Scams All the Way Down — In Little Bosses Everywhere, Bridget Read traces how the pyramid scheme
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As the coronavirus pandemic swept America in 2020, a few industries managed not only to weather the economic shock but actually prosper. Food-delivery apps, exercise bikes, and streaming services all profited handsomely, mostly because people were confined to their homes. Somehow, multilevel marketing companies did well too.
The Direct Selling Association, the national group representing companies that market products straight to consumers through independent sellers, reported a record-breaking $40.1 billion in sales in 2020. Except, as Bridget Read unravels in her new book Little Bosses Everywhere, that number is highly deceiving.
In the world of multilevel marketing (MLM) the only “sales” that are recorded are the purchases made by each seller, euphemistically described in the industry as consultants, distributors, or managers but never as employees. So even when products end up in someone’s basement or trashcan, that counts as a sale.
Read argues that what really happened in 2020 was not a growth in demand for vitamin shakes, makeup sets, or knives — it was a surge in desperate Americans tricked into thinking MLM was their golden ticket out of living paycheck to paycheck. The pyramid scam is bigger than ever before, and its influence has crept into nearly every part of the American economy.
MLM owes its start to Carl Rehnborg, an entrepreneur who tried introducing milk to the famously lactose-intolerant Chinese market. After his failed Asian business venture, Rehnborg became fixated on developing vitamins from alfalfa in Southern California. Like most vitamins, his product had minimal health benefits and his business, eventually called Nutrilite, struggled until his luck turned in 1945. That was the year he met William Casselberry and Lee Mytinger, developers of the “Plan.”
The pitch was simple: every Nutrilite distributor could make money in one of two ways. They could buy pills at a discounted price and then profit by selling them for a markup. Or distributors could become “sponsors” who made money by bringing in new distributors below them. All distributors in a “downline” would buy their products from the original distributor, who would also get a commission when their recruits made purchases. This method was far, far more lucrative for distributors at the top.
Door-to-door selling companies like Avon and Fuller Brush existed at the time, but the Plan was radically different because it didn’t require Nutrilite representatives to actually sell products. Multilevel marketing (MLM) was born and three middle-aged flameouts got very rich.
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