things that you can find now on multilevel marketing, if you were doing a Google search for example or some other stuff.
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MMS 72 Transcript
There’s a lot of reasons why people do it and sometimes they’re kind of being lied to that they’re told that a lot of you is the next cancer cure and they think, “I want to get in on this next cancer cure. I want a MonaVie juice because if I get invited to sell the cure for cancer, that’s a goldmine, I want to get in on that.”
[0:44:27] MM: The other thing I wanted to ask either one of you or whatever about, are these conferences. A lot of these things have conferences right? You’re supposed to go in solidarity and rah, rah, rah, right? How does that kind of feed in to this desire to keep going and I guess, I assume that they’re not paying for you to go to the conference, I assume you have to pay your own way?
[0:44:48] LG: Yeah, it’s very expensive. These women are spending $2,000 to go to Texas to get ball gowns and wear pink boas and for the chance to run across the stage, to say that they’ve won a car. Everybody wants their recruits to go to conference because then they come home and they’re motivated. It’s the same as us going to a blogging event, we come home, we have a list to do right? We’re excited, we’ve gotten new ideas. It’s a really similar thing to any kind of conference except it’s just you go homer and you do your MLM instead of something else.
[0:45:34] B: I’d say there’s a lot more pep rally to it. There seems to be a lot more motivational aspect to it of, “You can do it, you could be great.” Not that there isn’t that some of the blogging conferences but it seems to be a little bit more of a single company is sponsoring this and they’re really, they’re pushing their distributors because they are selling their product.
If I go to FinCon, Phill Taylor runs FinCon, he’s not going to, he has no incentive to really push me to be motivated to do all the sales stuff. It’s a little bit different in that aspect and I don’t wear a ball gown to FinCon, I wear a money pants.
[0:46:15] GC: I could vouch for that. I haven’t seen that.
[0:46:19] MM: It cost a lot less though. If you’re going to spend some money, spend money and
come to Fin Con and learn how money works, right?
© 2015 Money Mastermind Show 21
MMS 72 Transcript [0:46:27] GC: It’s a funny thing though because didn’t the two of them coincide one year?
[0:46:32] MM: Yeah, that was amazing in Saint Louis? [0:46:34] LG: I would have had a field day with that.
[0:46:37] B: The company that was suing me was actually having their conference in Saint Louis and so I had to walk around with my badge hidden so that no one could see that the man was there in Saint Louis at the same time. I got on an elevator at my hotel and there were three other people from that company in the elevator there. They all knew me, they didn’t know me because they didn’t have my picture but they all knew who Lazy-man was who had written about the company because the company had put out some, “We’re suing Lazy-man for his article,” and I was their worst enemy for what I exposed.
[0:47:19] GC: That was interesting because I remember going to that conference and I was on the train and there was an older couple who came up to me and they started talking to me and they were very friendly and they told me what they were there for and I didn’t know what the name of this company was, I think the parent company and asked me what I was there for and I said, “Oh I’m here for a personal finance blog or a conference.” And they kind of gave me a strange look and it wasn’t until I spoke to you a little bit later that I can understand where that was coming from.
[0:47:50] MM: Public enemy number one.
[0:47:56]GC: Lauren, what was it that got you recruited into it and what was it that finally got
you out of it?
[0:48:02] LG: Well, I got in to it, I was pregnant with my first child and I was young.
[0:48:09] GC: Recruiting right off the bat.
[0:48:12] LG: When I got recruited, I was young, I wanted free makeup, I love makeup and the lady that I met was really fun and she — I mean the whole thing was like, “Yeah, just get the
© 2015 Money Mastermind Show 22
MMS 72 Transcript
starter kit because you get a really good deal. You get $350 the product for a hundred.” I’m sold. Sure. I did that and then I got all wrapped up in the whole you know, I loved recognition and that was one of my things that I loved recognition and they were giving that to me. So I thought, “Oh I’ll just continue to do it and have fun and I’m a competitive person.”
That was another thing, to see that this person was doing that, I can do that, I can totally do that. Then I was in it for two years to rule, I quit, I won my Cadillac, I was in so much debt because one of the things...
[0:49:19] MM: Okay, wait, I’m sorry. You won the Cadillac, you’re like one of the elite but you’re still in debt?
[0:49:26] LG: Oh yeah. [0:49:27] MM: Okay, go on.
[0:49:29] LG: So I went to director training in Dallas as one of the brand new directors, the future of the company. The girl that I was staying with was in $40,000 worth of debt in the past six months. They won’t tell you that this is what happens and I fully kind of, I did a podcast on this on my podcast a few weeks ago where I talked about this in detail. I’m kind of waiting for Mary Kay to sue me, we’ll see what happens with that.
[0:49:59]B: Let me know, I can help you that if they do.
[0:50:05] LG: A lot of these women, they get to a point where you have, you need 30 women to qualify for a director and let’s say you have 19 and you have a month left. I only need 11 people. All I have to do is sign 11 people up and put orders under them and then I get my director status and then I have all these people to work under me and I can keep my status.
A lot of these people are fronting tens of thousands of dollars to get to this status and this happens all the time. It wasn’t me, it was encouraged by my higher up, it was encouraged by the other directors that I was in director training with and this is what happens all the time.
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MMS 72 Transcript
People are buying their way into this positions and I was in, I mean I had my own spending issues on top of it, which is why got into so much debt.
[0:51:02] GC: That’s another show.
[0:51:03] LG: That’s whole other podcast we can get into. We were drowning in debt, we had $40,000 in debt, we couldn’t afford our bills and I remember praying one day and I just said, you know what? I’m going to go out and they say if you’re struggling, do a 10 class week where you book 10 skin care classes and go out and do them. I did that and I worked my tail off and I said, “Okay god, if I’m supposed to do this, you tell me? I’m going to do the work,” and I lost a thousand dollars that week by giving away product and not selling anything.
[0:51:40] GC: It sounds like at least you had that realization.
[0:51:42] LG: There was the answer right there and I packed my stuff off, I shipped it back to the company, all my inventory that I had, I put on a suit and I went out and got a waitressing job so that we could pay our bills. That’s kind of what happened, I just had a realization. Mark was telling me, Lauren, hello, you’re paying for the Cadillac? At that point I was paying that $900 a month for the Cadillac. I think I only did it one month and he was like, “Lauren, you’re quitting, we’re done, we’re not doing this, this is ridiculous,” but I was so in the mentality that I couldn’t see it. What?
[0:52:17] MM: “I’m on the verge.”
[0:52:19] LG: When they came to tow my pink Cadillac away, I was so embarrassed that I hid in my bedroom peeking through the window because I made Mark go and take the keys to the guy because the pink Cadillac director whose car got repo’d and in the nice neighborhood. It was the talk of the town.
[0:52:41] GC: Hope is a great motivator isn’t it right? Or maybe desperation. [0:52:46] KP: Or a cult.
© 2015 Money Mastermind Show 24
MMS 72 Transcript [0:52:48] LG: Or that. Yeah, it’s an embarrassing story but.
[0:53:03] GC: I’m glad that you’re telling it and we’re getting Brian’s side of it also because I think a lot of people, even in the beginning in the show, I had said that some of these companies they sound so benign and you think,” I’m just going to get in to this, I’ll sell to some family and friends, it will be maybe a couple of extra bucks but you know what, like I said, maybe I’ll get some discount on makeup.”
Then it turns into this giant behemoth where maybe all of a sudden you’re in debt or you have all this obligations that really don’t fit in to what you thought you were getting into. I think that’s the scary thing that people are maybe being sold this hope and this giant carrot that they’re never going to get to.
[0:53:44] B: I’d like to ask Lauren a question if I could. [0:53:47] GC: Absolutely.
[0:53:48] B: Lauren, did you see a lot of churn in your group? The people leaving Mary Kay underneath and your need to recruit people to kind of keep the same level in order to maintain the car or in order to maintain your rank, just keep on recruiting people to replace the ones that had quit?
[0:54:07] LG: Yeah, you had to constantly do that. For every three people or five people you brought in, one might stay. I said I had recruited over 300 people but probably only 30 of those people were actually doing anything. Yeah, it was a big challenge because you deplete your friendships, you deplete your family, nobody wants to come near you when you’re trying to sell to them all the time and I think I did a pretty good job not doing that because I was real, like I didn’t want to.
They even teach you crazy things like how to go up to strangers in the mall like scripts to use to get them to come to your events. I’m telling you, I’ve got all the... it’s crazy what they teach you. It’s called warm chattering. You go out and warm chatter. That means you go up to somebody at the mall.
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MMS 72 Transcript
[0:55:15] GC: This reminds me and I had completely forgotten about this but there was one time when where somebody was trying to recruit me and I don’t know which company. I don’t want to misuse Amway but it was something along those lines if it wasn’t that. I remember my parents saying, “Hey, can you come over one day? These people have this offer, we just want to get your opinion on it and this person in the living room and really amiable, just talking about all these great opportunities,” and then he builds in to that yeah, I buy all this great stuff. It was a little bit like that scene in Go, that movie, without the nakedness.
Next thing I know, I’m thinking on my head, you’re trying to get me to sell me this stuff, you’re not trying to just sell me this stuff and that’s when I was like, “Woah, woah, this is weird.” Thankfully I ran away from that too.
[0:56:17] MM: You’re making me uncomfortable.
[0:56:21] GC: It did. Thankfully I was able to recognize all that but I’m sure that that’s a technique that does recruit a lot of people. That’s scary. We’re coming up to our hour here. I think we got a lot of great information here today because I think a lot of people, they don’t know enough about these types of companies and it sounds like it goes from the very obscure, very sketchy if it sounds too good to be true, you really need to run away to the more benign sounding where you’re going to get sucked in to without even realizing it.
I think people need to know a lot more about that and I think we could probably keep going and keep providing people information but there’s only so much time. Thank you both Brian and Lauren for coming on and helping inform our audience. Lauren, you’re a bit of a surprise guest, so tell everybody a little bit about Iamthatlady.com?
[0:57:24] LG: Okay, you’ve heard my story about getting into debt but we had to get really resourceful with how we got out of debt, I consider myself a recovering spender and I have a book coming out about that in the fall of next year. I teach people how to enjoy life on a budget and get out of debt as being a recovering spender and all that I went thorough to change my lifestyle from being a spending addict to being somebody who can live financially, with financial
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freedom. So yeah, my husband Mark and I work from home together and we have four kids and yeah, it’s fun. That’s what we do.
[0:58:10] GC: Alright, go check that out and I’m sure if you had questions about Mary Kay you could probably shoot her an email or a comment.
[0:58:17] LG: Don’t send me death threats if you are still in it.
[0:58:20] GC: No, I’m saying more for people who might have thought about joining it. Brian, tell us a little bit about what you do and where people can find out more information about you online?
I’m sorry, I was losing you a little bit there if you don’t mind repeating that. [0:58:45] MM: Repeat.
[0:58:59] GC: Technology there. Brian, his site is Lazymanandmoney.com and Brian has really spent a lot of his time investigating these types of companies and really being a consumer advocate for this companies to help people out. Besides being a personal finance blogger, I think he was that first and then this came up but he certainly spent a lot of time on that. If you ever need to look into that, certainly check him out. Let’s see if we have him back here. Are you with us Brian?
[0:59:35] B: Yeah, I might be back.
[0:59:37] GC: Alright.
[0:59:39] B: Is that better? I don’t know what happened, the Internet connection cut out and.
[0:59:45] GC: That does happen from time to time. I was just telling the audience how you spent a considerable amount of time investigating a lot of this companies and you’ve become maybe the consumer advocate or rather against these companies. Certainly an expert in what these companies do. If you wouldn’t mind adding a little bit more about what you do?
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MMS 72 Transcript
[1:00:06] B: Yes, I prefer to just be a regular personal finance person just like everybody else here and go into personal finance topics but I find myself fascinated by this strange world that all these things that are going on that appear to me to be very dishonest and just really out to harm consumers. It goes against trying to help people with their money while there are these organizations out here that are trying to hurt people, trying to profit off of consumers using these tactics.
I like to go through and help people sort of see what these companies are doing and look at it kind of from what the experience I’ve found which is kind of similar to what Lauren had said except she lived it, I didn’t live it. I live vicariously through thousands and thousands of comments that people leave on my site and give me different opinions. Over the last eight years I have a lot of experience through that and kind of filling with hundreds and thousands of people in the multilevel marketing community and sort of. I want to share that with everybody else and just let them make an intelligent decision what they should do if they want to get in to this.
[1:01:34] GC: Thank you for putting that time in to all that research and all that writing. I’m sure it’s probably helped a lot of people who are wondering about MLM’s. Both of you, thank you very much for coming on and thank you everybody out there for listening and until next week, be good with your money.
© 2015 Money Mastermind Show
Important issues discussed in this episode:
- Reasons that people turn into MLM companies for income.
- What makes MLMs so attractive?
- Are there any good MLM companies?
- How can you increase your chances of making and MLM a source of income?
- Warning signs that you are dealing with an outright scam.
Panelists In This Episode:
- Brian | Lazy Man and Money
- Lauren Greutman | I Am That Lady
- Glen Craig | Free From Broke
- Kyle Prevost | Young and Thrifty
- Miranda Marquit | Planting Money Seeds
- Peter Anderson | Bible Money Matters
- Tom Drake | Canadian Finance Blog
For a quick bio of each of our show participants, head on over to our panelists page.
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