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I Hate Indian Network Marketers So Much

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I’m pissed off.

See, I live by a shopping center that has a Safeway, Trader Joe’s, and Wal-Mart. The last two times I’ve gone shopping there, I’ve been approached by Indian men who were seemingly very nice and struck up a conversation with me. (Some background: For a long time, there weren’t many Indians in the U.S.–especially certain kinds like Sikhs–so if you saw another one, you’d greet each other, invite them over to have chai, etc. This tradition persists today, although less so, especially in Silicon Valley where we’re very common. But still.) As a result, I’m always especially happy to introduce myself to any Indian person I see. Here’s how the conversations went:

Seemingly nice man: “Excuse me. Hi! Did you go to Stanford? You look very familiar.”
Me: (Wondering if I have a Stanford walk or something.) “Hi–yeah, I did. Did you also?”
Seemingly nice man: (Ignores my question.) “Ah, great, great! (Smile.) What did you study there?”
Me: “Technology and psychology…what about you?”
Seemingly nice man: “So where are you from?”
(…We have a nice conversation in which he seems genuinely interested to meet me and hear about what I’m up to…and then…)
Seemingly nice man: “Are you interested in a new business venture?”

Ohh man. Because this happened FIVE times in two weekends, plus once at a shopping mall in San Jose, I can tell you exactly what was behind their approach. I know because I gave these guys my phone number (until I wised up), and when they called, I got frustrated and asked them what was going on. Here’s what I figured out.

Step 1: Go to a public place with a lot of people
Step 2: Approach people who look like suckers (me?) or people you have some affiliation with (in this case, five separate Indian guys approached me). Play up the cultural angle.
Step 3: Deceptively try to ingratiate yourself with them. Three of the five guessed Stanford because I look young and I wear glasses. The fourth asked if I went to Berkeley. Wrong side of the Bay, buddy.
Step 4: Get my business card and follow up with an “exciting business opportunity.” Sound disappointed when I decline. Follow up by asking, “So do I understand it right that you’re not interested in making money for almost no effort?” When faced with my flat response of “that’s right,” ask me meekly if I have any friends who would be interested in this business “opportunity.”

I hate when people try to scam me–but at least I have some experience in spotting scams. I hate it even more when defenseless people get scammed. And I just feel sad when people are wasting their time and relationships by engaging in network marketing.

Network marketing (aka multi-level marketing, or MLM), Ponzi schemes, or pyramid schemes–yes, there are differences, but I’m disgusted by them all.

My angry encounters with these guys come at a prescient time. Yesterday, The New York Times wrote a damning article on multi-level marketing companies and the new rules proposed by the Federal Trade Commission. “If companies have to tell recruits that the average income is only $1,400 instead of the $50,000 advertised on their site, or that the average salesman only lasts two months, a lot fewer people are going to sign up,” said one analyst.

These programs are a scam on your time and your relationships. Yes, there are exceptions and a few people make lots of money. But dig into the data and you’ll discover that most people–and I mean that statistically–most people make less than $100/month. Most people don’t last very long, either. “But Ramit,” you might say, naively, “how can it hurt? If I can make $50/month, what’s wrong with that? PS I think I can actually make $50,000/month!!!” There are four things wrong with that: First, you won’t make that much. Second, you’re not creating any lasting value or building a skill set for you. Third, have you seen how friends treat you if you try to turn your friendship into a sales relationship? And forth, engaging in these stupid “opportunities” distracts you from real entrepreneurship and your goals.

Let me explain.

An overview of network marketing, Ponzi schemes, and pyramid schemes
Network marketing/MLM
Beagle Family image from WikipediaNetwork marketing (i.e., MLM) is the most legitimate cousin in a family of questionable characters. They’re like the Beagle Boys from Duck Tales: an unfortunate family of degenerates. Anyway, multi-level marketing programs let you earn money based off the products you sell, and sometimes a percentage of the products sold by people you refer. That’s a key distinction: In MLM programs, you earn money from the actual sale of products, not just from endless recruiting of other people.

Unfortunately, the rosiness ends there. As our own Federal Trade Commission (FTC) notes:

Some multilevel marketing plans are legitimate. However, others are illegal pyramid schemes. In pyramids, commissions are based on the number of distributors recruited. Most of the product sales are made to these distributors – not to consumers in general. The underlying goods and services, which vary from vitamins to car leases, serve only to make the schemes look legitimate.

Furthermore, they write, “Avoid any plan that includes commissions for recruiting additional distributors. It may be an illegal pyramid.”

I knew a guy back in college who made me wish I were actually in an ivory tower so I could jump off into a pit of alligators, thereby evoking eerie similarities to Indiana Jones and the Temple of Doom. He was bragging about a new “venture” he had started. I was curious, so I asked him about it, and he had a very nice sales pitch–until I asked him a couple questions that he apparently didn’t have scripted answers to. What was he selling? “Oh, tons of assorted products like energy drinks and really good cleaning supplies.” (Which he had of course bought first, thus incurring inventory costs, and now had to sell. A few months of your closet being full of EnergyAde makes pennies on the dollars sound attractive.) And how much was he making? I wasn’t going to ask, but he kept bragging about how “profitable the opportunity is,” so I just asked. His openness vanished rather quickly, especially when someone else chimed in and said, “It must be more than $100/week, right?” That was a typical amount students could earn by working part-time on campus. “Well,” he replied, “it’s all about pounding the pavement and getting to that tipping point.” He’d been doing this for a year.

Another example of an MLM company is Amway. Now, as part of a $6.4 billion organization, something undeniably powerful is happening here. And who am I to criticize? I don’t run a $6 billion company. But the data behind Amway is illuminating if you’re thinking about MLM programs:

Typically, IBOs (Independent Business Owners, i.e., members) spend money on tapes, books, and seminars which are promoted to IBOs as the preferred way to learn the “business skills of the IBOs” and to maintain their desire to build their business…However, investigations like one done by Dateline NBC in April 2003….suggested that most of the money being earned by these successful individuals was coming from the hidden “tools” business rather than through selling the company products. Critics also claim that the materials are specifically geared towards encouraging IBOs to continue working for a non-economic return, rather than improving their actual business skills.

[...]

Amway was ordered to accompany any such statements with the actual averages per distributor, pointing out that more than half of the distributors do not make any money, with the average distributor making less than $100 per month.

Pyramid schemes
It gets worse. While multi-level marketing programs can theoretically be legitimate–even though few people profit, and many take a long time to realize they’re not–pyramid schemes are simply fraudulent. In a pyramid scheme, you usually make money recruiting others and hoping that people down the line will pay it upwards. The products you’re selling (if there are any) are overpriced and likely only purchased by members in the pyramid scheme. As a point of reference, the first sentence of the Wikipedia entry on pyramid schemes describes them as having a “non-sustainable business model.” That’s because, mathematically, pyramid schemes soon become impossible to sustain; exponential growth means that, soon, there aren’t enough people in the world to participate. Sort of like the amount of girls that can resist my charm.

In other words, pyramid schemes will typically promise a great return based on a small investment. The hucksters have developed a number of variations to obfuscate the real process (older readers may remember the “captain and passengers” model), but the result is always the same: bad.
snakey.jpg

Ponzi schemes
The final and most fraudulent example is the Ponzi scheme, which involves promises of unusually large investment returns by aggressively recruiting more and more new members to pay earlier members. In fact, the earliest investors often get incredible returns for a short while, thus spurring them to invest more and tell their friends. The scheme’s demise comes shortly thereafter, usually with the mastermind(s) taking all the money.

Ponzi schemes are different than pyramid schemes: the Ponzi scammer is the puppet master, whereas recruiting is distributed in a pyramid scheme. Ponzi schemes can also persist by getting more investment from existing members, while pyramid schemes can grow (and thus collapse) faster. There are lots of details about Ponzi schemes, but the main takeaways are they’re very fraudulent and very bad.

Why I have a dim opinion of people who participate in these programs–plus a case study
First, they’re deceptive. They used a simple heuristic–”Hey, we’re both Indian!”–to get attention. While that may work in the short-term, how would a real businessman feel once he realizes he was deceived? And what kind of people would shrug it off and stay with the organization? This is a great example of Cialdini’s “click, whirr” strategy to take advantage of these rules. Although I thought they were sincerely interested in me, they actually wanted to sell me on something. Bad, bad, bad.

Second, they’re not particularly innovative. They accosted me at grocery stores, for god’s sake.

Third, they’re often persistent to the point of being irritating. Here’s a little case study on something called Pre-Paid Legal. Last year, I gave a talk at MIT. About six months later, one of the students emailed me with an “interesting opportunity” for something called Pre-Paid Legal Services. This is basically a service where you pay $25/month in exchange for legal services; it’s like insurance for legal services. They have a fancy magazine (which she helpfully mailed to me) and very, very pushy people who try to recruit you. There are only a few catches to the service: Pre-Paid Legal has been found guilty of fraud, leading to this amusing quote by money manager Frederic E. Russell: “I think Pre-Paid was lucky,” he said. “But a finding of fraud is not exactly the greatest news as far as goodwill and reputation are concerned.” The article ends by noting the following tidbit: “Pre-Paid has set aside $3 million to cover any major damages that may result from the lawsuits. The company—which markets its product as essential—carries no legal insurance itself.” As you can imagine, by this point I was enjoying myself so much that I was eating popcorn while reading these articles.

Would legal insurance have even mattered? As one of their board members actually said, “All you have to know is the word: Yes. Does our product cover everything? Yes. So if somebody asks does it cover this or does it cover that, we’re going to say, ‘Yes.’”

That same article, from BusinessWeek, points out what’s not covered by Pre-Paid Legal:

A review of sample Pre-Paid contracts shows many limitations. Cases involving bankruptcy, alcohol, drugs, pre-existing conditions, wage garnishment, divorce, annulment, child custody, class actions, hit and runs, driving without a license, civil or criminal charges associated with a business, and commercial vehicles over two axles aren’t covered. Nor are any “claim, defense, or legal position which, in the opinion of the Provider Attorney, will not prevail in court.” Pre-Paid provides for 60 hours of trial time per year, but pretrial work — the bulk of most cases — is limited to 2.5 hours per year in a basic policy.

And yesterday’s New York Times article notes that an astonishing 45% of Pre-Paid Legal’s public shares are currently shorted, meaning sophisticated investors think this company is going to tank. It also suggests the consequences of the newly proposed FTC rules: “…Pre-Paid Legal would have to tell prospects that fewer than a quarter of its sales representatives sold more than one insurance plan in 2005.” How would the sales reps take it? Well, the reporter writes, “Pre-Paid Legal suffers from high turnover. In 2005, the company replaced at least 50% of its active salesforce…Industrywide, multilevel marketing companies typically replace all of their sales representatives every year.”

With most of this knowledge, that MIT student kept badgering me. Finally, exasperated, I had to tell her rather pointedly that we could go back and forth forever, but I wasn’t interested at all. (These MLM types bring out the most unsavory reactions.) A year later, a friend told me that he got another contact from her—this time endorsing another product.

stupid-MLM-man.jpeg

Fourth, these programs disproportionately target the wrong people. “Make money in your spare time!” they say. Do you think people with a busy career have lots of free time to try “opportunities” they hear about while shopping for tonight’s rump roast? Of course not. Professor Ken Wong, who runs the MBA program at Queen’s University, points out the obvious:

“The more educated they were, probably the less likely they would be to buy into the whole concept in the first instance. So you’re really targeting a specific kind of individual who life has treated in a very certain way, and you’re now saying you don’t have to have that way anymore.”

So we have programs that disproportionately target people who don’t know any better and remain “working” in these programs without being properly compensated—all because of big promises to come and clever marketing. You can see why I’m pissed. In fact, try to dig up research on “network marketing.” It’s hard to find anything substantive among the THOUSANDS OF PAGES OF AFFILIATE OFFERS THAT SCREAM OUT SCAM TO ME. Interestingly, many people have compared these programs (and especially their training programs) to cults. Not just hand-wavy cults, but the strict definition of cults, including isolation, increasing levels of commitment, etc. I agree, there are lots of similarities; for more on this, read Eliot Aronson’s excellent book, Age of Propaganda: The Everyday Use and Abuse of Persuasion.

Fifth, and perhaps most unfortunate of all, these programs are giving their members neither equitable compensation nor the core skills for future growth. If you’ve read this blog before, you know that I hate get-rich-quick schemes (see On Greed and Speed for details). If these so-called opportunities didn’t provide much cash, but gave participants the skills and contacts to run successful businesses, I would say great! Unfortunately, they don’t. Yes, that’s a broad generalization, but I’ve seen far more regret and bitterness over a long period of time than excitement—of course, with the exception of my grocery-store friends. They’d all been doing it for less than 6 months.

Why would you do these programs?
Is it to make more money? Then let me be very clear: You could make more by taking $100/week, putting it in an index fund inside a Roth IRA, and letting it sit there. You can even set this up to happen automatically. In fact, you could arguably make more by investing just $100/month.

Or maybe it’s to maintain your lifestyle and do something entrepreneurial. Great! I admire that more than anyone. But why would you pick an industry riddled by fraudulent opportunists and unsophisticated people whom you can’t learn much from? That smacks of a stupid frat-boy business idea.

Is it to make a difference in the world? Probably not, but just in case, there are many better ways to do it that don’t involve you calling up your friends and family and polluting your relationships by introducing a sales element into them. “Mom, I love what you and Dad have done with the window treatments here! Also, did you know you’re currently vulnerable to numerous legal liabilities? Fortunately you can protect yourself using an exciting service called Pre-Paid Legal Services®!”

Is it because you’re new to the area and looking for something entrepreneurial to ease your way into the community? I have to admit that the title of this post is a little sensationalistic. Also, most of the people who approached me were recently from India. Maybe they didn’t know any better. But you know what? That only reinforces my point of the kind of predatory organization this is. Plus, there’s almost no better way to actively push people away from you in a community than by trying to actively sell them something fraudulent.

Finally, is it because “it couldn’t hurt?” After all, how could it hurt to try it out? The truth, of course, is that it can hurt. You’ll probably alienate your friends, family, and acquaintances, just like that MIT student did to me. Moreover, following that logic of “it couldn’t hurt,” you might as well open a lemonade stand and sell drinks for $0.05 each. “How could it hurt? I made $0.75 today!” The point is that we need to optimize our choices, and $0.75/day (or $100/month) isn’t worth it compared to what you could make. If you read three articles on this site (e.g., about stocks, mutual funds, and retirement accounts), you’d easily make more. Or another site! Or a book! I don’t care. Just recognize the flimsiness of the “it couldn’t hurt rationale.”

I’m bound to get a ton of heat for this post because there are lots of bloggers who write about network marketing. They genuinely believe in what they do. Unfortunately, try doing a blog search for “network marketing”. The results are deplorable, which leads me to my final points.

Ramit’s 5 Maxims of Network Marketing
1. If you have to badger someone into even thinking about maybe considering allowing you to perhaps talk to them for 60 seconds, you may have signed up for a bad “opportunity.” Also, if your marketing plan involves you accosting customers in the cereal aisle, consider that I may be right.

2. If you spend more time recruiting people to do your job than you do selling products—and you’re supposedly in a “sales organization,” you may be in a scam.

3. If the organization you’re working for has repeatedly been sued for fraud–and often convicted–that may set off some warning signs. Also, if you’re participating in a business model that almost universarlly evokes disgust or, at the minimum, discomfort, that may be another sign. If a lot of people don’t like something, there’s usually a reason.

4. If you’re spending your days doing something that’s frustrating and only marginally useful–and your customers, if you have any, feel abused rather than thankful–step outside the bubble for a minute to acknowledge that you’re not creating any new value. I don’t know one entrepreneur who made it big doing something like this. Now, I fully understand the psychological difficulty in doing this. Maybe one good way to start is by asking people you’ve pitched what they honestly think about your recent activity.

5. Finally, it’s easy to be wishy-washy about MLM (“The real problem with MLM is not MLM itself, but some of the people it attracts”), but I’m going to go out on a limb here. If you do your research and discover an industry filled with fraud and broken promises—one in which you can reasonably expect to not only be swindled, but to then swindle others—you may want to reconsider your choice.

Thanks for reading. And please, tell your friends.


About me: My name is Ramit Sethi and I’m a recent Stanford grad. This site is about personal finance (long-term saving, banking, budgeting, and investing) and personal entrepreneurship for college students, recent grads, and everyone else.

To see more articles from iwillteachyoutoberich.com, check out my table of contents (over 2 years of posts) and my RSS feed.

A very special thanks to Ryan McCulloch for the beautiful drawings. He’s an illustrator and clay animator, and you’ll see more of his work on iwillteachyoutoberich in future articles.

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121 Comments

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  1. Great story, and perfect timing for me. I recently had an encounter with a sales scam that ticked me off a bit. A girl came to my door, probably late highschool or early college, and in 5 seconds rambled off something I couldn’t understand. She was VERY cheery, and even after asking her to repeat what she said I couldn’t figure out what she was on my doorstep for, but supposedly she was going to school and she wanted to meet 135 nonviolent people for some program she was in. She’d give me high fives after affirmative statements like “Are you a nonviolent person?” She’d ask me about where I was from and what I do. I was pretty suspicious, but I didn’t see the sales pitch coming, and when it did I was too confused and set up for affirmation that it was nearly impossible to say no.

    She was selling magazines, and I hate buying magazines, so it was easy to say no when she finally asked what I wanted to buy, but the instance I said no, she pulled out the charity card, and said I could purchase for one of the local children’s hospitals. Way to make me into the asshole for saying no now, and of course it would cost twice what it should, but she’d get points for some trip or school thing or something, and high five because she was meeting new nonviolent people like she wanted, and everything else she said completely confused me.

    What really pisses me off is that I knew I wanted to say no, and I knew the mental games she was taught to use to put me into a position where I couldn’t say no, and even knowing all of that I literally had to walk away for a minute (to find my checkbook) in order to say no, and it was still hard. Plus, there was this, if you buy from me, you’ll get this note telling others like me to stay away, so you win-win because there will be more little school kids like me coming around bothering you in our cheery cheery fashion (intimidation much?). I hate those companies, and I’m sure she was being taken advantage of, but man was she good, and played the part perfectly. I’d rather give her 5 bux for the performance, and she’d probably earn more that way.

  2. Yeah, I have a lot of MLM type offers on my site (cashduck.com) and I hope to God that people are smart enough to just take the money they earn for signing up, and not actually use any of these materials. I got an email from one person who had ordered some kind of grant-writing package, and she asked how much I thought she could make with it, and I honestly had to say that the eleven dollars she got for buying it was probably more than she could make if she actually used the materials.

  3. Long time reader, first time poster. I must have been around 4 years old (I’m 29 now), but I remember my parents going to a meeting about a business venture. It was the classic Pilot-Crew scheme. My dad, being good at math, didn’t buy in, but one of his friends did and paid dearly. :(

    And just this year, I was approached by an Indian gentleman while looking at SQL Reporting Services books at my Local B&N. And it’s the same story, too. I was wearing a Baylor shirt and he proceeded to ask me about my major, etc. Then came the business pitch. So, I just told him I was unemployed and had no money to invest in anything right now. (of course, I do have a job and, thanks to Ramit, a few other things here and there) That was enough to get him to leave me alone.

  4. Your comment about people saying, “It doesn’t hurt to try” — or the more desperate, “I have to try” — is all too familiar. My parents justify entering into “money-making opportunities” this way all the time. They don’t measure, compare, research the pros and cons. No, they focus on “But *what if* it works?!” It never does, though.

  5. I’ve been scammed more often than you’d care to hear about. From envelope stuffing for cash to tax sheltors (scams for big girls). I don’t doubt that I’ll be scammed again.

    The ones that irk me the most are the charity scams. The people asking for gas money to get themselves home (and its the same people asking day after day). The ones that make me feel like crud for saying no.

    In those cases, I weigh the money against the guilt. Often its worth it (to me) to merely give the money.

  6. Thanks for this post. I’ve lost a couple friends who tried to turn our friendship into a business relationship (PPL was one of the companies), and I wish others could be warned ahead of time of the consequences. It’s an ongoing joke with my friends that I’m always the one to get targeted with pyramid schemes. They say I must look like a chump or something too.

    To make matters worse, the last time a friend tried recruiting me, I told her she should learn to invest instead and she can be a millionaire in 20 years. She said 20 years is too long and she’ll be one in 5.

    It’s like people get too blinded by greed to use common sense.

  7. What a great post. When I hit 18, one of my first jobs was when I became recruited for one of these MLM scam companies. I only ended up losing a total of $50 in a period of 2 months but I learned a lot about sales. Overall it wasn’t too much of a horrible experience but I’m glad I got out and didn’t waste any more time than I did.

  8. Being Indian myself, I know exactly what you mean, Ramit. It has happened to me 3 times in the last 2 months, and of all places, in WALMART. Bloody hell, I can’t even shop in peace without these buggers coming up to me with that sly smile and a “Hey! You Indian?”

    I’ve become very curt with folks like this – they’re only wasting my time, and theirs.

    • You think it’s bad being Indian in the west? Try being a westerner in India, my friend! You met three guys at walmart? I get ten at the train station.

  9. I have been accosted by these guys at the bookstore multiple times. First, they feign interest in the subject of the book you are currently looking at, and when you start talking about yourself their eyes glaze over.

    I was looking at a programming book and this MLM guy started talking to me. Luckily I immediately knew what he was doing.

    Here are some of the highlights:

    Him: I am into programming too. I do some stuff with Flash (wow!)

    Him: I do e-commerce consultancy. Have you heard of e-commerce.
    Me: Yes.
    Him: yea…. it’s getting really big.
    Me: NO WAY!!! REALLY?!?

    Him: I work with e-commerce sites like Home Depot
    Me: Don’t they already have e-commerce site.
    Him: Yes, but it is not as good as it can be. That’s what I help them with.

    Him: Can I get your phone number so I can call you and we can talk about this more.
    Me: Not really… we just had a baby and…….. How about you give me your email address?
    Him: I only check email, like, once a week.
    Me: How about your website? I will check out your website.
    Him: My website is password protected.

    What the….? Don’t tell me you are an e-commerce consultant for Home Depot, then tell me you never check email and your website is password protected.

    Also, if someone ever says that their “business” is “really expanding in this area” and want to know if you are interested, just run away.

    I followed this guy around the bookstore and he tried to do the same thing to several other people before giving up and leaving.

  10. Great post, seriously. My mom got caught up in the Amway stuff for two decades, and never made any worthwhile amount of money. Sure, there are a few rare exceptions, but like you say, for MOST people it is a waste of time.

    I even started getting stars in my eyes with Automaticbuilder.com, but alas, after a couple weeks I realized it’s basically the same old thing. I don’t know if “scam” is the right word, but it’s certainly not as good as they make it out to be.

    I love your advice at the end. It would be better to just invest $100/month. I remember thinking the same thing myself. Good stuff, Ramit, good stuff!

  11. This is the absolute best post I’ve read in a LONG time (on any blog). That’s probably because it came at a time when I needed it most.

    You see, I’ve been an opportunity junkie for far too long and, despite knowing I have this issue, I keep letting myself get sucked into more and more biz-ops. I guess it’s the lure of making money online and someday quitting my regular job that drives me. Unfortunately, I’ve been approaching it all wrong for too many years.

    Just recently (like two days ago), I joined GlobalNetVantage, paid for their membership and then joined (and paid for) two of their recommended “programs”. I spent several hours then reading through their “training material” and signing up for several traffic exchanges.

    After wasting all this time, it hit me… What the heck am I doing? There’s no real product here! Sure, they claim to be selling a “membership” that provides valuable training on how to do business online. No — in reality, they train you how to join traffic exchanges, surf mindlessly for hours per day to rack up credits, join FFA networks and safelist submitters to promote the very membership program that teaches others how to turn around and do the exact same thing!

    Where’s the value in that? How am I helping people or making the world a better place? I’m not!

    So, just when I needed it most, I found an ebook last night about being a victim of business opportunity scams, and then this post today.

    REFRESHING! :-)

    My next task is to cancel my GlobalNetVantage membership and they try to figure out what I really want to do that will create value for others and make me a little money in the process.

    So, thanks again for writing up this post – it has been more helpful to me than you may ever know.

  12. I agree. I am frustrated with them too. I just give them a middle finger and move out. I am pissed of with these Amway guys of Indian origin. Unless the guy is a resident/citizen, he/she is not legally allowed to pursue this. I usually tell them that and ask them to get lost.

  13. your observation that these scams often target the poor and uneducated and desperate is right on. unfortunately these people have the most to lose, but the shiny dream presented is irresistible.

    my brother was in a state of dire poverty when somebody suggested that he take classes from University of Phoenix online. the tuition at this school is about 10 times the going rate at local community colleges, but somehow people get convinced that it is worth it. the quality of the education is inferior, and students get trapped by complicated contracts that often result in huge debts if they decide not to continue. but the advertising seems to be very seductive. it makes me crazy!!!

  14. Wow this happened to me in Walmart last month — but he wasn’t Indian.

    I thought it was kinda strange, but I didn’t know this was a common tactic.

    He started by asking me where the organic section was….

  15. This is a great post. A lot of military wives and stay at home moms are such suckers for scams like these.

  16. Hey Ramit,

    Steve Pavlina recently wrote about ‘saving’ timeshare sales people from a life of twarted purpose. It would be funny if the two of you could think of an intervention for these network marketors.

    … especially since they appeal to people who care about them first.

  17. Most people who get into this don’t realise they are making a fool of themselves. I had good friends who almost threatened friendship with me if I don’t get involved like they did, and almost always the passion that started them off dies down in just weeks. They I like to go to them and say “I told you so!”. And their response….”Well I was too busy so I don’t think I can invest the time for it”. Yeah right….!

  18. Timely. I just got my time wasted by someone who was into “Online Franchising”. That’s the new trigger term for Amway by the way. Nice guy who was looking at the business section of the bookstore and struck up a conversation. I mentioned my wife wanted to develop a product and the way he talked about “Online Franchising” sounded like he had the wherewithall to help her develop and move product, or at least to make contacts. Nope: Out came the “Do you want to be rich” pamphlets and pictures of double-diamonds from the 70s.

    Amway is a good idea for the private owners of Amway or those who can convince their friends to buy lots of Amway products. Other than that it is like any sales gig. You have to work quite hard and learn the art of selling. If you’re good and have access to an untapped market then you might make money int he long run. If you buy in as a get-rich-quick then I think you’ll get nowhere. I personally would rather work that hard developing my own business than someone else’s.

  19. This has happened to me more times than I can count. Id like to have little cut outs (that say I’m not interested, go to this site ____ to find out why you should also find another business) to print out that I could take along with me when I go shopping and just politely hand it to these people when they ask me these questions.

  20. I’d like to hear your opinion about Primerica… a member of Citigroup. What’s wrong w/ helping people do EXACTLY what you PREACH about Rammit?

  21. Hah, man have I been approached by these guys or have I been approached? made me always wonder “if your business is expanding so big, why the hell are you trying to recruit me?” of course this could just be the resident cynic in me.

    I am an Indian and most of the times I have been approached by Indian guys, once it was a Sri Lankan couple.

    The funny thing is some of the people I got approached by seemed to be well educated and when I try to engage them in “why they are doing it?”, there is no coherent response to that, the only thing I hear from these guys is one coined phrase “residual income”.

    When I refuse to participate in it, the funny part I have seen is (maybe its just me) some of the responses become belligerent, like “You don’t want to be rich like us, you are happy in your deadbeat job” or my favorite “Lets see how you can attain the American dream with that attitude”.

    More often than not, I am astounded to a point, thinking to myself “if you have to be THAT belligerent in your sales pitch, how the hell are you making money?” .

    Over the years I have wised up enough that when I see an Indian guy staring at me or walking down to me with a smile, my first question is “Are you from Brit World Wide?” and they respond with an even bigger smile “yes, are you part of it?” and I go “no thanks I am not interested”. In fact I am not interested in talking to you at all buddy, well I think this to myself don’t say it loudly though.

  22. Wow, I’m glad you took the time to post this! I can’t believe how deceptive these MLM companies are. I was sucked into one for about 6 months–even going to two of their rallies–before I realized what was going on. Happily, I hedged my bet (e.g., keeping my real personal contacts OFF LIMITS to these people) and didn’t lose too much. It was quite an interesting experience nonetheless to see all of these people sucked into one of these things. It was TRULY like a CULT environment at those rallies.

    I tell you, there is nothing more hilarious and saddening than watching professional, established people (40-50 or so) going nuts over some scam business and running around like lunatics!

    Just look at the Dateline NBC report Ramit mentioned. Here is the link to the show:

    http://youtube.com/watch?v=ot31XhgE_XE

    It is surreal what these people put themselves through.

    Thanks for bringing this important topic up. People need to be educated about the dangers of these scams.

    The saddest part? Amway recruiters are making it their mission to target college students–and for that very reason you mentioned: they’re vulnerable and could use that “extra income.”

  23. Great post…being a Indian myself I have had this experience N number of times with some guy desperately trying to be “very friendly” with you in a Mall or some public place…..but this seems more prominent in the Bay area..not so much in South Cali or even other part of the states….

    And the worst part is that these guys tend to bug you by calling you on your cell ( if you happened to be tricked into giving them your cell no)

    I am really glad that this issue was brought up…thanks Ramit!

  24. I was also approached by an Indian couple who asked me if I was Indian (I’m not…) and told me about an exciting business opportunity with Quixtar. I decided to meet up with them to hear the whole story. They made it seem so awesome and great when presenting the business, but in the end it just didn’t make sense. Glad I didn’t fall for it.

  25. Yup, i have been hit 2 times within 2 weeks..Happened in a busy shopping area and a walmart type store (Mejiers).

    They dress up real nice and are smooth talkers! But honestly, this is how they chose to earn a living……so let them be

  26. I’ve been accosted a total of 6 times in my life in various public places: borders, best buy, b&n, etc. To that effect, I am so wary when someone tries to approach me regardless of his/her intentions. I’m just waiting to hear that phrase “…but what I’m really interested in now is my e-commerce business”.

    Anyway, first time it happened to me, I decided to go along with their game. After thoroughly researching their operation, I found out that not only do they ask you to pay for their membership, you also have to pay for tapes, books, seminars, etc (overpriced mind you). What company makes you pay for your own training???

  27. Thanks for this entry. A loooong time ago, I was a part-time “associate” recruited into the “Forever Living Products” MLM for a couple of years before I read Dean Van Druff’s “What’s Wrong With Multi-Level Marketing?” and realized the whole tiered-pricing scheme was something very like a scam. Additionally, products were severely misrepresented to me in snake-oil fashion by sellers who really knew no better. Note: aloe activator in the eyes hurts.

  28. Within the past year I have been very annoyingly approached 3 times by people while browsing for books at Barnes and Noble, I spend my time in the finance and business section of the store and always seem to get “picked” by these people. None of them were Indian though, they were nicely dressed, they came across as sharp even wealthy individuals but after looking into their products (energy drinks) I found it was another BS bug everyone you know scam job. By the time the 3rd person had approched me with a very annoying “read any good books lately” small talk, I was ready to yell out GET A REAL JOB!! But my kindness set in and I just quietly walked away, he got the hint quickly and left me alone but I was still very much bothered by it and am tired of being harrased every time I go and attempt to purchase a new book! Im glad you brought this up Ramit, hopefully more will learn from this and be aware when someone approaches them.

    BTW- what do you think of this company USANA who uses somewhat similar techniques but supposedly offers good products (vitamins and skincare)

    -MS

  29. I don’t have the attention span to read that much of a blog…I wonder how many people really made it through the length of your post. That would have made a better series of posts and perhaps would have attracted more readers as they would come back again to see what you have updated.

    You could break it down into multiple exciting facets of your story with the conclusion being your take on how everything works.

    If you like writing long articles like this perhaps you should stick them in your news letter and leave the blog to the shorter stories and tips.

  30. This happened to me in LA on my first visit to US this year! I was in the B&N store browsing for books and I got hit by an Indian. First I thought, what a friendly guy, but then when he hit me with a business proposal, maan did I boil.

    Luckily for me, all I ended up was giving him my email ID and nothing more. But what really got my goat was the way they try to manipulate you (for e.g. “Hey you are missing on a lifetime”, “Which fool doesn’t want to make some easy money”, etc …

  31. I reckon most people read it all the way through. And seeing as how the many past long post attracted more and more readers.. I also reckon these long, informative, and useful articles are working.

  32. Just last year I was accosted by this guy who went to college with me (that was 3 years back) and apparently wanted to meet up since he happened to be in the same city (Mumbai) as I was working then. He happened to be a close buddy of my best friend and in trying not to be rude I agreed. He invited me for a presentation he was making and thought we could go out for coffee after that.

    Just before the presentation a young lady asked everyone present to sign a register with our contact details and I refused since I’m wasn’t here for the presentation but just to meet a friend. I could stand out and wait if it’s going to be a problem, I said. She convinced me in her sweet manipulative voice that it’s not going to hurt to stay. When she uttered the opening statement of the presentation, the very notion of where this was heading became instantly clear – HOW MANY OF YOU WANT TO BE RICH?? I refused to participate, I felt let down and duped into coming here. It was some multi-level marketing scheme of recruiting people to buy their products (rare coins, apparently – how innovative!!!) who in turn recruited people and obtained commissions. It didn’t need my MBA degree to smell something wrong in this business model. Anyway, I hastened out of that place after muttering a quick bye and pretending to remember something important that’s come up.

    Six months later I heard from my best friend that the guy was apparently broke since he had invested both his own meager earnings and his parents’ hard earned cash into this fraudulent venture that closed down two months later.

  33. Hmm, my original post wasn’t made. Anyway, I’ll make a shorter version.

    99.9% of MLM companies are never as good as they seem. They make it sound so easy to make a lot of money in your part time. It’s true that a few rare people will make good money in network marketing, but the majority of us would be better off investing $100/month like Ramit suggested.

  34. http://www.quatloos.com It’s not my website, but at least one good resource for scams. I can copy some other scams for you like high yield note scams.

  35. Google founders did not become billionaries by working and investing as Rami believes. They became billionaries by offering google stock to the market. As for the Indians in the Silicon Valley, those are the top 1% of their country’s opulation while more than half of the population lives in poverty. Work by itself has nothing to do with making money.

  36. I dont think people are staying awake at nights wondering which long distance they are using, or which soap/grocery products they should use. They ARE losing sleep over their financial problems though.

  37. Nice write up. I need to send this to my mom :). I am an Indian living in the US also and for a while there I ended up walking through B&N or the grocery store picking aisles so I could stave of the unpleasant encounters.

    My mom who is recently retired and I were talking on the phone, when she mentioned this business opportunity “her friend” introduced her to. I think my violent negative reaction threw her off :) I am hoping this article will present her with a more lucid view of why I reacted so violently.

  38. Enrique in 35, I don’t mean to be negative, but that just doesn’t make any sense.
    Those guys didn’t become billionaires because they sold some stock. They worked hard and invested their time and money into their company to build value into it. They are billionaires because the value of the company they created is worth billions of dollars. The act of selling stock simply transforms some of their illiquid wealth into liquid wealth-i.e. giving up a percentage of their company for some cash in hand.

  39. great and thought provoking post as always.

  40. Exact same thing happened to me in Wal-Mart there. Indian guy, seemingly nice. Called me out on Stanford, exchanged businesscard (his title was “Business Owner” if memory serves), etc. “We are already profitable, and we have only been operating for 4 months.” Give me a break! But I studied social psych at Stanford, so I thought I’d humor him and let him give me the spiel. It was great. You could teach a class schemes like that. He pulled out all the tricks in the book. Cialdini himself would have been impressed… but anyway, great post. I think we met the same guy.

  41. having met atleast 20 people like this in the past 8 years i’ve wisened up to their ways.

    i tell them that i have a better way to make money and they can make 100k in 1 year & there’s no cost, but they need to sign a loan on a house for me. they never call me back!

  42. Fantastic post, Ramit. When I was working for AmeriCorps as an idealistic young person taking time off from college, I needed to make some extra money, so I went into Google and typed in “make money.” Knowing absolutely zilch about entrepreneurship and marketing — I was previously a jazz pianist and brain & cognitive science major — I jumped on the first business opportunity I could find. I had no idea what “network marketing” was, but it sounded legitimate (given my dearth of experience) and I bit. I tried two more MLMs over the years, and neither of them panned out, despite thousands of dollars in investment.

    But I’m actually not writing to lambaste MLMs. I actually believe the underlying structure of “networks of economic reciprocity” has enormous potential for social transformation. In fact, Hindustan Lever Limited (HLL.com) works with women entrepreneurs in India to distribute essential goods to villages typically ignored by MNCs in the consumer goods space — C.K. Prahalad profiled the company in The Fortune at the Bottom of the Pyramid.

    I think the great travesty of network marketing companies — as distinct from pyramid and ponzi schemes — is that they market them as revenue-generating opportunities, promise “financial freedom,” and appeal to the unrefined, unsophisticated Gordon Gecko in each of us. Those who have fewer business or intellectual competencies are especially vulnerable to the false claims of MLMs.

    What if network marketing structures were used to lower the cost of essential goods in inner-cities, through buying cooperatives and family plans? What if the value proposition were not “get rich quick,” but rather “improve your basic quality of life?”

    I imagine the following scenario: a green energy company wants to both promote eco-effectiveness and empower everyday people to live better lives. So they create an affordable solar panel that consumers can place on their roofs to reduce a percentage of their grid energy use. Referring friends earns them both social and economic gains, and yet they have no expectations of the solar panels being a “business opportunity.” They could, theoretically, turn it into a business, but that’s only if they’re ready to take on a serious venture.

    My thought process is still relatively unformed on the business model, but I think there’s something to the concept of “network marketing” if we remove the stigma and traditionally shady business practices. Either way, I believe that entrepreneurs looking to make a difference would do well to look into how consumers can become “prosumers,” or producer-consumers, and expand both the revenue base and socially transformative impact.

  43. On the east coast, such “seemingly nice men” roam the aisles of IKEA waiting for their next prey. I had seen my roommate in college suffer at their hands, so whenever I encounter such “nice men”, I have my act ready, and I start running down their “opportunity” before they have a chance to throw their bait. I always give these persistent “nice men” my incorrect phone number and incorrect name…afterall, they should be rewarded for their persistence. ;-)

  44. great article dude. i’m up here in toronto, and these ‘IBOs’ lurk around Chapters (bookstore) a lot. i’ve been approached so many times i think i have an idea of the profile of a typical recruiter. they stare at you for a good 3 seconds, and then make their way towards you ready to ask you that ice-breaking question. once someone started following me around the bookstore for a good minute and when he finally caught up he said ‘vat a wast array of books hein?’… i responded with ‘um, no kidding, its a book store?’…

    great blog!

  45. Ahmit, great blog entry dude!
    I’m gonna blog about this and some of your other posts over at the LifeSizeMag blog (http://blogs.ayoafrica.com/lifesizemag) for our East African audience. When I was living in Toronto, a cute skirt I was interested tried to get me into Melaleuca but that sort of stuff just ain’t my thingy. Suffice to say, I skipped out on their meeting, which did nothing for my “chances.” :-) Nica gal though. Then my neighbour’s “associates” tried to get me into Quixtar, which is just Amway reincarnated for the web. Like, can’t people find legit business opportunities that TRULY help people?

    Mind you, in THEORY, Network Marketing does have some merit if implemented properly. What I mean is this. Instead of company XYZ wasting a ton of money of advertising costs, they could use their customers to push the product, right? But why are the products still just as EXPENSIVE as going to the mall? If only they’d pass on some real SAVINGS to me, the BUYER, then I’d be more inclined to push certain wares. With Amway, their stuff is overpriced so the customer is FLOCKED (4 letters!) if ya know what I mean.

    People, if you want a real business to get into, find out CHEAP ways to help people reduce their dependency of gasoline, electricity, other living essentials, etc. Or, target SMEs and help them in areas of IT (databases, eCommerce, web marketing, work flow, etc.). They don’t have the IT budgets like big corporations.
    Oh well…end of rant.

  46. Sorry to hear about your experiences. Like Ramit said there are legitimate Network Marketing Companies out there. I am not sure if this book has been reviewed in this site. But I had been considering Network Marketing as a way to start my own business because I did not have a lot of the money saved generally required to start one and I wanted to jump start now and not wait ten years from now because I did not have money. Once I build this small business I could use the money from it start another one that is an ever better one.. So I did research before hand to make sure I select a legitimate business to affiliate with. A book that helped me with guidelines on how to select a legitimate network marketing company has been “The Next Millionaires” by Paul Zane Pilzer. He was an appointed economic adviser in two presidential administrations and warned of the coming $200 billion savings and loan crisis years before Washington officials listened.

    http://www.paulzanepilzer.com/tnm.htm
    Another book Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money–That the Poor and Middle Class Do Not! by Robert T. Kiyosaki is another book that can teach you concepts of Entrepreneurship. Also Rich Dad’s Cashflow Quadrant: Employee, Self-Employed, Business Owner, or Investor…Which Is the Best Quadrant for You? is another book I recommend.

    So if this site helps people teach to be rich, I think consideration should be made to all types of possible entrepreneurships including network marketing business model. It does work, but like any other industry there are always some of the bad apples. So open discussion on how to select a good network marketing company would certainly make a great topic here. Not all businesses are for everyone, so why not discuss all of them, it will be
    up to the individual to decide what works best for them and network marketing might just be one of them.

    Ramit why don’t you accept one of these indian men invitations to learn more about the business they are in? Then write a well informed discussion on your next post about possible legitimate business opportunities ( whatever that might be) Really, I think it would prove useful that you attend one of their meetings to really learn what is going on. Everyone needs to be given the chance to learn that there is a different way of life than that of working from a 9 to 5 until 65 life or older and not all business are for everyone, so why not talk about all of the different business available out there. After you attend their meeting and do the research about any particular business opportunity come back and post on weather or not it is legitimate business and so on.

  47. Great blog entry. I’m glad to see the growing awareness of the shady MLM industry.

    I recommend readers check out the free ebook “Merchants of Deception”, written by a former Amway Emerald level associate. I just finished reading it. It is both insightful and shocking.

    Download the ebook here:
    http://www.merchantsofdeception.com/

    Liz, your endorsement of the over-rated and substanceless “Rich Dad, Poor Dad” book is not surprising. Kiyosaki is MLM-friendly, and it’s easy to understand why. His book only started selling well after some MLM companies started selling and promoting it to their associates as part of their training and manipulation tactics in chasing the promise of “financial freedom”.

  48. Hi thanks for pointing me to the ebook. I just finished reading it. This is a very sad account for that man and his family. I hope they have been able to get back to a normal life doing what they love. That was a very difficult story and I think it does help anyone looking to research the network marketing business model. However, I don’t endorse any book, I encourage research as much as possible. And these books from these authors helped me get started in that research. I never got the two authors of these books I mentioned for being MLM friendly. To me they certainly put forth useful information for those looking for guidance.

  49. this is classic. it sued to happen to make so often last year. any place I go, Costco, Vons, Gap. these people were everywhere. I guess this is coming back now.

  50. Wow. I can’t believe some MLM people are still pulling the same tactics. I moved to Charleston, SC about 10 years ago. I swear, the first 2 years I was here, every time I went to Books-A-Million, someone approached me with Amway. It usually went like this:

    Them: Hey, do I know you?
    Me: No, I don’t think so…
    Them: Did you go to Charleston Southern or College of Charleston?
    Me: No, I went to South Carolina State.
    Them: Oh. Well did you play football? (I’m bout 6’1, 260 and black)
    Me: Nope, not even little league.
    Them: I see….well have you thought about starting your own company….

    It went downhill from there. Now while I was in college, I did actually join Amway. When I showed my parents everything, my dad said, “well son, I don’t think this was a good idea, and I hope you learn something.” Well, I at least learned I didn’t want to have anything to do with Amway. The people that approached me here were promoting Quixtar, the online Amway. It got to the point where they would start their pitch and I would cut them off and say that if it was about Quixtar, I wasn’t interested.

    Also, a few years ago, a friend introduced me to PPL. Well, I did sign up for the service, but dropped it after a year. The funny thing is, people selling it to you never mention that there is a lower tier you can purchase, they always sell the big money one. And you’d think my friend would have my best interest in mind. Guess she was concerned about how she was going to payback her losses to the company because of people dropping out of her network. PPL only mentions that in the fine print.

    I find it interesting that Rich Dad, Poor Dad was mentioned by a previous poster. Let’s just say, I won’t ever buy a RDPD book again, but I will gladly go to the library to check the book out. Also, for those interested in real estate investment, please check out this site before losing 16K (ouch) like I did on classes that basically teach you how to do some questionable investing: http://johntreed.com/Reedgururating.html.

  51. “Nimit” expressed his wish for a card to say “no” to MLM recruiters and then refer them to a web site with information on the scams. Here it is. Go to http://www.mlm-thetruth.com
    Click on “Actions you can take” and click in the left column for convenient “answer cards” to hand out to MLM recruiters.

  52. All I know is that the wall of wealth is coming…and if you don’t know what that is, sorry you’ll miss out. The IRS says 1.6 TRILLION dollars is going to be trading hands PER YEAR for the next 20-30 years. Guess you gotta have a securities liscense to take advantage of that…. now where’d my series 63 book go. :)

  53. Hi Ramit,

    Nice article and bringing it to public about this dirty scheme of making money.

    I hate the people who gets trapped into this and then to recover their money or to make more money they try very hard to involve more people. I pity on these people for adopting these ways to make money. I have heard stories from my friends that the scene is really very bad in bay area. One of my friend has recently moved to bay area and has been caught by 10 people either in mall, walmart, safeway et all.

    To avoid from these people do the following:
    1) When they ask for your number tell them your number is 1234567890 or 0000000000 and just smile at him/her.
    2) If a person accost you and tries to be very friendly, tell him/her politely that you are not interested in any kind of business and if he from any *Star company please don’t waste your time as well as theirs.
    3) Become rude and shower all your anger on them.

    There are many ways to treat these kind of people. They should be publicly insulted for wasting our time.

  54. Wow, Let’s all agree with Ramit just because he has a bad opinion about Indians approaching him about Network Marketing.

    If Ramit would dig deeper, he will find that $30 billions in services and products are exchange through Network Marketing in the world.

    If He would do more research, he will find that in the top 200 fastest growing(forbes) companies are companies that distributed product through direct selling.

  55. Ha. Both my roommates get asked when they go to the gas station, but when i go up there i get nothing! I want someone to come up to me damn it…

  56. Enrique, you make a good point. Citigroup, which is #1 for the 5th year in a row in the forbes global 2000….uses direct selling. David Bach loves the idea of direct selling…. specifically in the financial services market. It’s no wonder that Citigroups marketing arm has produced the most 6 figure incomes in the world, out of ANY company.

  57. This has got to be the best website on the net. I can’t wait to buy your book to show my gratitude.

  58. the title is kind of harsh…i hate all these pyramid schemes…but this is not specific to indian community…i have asian friends who tell the same..so you are approached by indian because you are indian…since your blog is global…do not use “hate indian” word on your title…it really makes me feel sick if people use those words!!

  59. My God, do I hate Indians who try to approach me with business opportunities. I’m an Indian myself, so I understand your aggression, Ramit.

    These people are so damn friendly, and they act like they truly want to get to know you, but the reality is completely different.

    Here’s a conversation my parents had with a decent couple:

    Them: Hey, are you Indian? (Like you can’t tell that from their name and other giveaway signs…shows how much of a genius you are.)
    Them: Could you tell us which flowers to get (they met at a floral shop in a grocery store — what a surprise!)?
    Parents: Sure, these would be great for event ABC.

    Them: What do you do? How long have you been living here? All the BS intro. stuff. But they were careful in not mentioning the “business opportunity”. (I guess they are learning and adapting.).
    Parents: Why don’t you guys come over sometime? (Indian people are stupidly friendly sometimes. Of course, this was exactly what they were looking for.)
    Them: Shamelessly said yes. Called our house at 10:00pm at night to set up a time for them to cover over etc. (What decent person calls someone they had just met at 10:00pm?).

    –They set up the time to come over to our house for tea at freakin’ 9:30pm— (Are you nuts? We are getting ready to sleep by this time. Anyway, we being the host, offered tea, made small talk and here came the speech.

    Thanks to my dad, who told them I was an entrepreneur, he asked me some BS questions that had nothing to do with what I’m doing right now.

    Them: So, you want to be rich one day?
    Me: *Thinking to myself* No, idiot. My dream is to be a homeless one day. What do you think asshat? Ultimately, I said: “Yes.”
    Them: What do you want to accomplish in the next 5 years? Name 5 things.
    Me: What does this have to do with anything? Yes, I’m want to be rich, but I don’t think I could become a billionaire in the next 5 years until I’m really lucky or whatever. But I do want to drive a Lexus or BMW.
    Them: You’ll look good in a BMW.
    Me: Thinking to myself again – doesn’t matter whether or not I look good, if I have the money, I’m going to buy it.

    I’m a Corporate Finance major, so I know a thing or two about business opportunities and how things work financially. Also being an entrepreneur who’s been offered terms sheets by venture capitalists and angel investors, I can figure out things pretty quickly.

    And my god, the way they ask you to give them your phone number is downright genius. Right before they are leaving, so let’s setup a time to meet next week (maybe you could come to this seminar with us on our car) — pulls out his cell phone— so what’s your cell number?

    How could a person not give them the cell phone at that moment?

    The guy kept calling me until I finally broke down and said I wasn’t interested. Then he said, if I knew of other students who would be interested in this. I said, “No.” but I promised to send him an email. “I don’t check my email that often. So, how about I give you a call?”

    And the sad part is – he is a doctor?

    For crying out loud, please do everyone a favor and get out. This was the 2nd or 3rd business opportunity I’ve heard of. I swear, the next time I hear anything like this, I’m going to be all over that person.

    I’m not the one to burn bridges like that (you never know when someone might refer you to someone else etc.), but to heck with burning bridges, that person is going to get a piece of my mind.

  60. I hope they turn out to be alien worshipers that get onto a spaceship one day and never come back.

  61. Great blog! I’m in New York City and the Indian Network Marketers are spreading like a plague. I’ve been approached while shopping in the pharmacy by someone claiming to know me from a party or school etc. I made the mistake the first time by exchanging contact information and he has been pestering me like a flea.

    I’ve been warning my friends about these “business opportunities” for years but they never listen. A few months later they are trying to pitch a new get rich quick scheme. Everyone needs to be aware that getting rich not only takes hard work but it also means educating yourself. This is a great site for people learn and share experiences.

  62. For George (from post #50″:

    There is no buy-in at different tiers in PPL. All new associates start out at the lowest level there is.

    Bill

  63. Enrique (post 55)

    Your comment was an attempt to mislead the readers in promoting the MLM industry without addressing any of the points Ramit has made.

    “Wow, Let’s all agree with Ramit just because he has a bad opinion about Indians approaching him about Network Marketing.”

    No, the overwhelming majoirty of comments are by people that agree with Ramit because they ALSO have experienced the same thing and have formed an educated opinion – unlike those still involved with MLM’s.

    “If Ramit would dig deeper, he will find that $30 billions in services and products are exchange through Network Marketing in the world.”

    That does not make the business legit. Illegal drug trafficing also makes billions.

    “If He would do more research, he will find that in the top 200 fastest growing(forbes) companies are companies that distributed product through direct selling.”

    If you did further research you would see this is the exception and not the rule.

    By far, the major part of the MLM industry is filled with scams and scammers who try to profit from others at their expense and try to promote it, even on blog commentary.

  64. To Not fooled:

    Let’s take your arguments one a time>

    First Ramit mentioned only two companies and from there it extrapolated to the whole industry.

    Selling drugs is illegal.

    Distributing products trough direct selling is not.

    I agree with you that most compensations plans are not equitable. Ramit confused pyramids schemes which are illegal with distributions of products through direct selling and the formations of networks.

    I will give you two more websites which are third party verification that networking marketing is viable business:www.mlminsider.com, and http://www.brilliantexchange.com

    By far, the major part of the MLM industry is filled with scams and scammers who try to profit from others at their expense and try to promote it, even on blog commentary

    I am not promoting any company or the industry. I was giving another point of view by giving you Forbes as a third party, independent evaluations of companies using direct sales as legitimitated, public companies as been viables.

    If you look at any corporation, church,or school are build as a pyramid: On top there is the ceo,cfo, and board of directors and then the bee workers.

  65. One of the issues with MLM is that if thousands of people are operating their businesses professional and in a non-offensive manner – then you probably aren’t even aware of them. But if a handful of people are obnoxious and do things like you experienced – well, you remember it and do as you have done here – branded an entire industry because of the actions of a few. Quixtar for example has something like a million people involved in the US. FTC received only a handful of complaints a year about their reps behaviour. Better Business Bureau the same. Dateline goes to one small meeting within one “line of sponsorship” within one organization, representing a tiny percentage of all Quixtar business owners – and brands the entire of Quixtar the same. I’ve worked with Amway and Quixtar for nearly a decade and never encountered ANY of the issues they took about. They simply don’t occur in our organization.

    You’re a smart guy, you should no better than to generalize to a population from a small, possibly non-representative sample.

    I’m trying to get some true facts and analysis across at The Truth About Amway and Quixtar

  66. Bill,

    I wasn’t talking about associate plans. I was referring to the service. The cost of the PPL service I signed up for was about $20-25 per month. There is a lower tier around $12-15 per month. I was never told about that. The ONLY reason I found out was because I had another friend that had the cheaper service. I had to really dig into my paperwork to find out about a lower tier. Even then, I don’t think a price was mentioned.

  67. dontwannasayit Link to this comment

    Great article. I will give you a great blog entry too! So here is a lil about my background that might matter in my opinion.
    I have a BS in computer science, masters in software engineering, investor in Real estate and sales agent for a mortgage and real estate broker. I trade stocks. I have three companies that do business (software dev, property management). I am 29.

    I was approached by this number of Indians, whites and blacks and as usual pitched their business venture to me. As open mind as i am, i wanted to see if i am missing anything that makes money. So i accepted the invitaiton and made an appointment to see what this company is all about.
    I went to the meeting, heard the way i get paid by being as an IBO (independent business owner as opposed to salaried).

    It sounded like a good deal, cuz i am all about working less and making more. so… inorder to find more about the business, i signed up paying about $300. (i have paid $$,$$$ for some other biz info so $300 was little price).
    then, i have also attended some of the meetings they do. that is when i found SO MANY contradictions to what i believe.

    first of all, all these ppl think college education worthless and just wasting time. their reason: it just leads to 9-5 job. wrong: you only work 9-5 if that is your comfort zone and don’t aspire more.

    2nd:they make fun of ppl who work 9-5 and consider them losers. wrong: you need to get some experience to go out on yourself. create your own company and serve your customers!

    3rd: they tell you, you will be building residual income overtime that will make you 100k+ a year. nothing wrong with that but do it on the side until it builds momentum. don’t tell your recruits to quit their school/college and careers.

    4th: ask one of these guys how much ‘NET’ they make per month and for the EFFORT, TIME they put in. and if you do the calculation, you will see it is a bad decision.

    5th: never take a financial advice from a person who makes less than you.

    6th: you can make $100K+ in this business but this depends on your marketing personality, people skill a great liar(just like any other great sales person, me, the real estate agent).

    Some advice:
    MLM is one way of making money! But when you consider buying into a business please keep this in mind.
    -don’t buy unless it makes you money the minute you buy it.(gross-expense=net)
    -you have to analyse the risk involved in any business venture

    Eg:
    In real estate (rentals): tenants stability is your big risk factor. Others will be location and growth of the area.
    MLM: does the risk of spending time and effort really worth the result? Its your choice. I made a decision NOT to get into Quixtar and here I am happy. And there he is my BROTHER dropped out of college, work $15 an hour and getting $80 dollar per week from Quixtar which he became an IBO in 2001(5 years) hoping one day, he will buy his dream car that he posts on the fridge and live in the mansion he has on his computer screen, all paid cash, no debt. Dude can’t even pay 1g off of his cc. and trust me, this guy works hard 40+ in his business cuz we (his family) don’t see him very often. I even met my own bro at the bookstore. ;) he can’t just stop from loosing more because of guilt and stubborness. He really can’t see the numbers cuz somebody offered him 50k cash to go back to college and get his degree. he declined.

    So, here is what I am going to say: please, go to college, get a job, learn how to have work ethics, after good experience, start your own business!
    -You are a great person and you can do more than annoy ppl at bookstores.
    -You can still do business(be rich) without loosing your friends and family whom you are trying to recruit.
    -Knowledge is POWER. (Study marketing if u wish)

    p.s. The only thing I got out of the meeting was a hot Indian chic and we never talked about MLM.

  68. I would like to add my vote to the good directions Mr. Sethi has guided the discussion about MLMs

    My credentials… Fast 50 winner, 2005 winner of the New Product of the Year for the US from the foremost engineering society in the country, founder and owner of a 25 year old sustainable biz, long before that description existed.

    I urge young entrepreneurs to follow Mr. Sethi’s advice and pursue your own entrepreneurial dreams. He’s got it right. It takes hard work and diligence, not scams.

    Self enterprise is not only possible, it’s never been easier. Don’t complicate your lives by following MLM directions that only distract you from your real enterprise lives.

    I blogged the topic, based on Mr. Sethi’s comments. I thank him for reminding everyone that when it comes to MLMs, just say no.

    You can do it smarter and better yourself. Go get ‘em!

    Rick T.
    http://www.sustainablework.com

  69. There was a time in my life where I was perpetually searching for the newest “Get Rich Quick” idea. I was always trying to be “ahead of the horde” . None of it really worked. It wasn’t until I came to my senses about achieving success. In reality there is NO get rich quick schemes. Success, the real long-lasting kind, can only be achieved through hard work and stubborn dedication. MLM’s mostly fail to realize this.

  70. whats the deal with the e-commerce stuff? It sounded exactly like you guys have described above. Does anyone know which company is behind this?

    I had a guy who delivered my rental appliance the other day try to sell me on this garbage and it sounded like BS, but when I asked can I look at the website and got a negative reply, I knew it was a MLM / pyramid scheme. Does anyone know which company is behind this? And what IS their website? I would love to warn the guy who did not know what he was talking about.

  71. hahaha. I fine this funny because I use to be a huge network marketer. No they aren’t all pyramid scams. Some actually teach you really great business ideas, marketing, and how to sell believe it or not. I did it for 3 years and it didn’t last because the people at the top who start it are the only ones that have a long term big income over the newbies that keep enrolling with their big dreams like myself. Thank god it finally hit me that I was really good at saving money and investing so that is where I turned in the road down stock options trading. Although I am in the military it helps me keep savings and investing until I have enough to retire. I like this blog. No wonder you have a book deal you can write sooooooooo much. Impressive. I’d like to have someone ask me to publish a book some day. cheers- finance ninja

  72. I hate ALL network marketeers.

  73. Ramit, I have a feeling that you honestly understand very little about what is going on around you. I have read a few of your blogs and while I risk having missed some actual good points by limiting my exposure to your “writting” I just could not bring myself to injest any more of your bay area college, liberal flavored text (leaves a bad taste in my mouth).

    To you and all your readers… the world is a nasty place where the strongest and smartest people are the minority and they rule the majority. This is the way that the system perpetuates itself, because left up to their own devices, these “victims” you speak of would destroy the only proven system of forward movement we have. There would be very little progression as people occupied themselves with the unregulated use of resources until the world most likely turned into a far worst place to be in than it is now.

    My biggest thing is your hypocrisy, but once again that is what the people that you deal with are good for and why those who have gained actual success or at least logical thinking are such opponents of your and your associate’s views. I do not think I can blame you yourself, after all your blog is just a regurgitation of the agenda that was spooned to you in your first years and them repeatedly rammed down your throat as you aged in your social setting. You either had to submit to it and then regurgitate it yourself or be torn asunder by those leading the charge to manipulate your minds. But what you did not have to do was actually start to believe it and perpetuate that system through writing. My how funny it is when the puppet thinks that it’s a real boy only because the puppet master has switched to spider web thin string and told him so.

    I honestly did not get past your blog on VW and this one here, only coming across your blog because of your connection with Casey Serin and a comment by one of your users on PrLinkBiz. You were not even able to get this blog into the top 1000 blogs let alone the top 1000 sites on the web, so once again I am not at all sure how you think you are deserving your root name or why people would actually think you had a monocle of insight on how to function within the top 1% of Americans (the rich).

    You think poor people can afford the overpriced crap that is VW? Poor = not being able to feed your kids, living in subsidized housing receiving or one step above receiving government aid, surrounded by death, drug abuse, violence and despair.

    POOR IS NOT eating raman noodles in your dorm room and making 100.00 a week because you do not have enough time to work a college job making 200.00 a week while mommy and daddy pay tuition on top of scholarship money. POOR IS NOT getting fed by going to fund raisers or club meetings where there will be free food, that is not hungry my friend. There are not one VW in the hood or the trailer parks Ramit. You are guilty of the same crap as others, that is thinking you know the world when you really do not even know things outside of your own area and being very vocal about it.

    VW targets naive, liberal/socialist hippies who do not know what to do with money, and I think your only qualm with them is that you and/or your friends were stupid enough to shell out someone’s money for these unreliable buckets to get better social standing amongst other smug hippies or for a cool guitar so you can strum out emo songs through your car’s radio. This was my first clue that you do not know how business, let alone the world works. The skip a payment is to allow the customer base that they target specifically, that of spoon fed, liberal, fools who fall for the agenda, to not miss a payment because they spent all of their allowances on Christmas presents, or to otherwise seem like “nice” people. Open your eyes man, there is a world outside of liberal California, you should go see it sometime if you are not to afraid. I plead with you though, to keep your mouth shut when you do, people’s reactions to your thought process will not be as clean and intelligent as this comment.

    As far as your blogs on pyramid schemes go…. booooo hoooo. So some people at the top are smart enough to get people who do not have much brain power to feed them money. So basically we have a micro model of the macro of society. In any MLM the few lead the many and basically feed on them, this is how the world works. 10% of America is actually making a decent living, 1% is actually making REAL money SAME IN MLM. They are just selling a product that is as difficult to truly succeed in as real life, same hard work, same chances. Do not get mad because these people are using a resource that is wasted on those that feed into it, that is time and most of all money.

    But what REALLY got to me is the fact that you own “company(s)” but want to come at business as if you were some starving idealistic college kid like the rest of your friends. Also that you are a psychology major but you have allowed the agenda of your area to completely skew your perception of how the human mind and thus its effect on the macro (sociology) work. Last but not least was the title of this page “iwillteachyoutoberich” LAUGHABLE.

    You must mean rich in the way of liberal, tree hugging, idealistic, bongo tapping, save the whales, “my fortune is my friends” terms because it sure as hell is not monetary. Not one of your companies has as far as anyone can find grossed or netted even mid 6 figures, let alone 7. The very fact that you typed this

    Consulting
    • Storm Ventures: Emerging Internet technologies & investment evaluation.
    • Omidyar Network: Social entrepreneurship and investment recommendations.

    Was enough to let me know, just as you saw through Casey’s email, that your original ideas are over inflated in worth. “Emerging” made me laugh, how long has it been emerging, is this anything like geeks referring to Mac as “up and coming”. Emerging bring to mind child birth, which in tern has me thinking “if you are awaiting the breech of a baby’s head, and it does not come, when do you start to think maybe the child was not strong enough to make it” You talk a lot about honesty and realism I bet, but when are you going to turn that same opinionated, loud, snobby eye on yourself? Internet technologies….. your best chances are using your racial connections to attempt this offshore using outsourcing (if you have not already)

    “give a man a fish, he eats for one day, teach a man to fish and he eats for a lifetime”, how does this relate to you? Well you have the same idea here, but the thing is YOU DO NOT KNOW HOW TO FISH. You have yet to, in any of your “fields of expertise” get results that warrant you being able to look down on far more successful operations let alone give advice to anyone.

    Sometimes I wonder if our founding fathers would have fought so hard for the 1st amendment if they knew that years later, it would allow people who do not have the basis of common sense to go about running their mouths loudly about complex issues that they have no grasp on. I suppose the only good point is that you, people like you, and those that would agree and act upon your ideals have very little control over the workings of the world, I am very thankful for that. The only thing worst than being wrong is being loud and wrong.

    Of course I will give you your props on having regurgitated the works of other people who wrote books on investment and investment opportunity, that part of your blog is dead on, I hope (and I see many times you do) not try to take credit for these ideas as original or yours, that would just be to much.

    Only one last thing to do now and that is to say YOU HAVE BEEN JUDGED.

  74. Richard Bliss Brooke Link to this comment

    I agree with most of what you said and ……

    I have been a full time MLMer since 1977. My father was a Stanford grad and my mother Mills. I didn’t go. Not because I was not smart but just didn’t enjoy academics. I made my first million as a MLMer by the age of 28 and created maybe a dozen more of people with whom I worked or “recruited”.

    For the last 20 years I have been the CEO of Oxyfresh.com. We are privately held and sell about 60 personal care products mostly in the dental care and pet care arenas. We acquire three times as many new customers each month as we do distributors. But that does not mean that we do not encourage our reps to spend most of their time on sponsoring new reps. We do. That is how the business is built. Amway does 6 Billions a year simply because they have 3 million distributors. Distributors are often the bulk of the consumer base much like a buying club. Costco and Sams have done well with this approach. My company Oxyfresh is 23 years in business. All of our product sales go to consumers. Our “unsatisfied” customer rate is less than .01. We pay out millions every year in commisions and support a multitude of businesses with millions more in revenue. Oh and by the way we got sued once for fraud as well. And we were guilty. No one got hurt. No one bought something they didn’t want based on it. It was a dumb mistake that we paid for and moved on.

    Most distributors do not earn enough income to justify staying involved and end up quiting. The ease of entry is a major cause of this. $35 to “be in business” is a bit of a joke. It is easy to quit since there is little financial loss at stake. People ask me some times what the average distributor earns. The answer is nothing. Average people do not do well in this or any other business venture. Success in MLM requires vision, motivation, courage, people skills and a great enthusiam for your product. Most people do not have it. Interesting don’t you think that most people that want to go to Stanford do not get to go. What is the percent do you think? What is the percent that actually get to apply? What about those that get accepted….I’ll bet you lose some of them as well. Then what percent of Stanford grads actually manifest something worthwhile with their education. I know lots of Stanford grads many of whom earn the same as they would had they invested the money they spent on Stanford on a small business and worked it hard. It boggles my mind to think of how successful any MLMer would be if they invested in their MLM business above their $35 the same amount you invested in your education. ( or did your parents pay for it?)

    I am not saying a Stanford education is a bad thing. If I could have got one without going I would love to have it. Good for the ego and the resume.

    Your anger about MLM and it seems just about everything else in life is often justified. But just because Indians without a Stanford degree have the guts and courage to accost you in a parking lot does not mean the business model is all bad. You promote investing but I dont see any posts on the constant fruad purpetuated by the public markets and companies. I am clear about that fraud and I still invest….wiser perhaps but still invest.

    MLM is a 100 Billion dollar business worldwide. 175,000 people take a stab at it EVERY WEEK in the US alone. 90-99% of them will eventually fail. Some will be bitter about it. Most I have found will have learned something very valuable about life and themselves along the way. Many will remain as customers for a product line they experieced as very valuable.

    Our industry certainly has a lot of cleaning up to do and it is not any different than most other industries. There are the good, the bad and the ugly.

  75. Great blog. Do you mind if I post this on my MySpace group called Control Your Own Mind? Since these scams are really like cults I think it would be a great addition to my little group. Thank you for posting this.

  76. After the riots happened in LA, many Koreans that had lost their businesses got tricked into MLM schemes. Since many of them had lost big and lacked start up money for new businesses, the MLMs seemed like a life raft.

    My mother sold long distance telephone service and herbal supplements (Herbalife and some others).

    There’s also the age old ponzi, which must exist in India, because I believe there are variations in every country.

    I forget what it is called in Korean but basically, it’s when neighbors or housewives that know each other put cash in a communal pot that gets paid out to a different participant each month. Every story I’ve ever heard about these “borrowing circles” has been that the organizer always runs away with the pot of money right before the person who stands to receive the most money is supposed to be paid.

    Every Korean auntie claims to have been cheated this way, proving your point of it’s cult like effect. No one ever has a good story about these ventures but so many folks buy into them anyway.

  77. Did you know social security is, or should I say WAS a large ponzi scheme?

  78. Like anything in life there are some good companies and some bad ones. There are also people who are professional and those that are not. I have to say Kudos to those people who approached you at Wal-mart though… they obviously want to build their business and are working it. The problem with most network marketers is they don’t ever try to work the business. And like anything else in life MLM’s require you to work. How much you work is up to you, but they do require work. Network marketing is not a scam, scheme or ponzi industry however. Yes there are cons out there and you should take a close look before getting involved. However, MLM is one of the few ways the average person can leverage their efforts and earn additional income. A portion of that extra income should be put into investments, IRA’s etc. Articles that condemn the MLM industry as a whole are doing an injustice to people who could benefit from earning some extra income. The US Government also gives tax incentives and breaks to businesses in this county. Having a home-based business has some tax advantages that you don’t get when you work for someone else. David Bach has several excellent books on how to become a millionaire. He is not promoting any MLM. You can buy his books at most bookstores. He makes some interesting points about the MLM industry and why people SHOULD get involved. Granted most people are not going to become rich in MLM. The reason is simple; they don’t want to learn how to do the business properly and won’t get off the coach and work. For those who may be looking for a few extra hundred or even a thousand a month and don’t have the time to work another full time job, network marketing is the best way to earn that money without a huge risk or investment. So next time someone calls or approaches you wanting you to take a look at their products or services, don’t get mad and think they are con’s. Recognize those individuals as people who are ambitious. They are living the American dream, entrepreneurs aspiring to get and have more from life not complacent or cynical people looking to find fault and criticize others who are at least trying to make their lives better.

  79. Damn man, I agree. These scams are just a waste of time. And yes, I live in Silicon Valley as well.

  80. Imaginativeone Link to this comment

    Primerica!

    I was scammed out of $15,000+ from those thieves. Thanks for your insightful and informative essay.

  81. Nice article,I must say and very true as well.I was scammed by skybiz people in 2000.What I felt bad about was your usage of Indians as propagators of the scam.In my opinion,all the scams generate from the developed countries first and we gullible as well as greedy Indians fall into the trap.So we Indians should be considered as not the ones propagating it,but the ones who are suffering from it.

  82. Wow, I got hit by this in Austin in 2004.

    A phd kid, indian ofcourse, asking ” are you interested in a business opportunity – referral and so on”.

    How do smart kids get conned into joining this? Makes you wonder how they got into a school/doctorate/any program in the first place!

    Great blog!

  83. I was in a Sheetz going to the bathroom and this dude walks up behind me at the urinal and starts asking me if I’d like to get rich with minimal effort. Guess what — he was selling Amway. I started to fuck with him by asking him what he did for a living (he was a laid-off machine operator at a factory) and whether he’d made any money — ‘Not yet, but I’m in on the ground floor of a great opportunity and want to spread the world so we can all get rich!’ Ground floor? Amway has been around for almost 50 years. The only people ever to get rich off of Amway have been the scam-artista at the top of the chain. This guy doesn’t realise he’s a disposable cypher, and there millions more greedy, ignorant suckers behind him waiting for their turn at the trough.

  84. Good Day Ramit Sethi, you seem to paint a very bad picture about mlm.
    I can tell you have no experience in network marketing, you have a diagram of a pyramid which you say is mlm if that is then our entire gov is mlm your job is mlm, what is mlm? The new way a company takes it product to the market. Eliminating the old way of distribution, Robert kyosaki calls it the greatest business in the world. Ben Johnson calls it the greatest business in the world; Paul Zane pilzer calls it the greatest business in the world. i call it the greatest business in the world…

  85. Thanks for this article. I just found out about your site from my brother 1 week ago and I have already read 1/3 of the archives. Halfway through reading this post I was reminded of a good friend who I went to HS with who got into, of all things, Pre-Paid Legal in college and would not stop pestering me to join. After a few weeks I had to screen my calls, block his screen name from my AIM and basically avoid him on campus. I still hate to think how he was brainwashed from being a really great and popular guy in HS to being an incredibly annoying scammer later on.

    Here is another type of scam that I am not sure if it was mentioned previously. I run my own business on eBay and 2-3 years ago I was scammed by someone from the Phillipines posing as an Oil Tycoon. After stating he will pay a large amount for an item I am selling, he ask for more and more items with the promise of more and more money that was never sent (obviosuly). This guy stole over $1000 from me and more than $10,000 from others that I found out after creating an eBay auction just to list his name and information and warning others about him. Now I see it all the time, there are African Kings, Oil Tycoons, Lottery prizes and lots of other types of “FREE” money that is just for you to pick up if you send them a little bit of remittance fees or give them your bank account info. Avoid these at all costs please! Thanks again Ramit.

  86. There’s a right way and wrong way to do Network Marketing and you were harassed by the wrong. I’ve been in a MLM coaching program for about a year now and needless to say that approach is old. I and others in the program view ourselves as consultants. We only share our business with people who have prequalified themselves for interest and aptitude.
    97% of people in MLM fail. Dealing with the wrong people is very likely a large factor in that failure rate.
    Multi-Level Marketing should be treated like any other business. Get educated, be mentored by successful people and understand that it takes time to create success.

  87. I certainly enjoyed your comments however i agee with Charles Onuoha. I too have just become involved with a network marketing company which i believe is the most honest company of its type in the world. there is no such thing as pyramid or the man at the top creaming the top while you slave at the bottom. In fact their system is the best i have seen yet. Also they DO NOT SELL PRODUCTS BUT A SERVICE which we all have in our homes. So thee is not Inventory or product but a service. I am grateful to the founders of this company for giving myself and friends the opportunity to build a business and also grow above your upline if they do not work their business.

    of course your emails will be appreciated.

  88. this was one of the great things i ever read in my life!!
    i am happy that there is an option of learning from other people’s experience….and thank GOD that India has still not been engulfed with these MLM’s
    great going dear!

    thanks

  89. I suggest the best way to check whether a business is authentic or not is to check the federal government websites like http://www.bbb.org and http://www.ftc.gov
    Its far better than we discuss here.

  90. We own a primerica biz worth over a million dollars. Was hard work but not a bad result after 7 yrs.Don’t be so negative, you have a lot to learn,noob.

  91. I was scammed by a GPT called SWATCASH.COM.

    I filed a lengthy report with FBI.GOV, BBB.ORG and other scam reporting sites. Swatcash accused me of fraud and threatened me if I filed any sort of report. They kept my check. In addition they had an offer (which I completed)that they were not authorized (according to that company) to use.

  92. Take a look into “Mary Kay” sometime. That’s a similar setup (not precisely MLM, I think, but a close close cousin). My mom’s friend used to do it when I was a kid, but it didn’t work out for her. Fortunately, she got a part-time job and did a lot better.

  93. I read the Merchants of Deception.. was a horrifying experience as well as true to the age old Golden rule – one who has the gold makes the rule..! :)
    I have been approached by countless # of people for such MLM schemes, from Amway, Britstar, Quest International etc., who promise to become rich.. sorry folks, you can never become rich quick. Hard work, determination & careful planning will take you there. Also, YOUR requirement & progress are COMPLETELY different from others so don’t take instructions from others blindly. THINK clearly, consider if it will suit you & then take the advice..!

  94. One of my sisters was involved with PrePaid Legal opportunity. Her and her husband were all gung-ho about it, and they were even written up in the local paper. Today, they can’t stand the concept of MLM and hate being asked about their MLM experience. :) I agree you should be careful talking to your close friends about “opportunities.” It’ll just change their projection of you…probably for the worse.

  95. I have been experiencing this for the last 5 years (I’ve been in the States about 7 yrs now) and it has come to the point now that I distrust any desi who wants to talk to me! Kinda sad really, but it’s either distrust them all or suffer through their rather inane ice-breaking conversation!

    But the worst happened last week (at Walmart, of course!). I and my fiance have recently moved to St. Louis and are looking to make some friends. So we were quite happy when we bumped into an Indian couple and found out that the guy worked for the same company that we do (I’ll give you a hint, it is a major beer maker). We talked about work and exchanged phone numbers. And 2 days later, he called to talk to us about a “business opportunity”!!! I mean, where we work, the pay is pretty good, so it’s hard to imagine he’s into this for money, I guess it is just greed at this point!

    My fiance’s reaction was telling when he hung up the phone and said, “How dare he call me for this after pretending to want to be my friend!”. There is so much good will lost by that, so that even if he never brings up his business again (hard to imagine!), we could never be friends with him because we already feel cheated. I wish these people would get a hint and stop wasting their & our time and any goodwill we may have for our kindred.

  96. Hey Ramit,

    I have some more insight into this article from an insider’s point of view. I had worked with one MLM for 4 years and quit after making meager amounts of $ and seeing that poor people were being lured into this and were giving up a meal or two in a week to be able to “buy tools”.

    Thats right. Thats where the profits come from when the people climb the ladder of people they sponsor into the scheme. For example, they sell CDs with “motivational” rants about how rich they are and how grateful they are etc etc. They are all repetitive. These sell for say $10.00. The people higher in the chain buy it for a smaller price from the “training corporation” that has nothing to do with the parent MLM at a cheaper price and sell it to their “down-line”. It gets to 10-12 bucks by the time it gets to the “leaves of the tree”.
    Other sources are books and tapes and seminars/conferences that generate revenue for the “training company”. People cannot blame the MLM this way because they are in no way related to the “training company” on paper.

    I’ve personally seen the people higher up bickering over the profits that are generated.

    Hope this info helps. Hoping to see another expose on this :)

  97. mr ramit,

    what a post…? dumb post for a person like you who does not understand the business principles of the business..
    –why people(mostly indians) do the amway business is they are on h1b visa on which they are not suppsed to do any traditional business.
    –mosto of them are software people who keep moving on the projects and whenever they are on bench, they dont get paid, so the money tht they make from this business will help them… i am sure you cannot pay them…
    —go and mee the people…the principles and values that they live their life…you can remember your days back in india…

    and coming in general…

    i think all the universities are fraud , because even they charge fees of $ 30K per year to the students who dont have any money..then the students swipe their credit cards…tthen the credit card companies rip them by charging the interest…and then you are a fraud because you take money from them to help them to tell them about personal finances.

    you i think you are the biggest cheater…

  98. Good comments. What they don’t tell you is the costs associated with the promotional material, shipping+handling for products, and other various fees.

    They even make you pay to attend product promotions. With regard to the products, the price is more expensive for a non-brand name products. For the health products, the companies/marketers promote the product as helping relieve many medical symptoms.

    Better to stay away and figure out a “real” business that doesn’t require promoting to everyone you know.

  99. I must say that Ramit does have some very good points. Unlike most, however, I can appreciate MLM businesses a bit more. Just be known… I am not writing this response in argument to Ramit or anyone else that has commented, but am merely trying to put my two cents on the MLM topic as a whole. Furthermore, I am not part of any MLM, but intend on joining one for the sake of trying.

    My rant…

    Just like investing and budgeting, there is no one size fits all for people in the work force. There are “some” people who make money, and “many” who do not. It is my observation, however, that the same people will continue to make money while the others continue to not make money. This is proof enough to me that there is something to be learned, and there is a skill to be picked up.

    Backing up with Ramit said, it is the “people” that ruin the reputation of MLM. People often lie and mislead their subjects. It is all about 100% sales, and “chasing your dreams”. My wrinkle, however , is that this is very much like other jobs. “Take ownership of your own career” is a huge selling point for any corporation trying to attract talent, and yet most are bucketed into a specific role day in and day out (hence the term 9-5!).

    I want to write a lot more but unfortuntaely Igot some work to do. Maybe I’ll come back some time.

  100. I think perhaps people find it easy to deride these business models without really examining what they are about.
    My parents have been involved with Amway for over 20 years and I have grown up with succesful distributors as my parents friend.

    I agree with much of what you say but feel perhaps you pan the upside. Granted you are speaking about a generality of sprurious organisations however the fact is you are opening up a networking business model to people who do not need specialised skills or years of study to be competent. The company takes care of product development and the distributor takes care of finding a sales network – this can be retail selling or developing a network and deriving a benefit from subsequent volume. Exactly the same as any business owner would leverage their contacts. This takes skill to do professionally and many people abuse their personal relationships to do this. I have seen my parents use soft-sell strategies to great effect. Many people take a second look when the benefits are presented in a pressure-free light.

    If you compare a business with no input but labour required to establish a network, generate sales etc to being a professional. Consider your input for your chosen career which requires good grades, study at Stanford, tuition fees, the opportunity cost of that etc. I signed up to use some of their vitamins for a year which cost me $100 approximately. I can quit whenever I want. A lot of people do just that.

    I personally am not involved with Amway (apart from occasional consumption) not because of the reasons you have put down but merely because I don´t want to be doing what my parents are doing. I think it presents an alternative to working 40+ hours a week to provide the lifestyle we look for nowadays.

    Josh

  101. Hi Ramit,

    This is Kannan.
    I think,you got it all wrong about MLM or Network marketing.
    It is unfortunate that smart people like you spreading wrong information.
    MLM is a unique business model where you can reduce your overhead and
    need not to invest much on advertising and running a factory.
    MLM is a place where with a small amount of capital,you can start your own business.
    If the product is not good,that MLM company won’t stand even for three months
    just by word of mouth sale.
    MLM is a business in which there are 14 million distributors involved(approx) worldwide and

    generating around 80 billion dollars(approx).
    If you are in MLM,you will learn to do the following skills:

    1.How to write professional emails
    2.How to write your own Adv copy
    3.How to get rid of shyness and come out of your shell
    4.How to talk to a stranger
    5.How to write your own ebook
    6.How to write articles in your niche area
    7.How to do presentation
    8.How to tackle rejection
    9.How to do prospecting and close sales
    10.How to run a business

    People like Robert Kiyosaki and Donald Trump are recommending Network marketing.
    Grab your copy of their article “why we recommend network marketing” here at this link:
    http://www1.freewebs.com/legitimatemlm/TrumpKiyosakiArticle.pdf

    Please go through the books like “Rich dad and poor dad”
    and “The Business School for People Who Like Helping People” by robert kiyosaki.

    All the best for your book.

    Thanks,
    Kannan Viswagandhi
    cell: 847-312-2481
    http://www.kannanviswagandhi.com

  102. Ramit,
    Excellent post on MLMs. Even if only a few people learn the truth from your post, it has served its purpose.

    A business needs to sell either a product or a service at a competitive price. Quixtar has neither. Their products are way overpriced. No wonder the only consumers are the IBOs themselves. That is exactly what a pyramid scheme is.

    People who compare a pyramid scheme to a corporate pyramid – Dont confuse an organizational hierarchy pyramid with a pyramid scheme.

    A corporation that is a genuine business, say like Microsoft, sells products mainly to outside customers.

    It is ironic that the IBOs work a 9-5 job and use *that* money to make a few distributors at the top rich. On the whole the system is so inefficient that it does not create any wealth. Just sucks a lot from the productive society outside it, and ruins a lot of lives in the process.

    A lot of immigrants fall into this due to greed, misinformation, and a lack of social life. These people are told in their meetings that 90% of Americans over age 65 are broke. How many of you Indian Quixbots personally know Americans over 65?

    Quixtar and other MLMs are cancers that are ruining the lives of tens of thousands both in the US and in some Asian countries.

  103. Hi Meghna,
    I too had a similiar experience like yours in St.Louis. Was the guy introduced you as Jay or JK or something. Did he say he recently moved from Chicago. Just curious to know it is the same guy.

    Thanks

    Saket

  104. Hi Ramit,

    Checked out your article in the chronicle.. you’re an inspiration.. I totally understand the frustration as my husband and I had the similar experience. We’re very outgoing and approach people of indian origin or any for that matter with a smile.. I know when I first moved to US from India, I found it awful for indians to not even smile and say hello as you passed by them, and that’s when I decided to always greet people with a smile and a hello.. But lately, it’s been nothing but asking for trouble when you smile at an indian. My husband and I were talking about this over a snack party with our friends and got to hear all about their experience. I’m starting to worry that “these amway people” are changing us and our culture in a way that I’d not thought possible. I mean, who’d try to change my greeting and smiling habits, but me? Little did I know..

    Anyways… We now, greet people with, please don’t take this conversation further if you’re going to talk about “a business opportunity” :( Sad, but true.

  105. There are bad and good MLMs. When I started with one I have to buy a lot of products and I did not made any money. But when I started with the second opportunity I never knew it was MLM. I did a lot of personal production and after 18 months I build a big team and still making good business. To me, this second business is like a big franchise company. I make personal sales and I buid a team and they make personal sales. No scam. All with regulated genuine business.

  106. I agree with Joseph and Kannan. Those who have not been involved or are successful in MLM (Direct selling I like to call it) should not give bad opinions and make judgments on it.

    My MLM business has given me a lot of free time, financial freedom, self development and fun. I have gained many new friends and have not lost any just because I have an MLM business. In fact friends love my products and some are my business partners. I have never talked to anyone at a shopping center about “a wonderful opportunity” that I can provide for them, that is so unprofessional and tacky. I have not made one cold call and don’t intend to.

    I finished working full time a year ago and have not looked back. It’s not easy at first but what other business out there are easy? I know a lot of people in business and most of them have failed in the first 3 years. Mine has not and won’t.

    MLM is very professional and can definitely provide you with leverage and financial freedom – do your research.

  107. Your comments and warings are for the most part correct on MLM but I would disagree with you regarding Prepaid Legal as it has been a lifesaver for me as a retail business owner with 15 employees for over 10 years. I now sell Prepaid Legal because of my own positive personal experience and the value is real.

  108. Whomever writes positive things about MLMs are either the noobs who are ignorant to the fact that they have been duped, or the brass at the top who are either 1)ignorant to the fact that they are scamming people(these people can be very stupid) or 2)know it, but also know by doing that they are paid hundreds of thousands of dollars. So F*** MLMs and Network Marketing! I used to be into these things (Primerica) and found out how they really work. Great post Ramit, and let all these MLM heads make a fool out of themselves in the comments section. I hate MLMs and I think they should be illegal.

  109. Very Interesting read. After seeing the pros & cons and filtering it through 53 years of ripened bheja, I have come to the conclusion that if you are selling less products and buying more motivational tapes and books and spending hours getting from meeting to meeting evry weekend ( keeping tab of costs of course) to make you better salesman then you better quit.

  110. MLM fever is rising in India too. I am from Mumbai and I have had many people present me a ‘new exciting business opportunity’. Amway is a pyramid scheme but they do have some products to sell. There is another such Ponzi scheme which collects money from gullible youngsters to join their organization and then pay them ‘commission’ to get ‘their’ friends join the chain.

  111. Good Job publishing this article on the web. I hope it helps someone realize what a waste of life this is. Amway and Quixtar are more than a scam. They are devious cults that suck the joy out of your life. I never got involved in this myself, but have seen some close relatives throw years and years of their lives away in fruitless pursuit. People should check out dateline NBC’s take on Quixtar. Just youtube..

  112. Yeah, There are so many people who don’t know what they are talking about. I suggest you to read a Book by the famous economist Mr. Robert T Kawasaki on Eight Hidden Values of Network Marketing other than Making Money.

  113. I’m pretty sure “the famous economist” Robert T. Kawasaki isn’t too famous considering he doesn’t even show up on a Google search.

  114. I recently joined something called “YOR” which indeed seemed to be a scam before, selling VoIP and now health products, well I’ve had my doubts but ultimately your post made my mind clear about the subject. I knew I would regreat signing up and losing 170$. I sold 120$ of it, though. But now, time to change. Thanks!

  115. Hi Ramit,
    This reminds me of when I was in high school and my (Chinese) mom (who is a research scientist!) did a brief stint as a Mary Kay lady.

    Introduced through a friend of a friend, she started going to meetings, sampling cosmetics products, and purchasing them to sell to others. My mom has never been sales-y, however, so 6 months later, we still had the boxes of lower-quality, higher-price cosmetics by a company whose icon was an 80 yr old scary lady with a face full of bad makeup!! Yikes.

    Interesting how these schemes target people with either 1) less education or 2) less cultural familiarity.

    -Susan

  116. Hi,

    I thought I would also share my comments on this blog, because this sort of practise of striking up a conversation with anyone in public is really misleading, I am from Malaysia but honestly I am so afriad of meeting Indian people in public, they seem so nice and then after asking all about your private information and inviting one over to your home, it starts with the business proposal….

    I am not sure if those who do this know how extremlely rude it is to strike up a conversation with anyone with a profit motive behind the talk….

    It is better to have been silent, rather than to appeal to ones emtions. Or rather just directly bring out the business proposal.

    I do think that these people are targeting those who they think are alone and by themselves in the USA…

    I hope no one gets mislead by those who seeminly wants to be their friends but has an ulterior motive.

  117. I am of indian origin and I have had this occur to me about 6 times mainly in the SF Bay Area and Seattle at Walmart, B&N, Grocery Stores. The thing that really disgusts me is that these Indian men will come up and act like your friend. This insincere approach is what ticks me off the most. Sometimes they even do “tag-team” with their wife to talk with mine , while the guy sells his business idea to me.

    Here are my strategies for dealing with this problem
    1. If an Indian man approaches me and asks where I am from, I tell him PAKISTAN. For some reason they leave after this point :-)
    2. Politely tell them to F@CK OFF. Usually this works, they are embaressed and leave.
    3. Yell out loud “Stop touching me or I will call security”
    4. (Only works in grocery store) Go and pick up several pounds of BEEF, the gross stuff in the foam trays and start putting it in their cart. Walk away and watch them hassle others. While they are gone, put even more BEEF in their cart. Keep on doing in until they get fuming. If they start getting mad, open up the packet of beef and throw it and their shirt. Of course pay for the tray of meet.

    These strategies have always worked against those Amway/Quixtar Business A-holes.

  118. Last week I have been in the Target store and this young Indian guy semi formally dressed started to approach me and recommend me on a product. He started asking questions about my origin and what I do. Than he mentioned about him involved in e-commerce biz affiliated with K-Mart, Target and all that big shots. Then the conversation went to like number exchange for maybe a friendly chat. After I get home he started calling me to want to setup a meeting next day. I kinda agreed but was feeling like the MLM sales precognition creeping in. Sure enough the next day he showed up and start blah about how would I like to build a nice residual income, said like $2,000 to $3,000 dollars a month. Sure, why the fuck not? Then he pulled out the brochure and let me wink at it for about a second or two before he tuck it back into his little brief. He was insisting about me joining him the next day for a business meeting and he would personally drive over to “make sure” I don’t get lost driving over to the meeting location. Sounded like he wanted to make sure I show up or else. Right at the next day I bulked and refused to go. He became totally unfriendly and got mad. I look up his website and sure enough it was the BWW/Quixtar junkie network. I am glad I do some research online and had the precognition to bail before these possessed folks globe all over me……

  119. How do you feel about Mary Kay Cosmetics?