Multi-level marketing? Really?

[amphora]

Vagabond MD wrote:

I will go further than “not a fan” to say that I despise MLM and view it is a sibling of the Ponzi scheme and a first cousin of the sock puppet, both detestable on their own.

My favorite is when local moms, usually the wealthiest and non-working types in my ‘Hood, host trunk show parties, creating peer pressure for their guests (like my wife) to buy overpriced crap they don’t need.

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I agree. MLM is about recruiting more and more sellers rather than just selling a product -- that's why it's called a pyramid scheme. I find it to be an unethical business model and not just some side hustle for someone with an entrepreneurial streak.

Having read both the WCI and PoF blogs, PIMD seems like a drop off in terms of quality. I've found some PIMD post engaging, particularly the ones on real estate investing, but PIMD reminds me of the more generic personal finance sites. There's not much physician specific content.

The blog posts are short and short on details. He rarely runs through the math and seems to be a follower of Kiyosaki (http://passiveincomemd.com/book-review-rich-dad-poor-dad/) in addition to MLM. Basically, his investing views seem quite different from WCI.

[MPMD]

I completely agree that PIMD is no where near the quality of WCI/PoF.

MLM is just absolutely awful. Rodan and Fields is a decent part of the reason I basically never look at fb these days. It's actually quite sad to see the posts to me. I hope the people selling it are getting some money and feeling like they are doing some good in the world but, as others have said, I'd rather do just about anything else.

In the case of R+F they seem to have made an emotional commodity out of people (mostly women in my experience) posting faux-spontaneous pictures of how much better they look after 2 weeks of face-crap.

I have also been shocked, although I probably shouldn't be, by the acquaintances of mine who have gotten into R+F. Without betraying confidence, if you are posting pictures of your new Range Rover next to your R+F hock, you might need a financial checkup.

[The White Coat Investor]

Here's a thought exercise for you- what product(s) do you think would be sold well through a MLM structure?

[ITEngineer]

The White Coat Investor wrote:

Here’s a thought exercise for you- what product(s) do you think would be sold well through a MLM structure?

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1. Product needs to be marketed to both sexes for largest sales audience possible.

2. Product needs to be consumable. Jewelry/Purses/Kitchen Items/Bags aren't really consumables.

3. Everyone needs it.

If any product would ever be successful, it would be electricity sales. Since they could be marketed to anyone (not just women as most MLM organizations seem geared towards them), it is a 'consumable' (meaning you have to buy more each month) and everyone uses it.

That said, I remember the MLM Electricity push of 7-8 years ago. Luckily, I don't know anyone who sells it anymore. One less thing to be hassled about.

[Rose Boy]

WCI, I'm not sure what you're trying to get at. However, there isn't much of a thought experiment needed - Amway has shown us that MLM can be used to "successfully" sell just about any product.

 

I think it’s a bit beside the point, though. What I and others object to is the morality of MLM. Numerous studies have shown that 99% of people lose money in MLM schemes, while those that do make money are essentially doing so at the expense of those lower in their chain of distributors (not to mention the morality of hitting up your relatives, friends, neighbors, coworkers, etc. to support your “business”). Everything I’ve read on your blog so far has been pretty legit, so I’m not sure why you are putting yourself out there to support MLM?

[DMFA]

ITEngineer wrote:

The White Coat Investor wrote:

Here’s a thought exercise for you- what product(s) do you think would be sold well through a MLM structure?

Click to expand…

1. Product needs to be marketed to both sexes for largest sales audience possible.

2. Product needs to be consumable. Jewelry/Purses/Kitchen Items/Bags aren’t really consumables.

3. Everyone needs it.

If any product would ever be successful, it would be electricity sales. Since they could be marketed to anyone (not just women as most MLM organizations seem geared towards them), it is a ‘consumable’ (meaning you have to buy more each month) and everyone uses it.

That said, I remember the MLM Electricity push of 7-8 years ago. Luckily, I don’t know anyone who sells it anymore. One less thing to be hassled about.

Click to expand...

I remember Ambit Energy.  Had like three former cheerleaders from my old high school friend me within a week of one another back in, like, 2007 or something.  I was like "sweet, the girls are loving me now that I'm in med school!  Where were y'all five years ago?"  Turns out they were just trying to get me to change electricity providers.  Groan.

[VagabondMD]

Rose Boy wrote:

WCI, I’m not sure what you’re trying to get at. However, there isn’t much of a thought experiment needed – Amway has shown us that MLM can be used to “successfully” sell just about any product.

 

I think it’s a bit beside the point, though. What I and others object to is the morality of MLM. Numerous studies have shown that 99% of people lose money in MLM schemes, while those that do make money are essentially doing so at the expense of those lower in their chain of distributors (not to mention the morality of hitting up your relatives, friends, neighbors, coworkers, etc. to support your “business”). Everything I’ve read on your blog so far has been pretty legit, so I’m not sure why you are putting yourself out there to support MLM?

Click to expand...

I would not agree that the WCI is “supporting MLM”. I would not even agree that it is a major emphasis of a newly affiliated site (PIMD), an issue that I was not aware of until today. Like others, I think of PIMD of as being that “real estate income for docs” site. I do not think each of the three affiliates in WCI need be in 100% agreement on all issues. Heck, I wish my practice partners could reach consensus on 50% of issues that arise.

[Hatton]

MLM my views on this go back to my childhood.  My first cousin got a degree in Nuclear engineering but some how managed to get involved in a MLM called Koscot Cosmetics in the 70s.  He made tremendous money and had a large home in Orlando Fl.  then he got indicted for mail fraud and spent months on trial.  It was a hung jury.  Several of my relatives bought into the pyramid and lost it all.  Clyde resurfaced a few years later on a Sunday morning faith healing over the air waves type show.  In this case only small samples of the product was produced so more clearly a fraud but buying in to something and then convincing others to join for a fee is all the same.

[Zaphod]

I dont think MLM is the best method for any type of business. I am full on game to entertain and discuss and try to learn more about specific scenarios that may lend themselves to it, but am super doubtful.

Remember the difference between a MLM business and pyramid scheme relies entirely on the tolerance of the US government giving out lenient judgements and vague wording in relation to business structure. From a no nonsense view point unless theyre pyramid schemes these simply wont actually work as MLM is just garbage as a set up without that component. US government allows a certain amount of pyramid in your 'MLM'. If that changes one way or the other it becomes more or less difficult.

Just have to recognize these exist solely at the discretion of the whims of whoever is in charge of the FCC/FTC or something like that.

[Complete_newbie]

@DMFA hilarious. Sudden money or popularity - check yourself.

[startupdoc]

Generally speaking: good products do not need to be sold. If there are fancy ways and gimmicks that are required to sell a good, it is very likely that good is crappy. There has got to be better ways of making passive income without risking looking "slimy."

I really roll my eyes if someone in the medical field is selling crappy unproven products for a medical problem. Especially if its a physician. The problem is, when a physician sells a medical product, the general public is more likely to buy it because an authority figure (thats supposedly an expert) gives that product more street credibility. Therefore, a physician, has an extra social responsibility of being very careful about their recommendations. Some may think this is an unfair burden, but I believe it is important for the credibility of our profession.

[countryphysician]

Good video by John Oliver on the problems of MLM. Quite funny as well.

https://youtu.be/s6MwGeOm8iI

[The White Coat Investor]

Rose Boy wrote:

WCI, I’m not sure what you’re trying to get at. However, there isn’t much of a thought experiment needed – Amway has shown us that MLM can be used to “successfully” sell just about any product.

 

I think it’s a bit beside the point, though. What I and others object to is the morality of MLM. Numerous studies have shown that 99% of people lose money in MLM schemes, while those that do make money are essentially doing so at the expense of those lower in their chain of distributors (not to mention the morality of hitting up your relatives, friends, neighbors, coworkers, etc. to support your “business”). Everything I’ve read on your blog so far has been pretty legit, so I’m not sure why you are putting yourself out there to support MLM?

Click to expand...

Now I'm a supporter of MLM? Are you kidding me?

Look pal, I'm learning about this right along side you. I have no MLM business experience whatsoever as a buyer or seller.

But here's the deal as I understand the business structure. Let's compare it to a more "standard" structure.

Let's say you have a product. You want to sell it. You think it's an awesome product. So you have some options. First, you could hire employees to go out and sell it. Pay them a salary and benefits. There's some risk there. You don't know how much you'll sell. Plus you don't have much start-up money because you blew your life savings on developing the product. But at any rate, you hire the employees. Luckily, every one else thinks the product is great so you quickly start bringing in revenue and can pay the employees.

Or, alternatively, you decide to share some of the risk with the sales staff. You say, I'll teach you about this product, provide you this product, and teach you how to sell. I'll mentor you along the way. Instead of you paying me for that expertise and work, I get a small percentage of your profit. If you're not successful, I'm not successful. Our incentives are aligned. The more of this awesome product you can sell, the better we both do. But wait, you can even do the same thing I'm doing once you're successful. You can teach someone else about it, provide the product, and teach them to sell. Then you get a percentage of what they make. Of course, you still have to pay me a small percentage of the profit passed on to you since I taught this to you, but if that third person sells like crazy, we all stand to win.

This is not a pyramid scheme. If the product sucks and nobody buys it, there's no money for anyone at the end of the day and the business does terribly.

Now, I think the problems come from the set-up being abused. The new recruits are told this is easy. The new recruits are made to pay for the seminars where they are taught to sell. Or they have to buy a certain amount of product themselves. Or they have to pay for training materials and the training materials are actually the product because nobody ever actually buys the product. That's just a bad business.

But I don't think I'm entirely convinced the underlying business structure is amoral or bad in some way. You give me a no-brainer product and eliminate abusive practices and I could go gangbusters with this set-up. You don't HAVE to have meetings in people's houses. You don't HAVE to pressure your friends and family. You could start a website, put up billboards, or knock doors to sell it.

At any rate, I'm looking forward to learning more from someone doing this successfully. Apparently there are a lot of doctors and doctors' partners out there doing this and I'd like to learn more.

[The White Coat Investor]

startupdoc wrote:

Generally speaking: good products do not need to be sold. If there are fancy ways and gimmicks that are required to sell a good, it is very likely that good is crappy. There has got to be better ways of making passive income without risking looking “slimy.”

Click to expand...

Explain that to term life agents. They have to sell their product.

Vanguard advertises. Why would that be?

How did you find out about the iPhone? Advertising. Marketing.

But I agree, if you need a fancy way or gimmick to sell something, there's a good chance the product sucks. Is MLM shared risk or a gimmick? Dunno.

Business 101: Make sure the product doesn't suck.

[Rose Boy]

The White Coat Investor wrote:

Rose Boy wrote:

WCI, I’m not sure what you’re trying to get at. However, there isn’t much of a thought experiment needed – Amway has shown us that MLM can be used to “successfully” sell just about any product.

 

I think it’s a bit beside the point, though. What I and others object to is the morality of MLM. Numerous studies have shown that 99% of people lose money in MLM schemes, while those that do make money are essentially doing so at the expense of those lower in their chain of distributors (not to mention the morality of hitting up your relatives, friends, neighbors, coworkers, etc. to support your “business”). Everything I’ve read on your blog so far has been pretty legit, so I’m not sure why you are putting yourself out there to support MLM?

Click to expand…

Now I’m a supporter of MLM? Are you kidding me?

Look pal, I’m learning about this right along side you. I have no MLM business experience whatsoever as a buyer or seller.

But here’s the deal as I understand the business structure. Let’s compare it to a more “standard” structure.

Let’s say you have a product. You want to sell it. You think it’s an awesome product. So you have some options. First, you could hire employees to go out and sell it. Pay them a salary and benefits. There’s some risk there. You don’t know how much you’ll sell. Plus you don’t have much start-up money because you blew your life savings on developing the product. But at any rate, you hire the employees. Luckily, every one else thinks the product is great so you quickly start bringing in revenue and can pay the employees.

Or, alternatively, you decide to share some of the risk with the sales staff. You say, I’ll teach you about this product, provide you this product, and teach you how to sell. I’ll mentor you along the way. Instead of you paying me for that expertise and work, I get a small percentage of your profit. If you’re not successful, I’m not successful. Our incentives are aligned. The more of this awesome product you can sell, the better we both do. But wait, you can even do the same thing I’m doing once you’re successful. You can teach someone else about it, provide the product, and teach them to sell. Then you get a percentage of what they make. Of course, you still have to pay me a small percentage of the profit passed on to you since I taught this to you, but if that third person sells like crazy, we all stand to win.

This is not a pyramid scheme. If the product sucks and nobody buys it, there’s no money for anyone at the end of the day and the business does terribly.

Now, I think the problems come from the set-up being abused. The new recruits are told this is easy. The new recruits are made to pay for the seminars where they are taught to sell. Or they have to buy a certain amount of product themselves. Or they have to pay for training materials and the training materials are actually the product because nobody ever actually buys the product. That’s just a bad business.

But I don’t think I’m entirely convinced the underlying business structure is amoral or bad in some way. You give me a no-brainer product and eliminate abusive practices and I could go gangbusters with this set-up. You don’t HAVE to have meetings in people’s houses. You don’t HAVE to pressure your friends and family. You could start a website, put up billboards, or knock doors to sell it.

At any rate, I’m looking forward to learning more from someone doing this successfully. Apparently there are a lot of doctors and doctors’ partners out there doing this and I’d like to learn more.

Click to expand...

As far as "learning about this right along side you," I'm sorry, but I don't buy it. There's tons written about MLM out there, you don't need to have first-hand experience to know it doesn't work like the fairy-tale version you laid out. You seem to have a keen sense of bad products when it comes to whole life insurance, for example, so I still don't get why you approach MLM (and hiring, or partnering, or whatever your arrangment may be with PIMD is tacitly supporting MLM as he writes about it) with such wide-eyed enthusiasm. You're motto is preventing "doctors from doing stupid things with there money," and MLM seems pretty clearly to be a stupid thing to do with your money.