Over the course of 5 or 6 years, I’ve come into contact with a few different companies with this model. At first, it seemed really exciting. Like everyone else, it’s extremely enticing to retire at 30 years old, and have distributors underneath you who do nothing but grow your assets while you simply vacation. It’s a valid desire to want to provide for your family, and these companies promise that you can do it soon, as long as you work hard.

As soon as I decided to dig deeper, I noticed that arguments became closer to ad hominem than to counter-points. I was met with “How is that different from X company??” and the like. I asked my brother, a graduate of economics, what he thought about MLMs, and he had a passionate response against them. He didn’t specify why they were bad, other than that anyone who was employed by one was annoying to the point of him not wanting to associate with them anymore. This was enough for me to look elsewhere for my life plan, but not everyone is motivated by fear of being annoying, like me.

I’ve had more than a few friends tell me about their experiences with these companies, and some have been nothing but good, while others were nothing good at all. One friend lost $2000 upon leaving the company because he didn’t reach his sales quota. Others I know have been living less-than-mediocre lives, moving from one MLM to the next, until they couldn’t afford it anymore. I’ve read about garages full of products that people couldn’t sell, but had to buy on their own dime just to keep their status in the company, so they could have a higher income.

The companies themselves love to show off the people who have been successful in their company. It doesn’t matter which one you meet with, there will be miracle stories and success stories galore. Sometimes it gets annoying how much they focus on how rich you’ll be.

But what is the reality of these companies? Is it possible to reach a point where you can retire at 30 years old? Maybe, but I’m not sure you’d want to even if you had the opportunity.

Critics of MLMs point out regularly that you can’t sustain the business model, and they explain it using simple mathematics. I’ll use this, but go deeper, using the business model of one of the largest MLMs.

There are around 7,506,600,000 on the planet as of writing this.

According to Amway’s documentation, you need 6 people working for you (sometimes referred to as “down-lines”) to qualify for the “Eagle” level. Let’s just say everyone has 6 distributors, all the way to the top of your “up-line”, and back down each branch. That means 1 + 6 + 36 + 216 + … + 6^n people. That means that after 13 levels, you’d have 15,672,832,819. Twice the population of the world.

What does this have to do with anything? Let’s back up.

If there are 7,506,600,000 people in the world, that means that there won’t be enough people in the world for level 12 IBOs (”Independent Business Owners”, or “Distributors”) to become eagles. There would be 2,176,782,336 of those people, and only 5,329,817,664 people left in the world to recruit, which is 2.4 people per level 12 distributor. Do you see the problem yet? Let’s bring in Amway’s rewards system.

If you are a level 11 distributor in this hypothetical, you’d have 6 distributors under you, and each one, if we stick close to the average, would only have 2 or 3 distributors each. Let’s say half have 2 and half have 3 (above average down-lines for this circumstance) After doing the calculations, and assuming each one could do $300 of sales each month of products that end up being 100 points total, you’d be making something like $11,000 per year, after accounting for some (but not all) of the rallies and events they suggest you go to (sometimes $250 per person), and basic monthly fees they make you pay for just to have the “privilege” of using their distribution chain.

How many people are on this level again? 362,797,056. And everyone below them would be making less.

If you’re on level 10 you could be making around $105,000 per year, a difference of almost $90,000. However, there are only 60.5k of these people, out of the 7 billion on the planet. That means that less than 1% of the world would be making a living wage.

Now this is not realistic, because the whole world would never join the company. But, the principle of the business model is built on the fact that a HUGE majority of people in the company will lose money every year. It’s impossible to sustain, and it’s unethical to participate in a company that is built on this principle, in my opinion.

If you’d like a more scientific explanation of the unsustainability of this type of company, this former distributor did the math based on his experience, with specific examples of extra costs. Though, I have no idea when it was written, and prices and policies may have changed since.

I realize that using idealistic arguments isn’t realistic, and doesn’t represent the real world, so I would like to re-iterate why I used this example. It highlights that the principle this business model is that there must always be more people to recruit, or you will not make money. In the event that there is nobody left to recruit, the model collapses, and there is no more money. And unfortunately, as I’ve illustrated, it’s the 99% that suffer for it. If you bring someone into this company to work under you, you are creating a dependence for them which they must fill in order to succeed. That chain is never broken. It is a dependency that by definition insatiable, and therefore is not sustainable. And those living off the profits are living off of those who can’t grow their down-lines no matter how hard they work, and end up making a measly wage not fit for a person.

So next time you think you’d like to retire early, idk, start a YouTube channel, if you think you’re lucky. Otherwise, do the smart thing. Make solid investments with what you have. Increase your capital by learning as much as you can, until you become an asset to someone, and can create value for them. Or, become your own asset, and run your own business, and I don’t mean with an MLM where your business is a subsidiary of someone else’s, and a chunk of your profits go to them. Reap everything you sow, and whatever you do, be the best at it.