Thursday, December 13, 2012

To MLMers, "Employee" is a Perjorative, but Why?

Robert T. Kiyosaki
Cover of Robert T. Kiyosaki
Just the other day, when discussing a suspect scheme (it's a clone of an existing pyramid scheme), its defender trotted out this argument:
The people that call [Redacted] a scam are the quitters, employees of the world, and the people that can’t stand that there’s a 19 year old kid from [redacted] making more money than them just for traveling and showing people how to get what he has.
Clearly, "employee" is meant to be a pejorative. But why?

Blame one guy: Robert "Rich Dad" Kiyosaki.

In his various books, esp. "Cashflow Quadrant", he basically made the claim that there are four kinds of people: Employees, Self-Employed, Business Owner, and Investor. It goes something like this:

Seem to make sense, until you realize this is a MASSIVE simplification. You can think of examples all day to contradict this. You can easily span multiple categories. This sort of classification is no more useful than, say "bloodtype determines personality", or "Zodiac sign determines personality". It's a bunch of pithy stereotypes, nothing really useful. 

The truth is, nobody liked the book until Kiyosaki started pitching it to the MLM circles, where it was readily adopted as a MLM "training tool". MLMers basically claim that MLM is the easiest way for a regular E to move over into B. 

But is it real? Is MLM really the tool to move from E to B? 

Consider this: if you're an upline in MLM, and you have downlines. Do you actually "own a system" like the way you own a business? The answer is "not really". You own a tiny SLICE of a system, extremely downstream portion.

FACT: The real owners of the MLM company owns the system, and you all are working for them: selling their stuff.

FACT:  You don't own ANYTHING other than the inventory you buy from them (if any) and some title in their computer system (and some contacts for your uplines and downlines)

FACT: Even if you work very hard, your chance of failing is great (believed to be over 90%) If you fail, it certainly *can* be the company's fault for bad product, lack of support for you, bad upline or downline, etc. etc.

CONCLUSION: You are EMPLOYEES with a delusion of grandeur that you're Business Owners.

A Franchisee, like a branch McDonalds, would be a business owner because he PAID for such a system. He only pays McDonalds for the material (which he needs any way) and some licensing and advertising fees, and some training (including in the franchise price). How well the business runs is up to him. He owns his piece of system and is fully responsible for it. If he fails, it's not McDonald's fault, but his own, because he didn't manage the employees to follow the system properly. A McDonalds franchisee owns the full system from manufacturing to retail. They take in material, they spit out consumer goods and distribute it to people and get paid for it. They profit by adding value: cooking the food.

MLM is NOTHING like that. 

At best, MLM is MARKETING. It's a way to sell EXISTING products. MLMers do no manufacturing (handled by parent company), and virtually no distribution (most products nowadays are drop-shipped by the company itself). MLMers solely exist as a SALES FORCE, nothing more. AND it relies on the company for two things beyond its control: product, and compensation plan. 

The ONLY THING MLMers can control is the amount of money s/he puts in for promotional purposes, such as brochures, flyers, ads, meetings, parties, samples, and such, and how much time to put in (also for promotional purposes).  That means fundamentally, MLMers are EMPLOYEES at the mercy of the company, except they are treated as independents and thus NOT protected by labor laws. 

At best, you can consider MLM to be self-employment, but it is certainly NOT owning a business, as you don't own any system.  

Once you have whole team of downlines, and you managed to train them to be successful salespeople, then you can let them sell almost any thing, not just whatever MLM you start with. THEN maybe you have a system. 

But does joining a MLM makes you own a slice of the system? No way. 

Is that inherently fraudulent? You be the judge. 

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  1. You've got to be kidding? Owning a franchise is nothing like you discribe! You must do everything exactly as it is laid out in your franchise agreement. Do you think a franchise owner sets his own hours? What if he wants to buy cheaper staws for his business from another company? No way! And what about advertising? you will spend a set percentage of your revenues through cooperative advertising ventures set and approved by the company. Ask anyone who has owned a real franchise and see if your assesment or mine is more acurate. At least with MLM you don't have to work with a bunch of teenagers all day long to make a profit!

    1. And MLM offers even LESS control, as you don't make or add value to the product. At best, you "consult" the product. All you do is marketing. Which was the whole point. I am not arguing for or against franchising. I am simply explaining that MLM is even LESS control than franchising.