How Exactly Do Networking Companies Work

I have been hit so many times by MLM businesses. I have listened to all their pitches about how you can retire early and have wealth beyond your belief. After hearing the sales pitch of one you have heard them all. But in my mind I always question whether or not it is true that a person can be a millionaire off the MLM system of marketing. I mean it is a duplication of ones own efforts exploded by the efforts of many others. But is it a pyramid scheme, or is there really an honest way to make money by signing y0ur friends and family up below you in a matrix commission paying business. The way I have learned is that you join a business and you tell your friends about it. They in turn tell their friends, and then you start generating wealth through the efforts of many people working in your downline. To me this is a very genious idea that in fact is a real way of creating wealth. But why is it that MLM or now called network marketing companies are looked so poory upon. In my mind I believe that the idea is a very good one, and there are real good companies out there with the opportunity to build wealth. But the bad name has come from people trying to scam on others. So after a few people have been burned, the whole industry is labeled as a scam. I do no believe this is so. I am currently a network marketer and I have seen the success it can generate. So as a conclusion, I would like to say that network marketing a a legitimate way of creating wealth. It is no different than a heiarchy of management in the corporate world. All things are build off the pyramid model and network marketing is just a way to duplicate your efforts in creating wealth.


Dr. Tufte said...

-3 on Liz's post for many, many spelling errors.

Network marketing companies are a big thing in Utah. This is not a good thing.

At best, network marketing is a marginally ethical line of business, and its popularity in this state is of a piece with our high rates of business fraud, and personal and business bankruptcy. People ought to know better.

Having said that, humans have a long history of falling for centralization and hierarchy as a way of creating value. This is not to say that they can't create value, but that they don't do this by their existence but by their efficieny gains.

Network marketing is once again, a form of prisoner's dilemma. For an individual, joining such a firm might be an optimal choice, but for society as a whole, it isn't.

Matthew said...

Dr. Tufte said, “Network marketing is once again, a form of prisoner's dilemma. For an individual, joining such a firm might be an optimal choice, but for society as a whole, it isn't.”
It seems that this is true because there will always have to be someone at the bottom, so someone has to lose. It also seems like no new value is being created when you pay money to someone to be under them. Multi-level or network marketing – whatever you want to call it, it's still a pyramid scheme, and those are against the law, right?

Dr. Tufte said...

Apparently, not in Utah. I actually get quite a lot of flak from students about this position.