Isn't Network Marketing an Illegal Pyramid?

The short answer is no—in case you were reading to genuinely find out. Illegal pyramids (like ponzi schemes) are designed so that those at the top and those who get in early enough make the most money. When it is functionally impossible for the newest registrant to earn the income that those at the top are making, then that is considered a pyramid. When a person down in your organization cannot pass you in title, rank, and pay, then that is a pyramid. And when commissions and over-rides are paid primarily on the recruitment of new associates as opposed to on products, then that is a pyramid. When commissions are paid from the registration fees of new associates (with no real underlying product, service, or value) and when the business stops when recruiting stops, that is illegal.

So, let's think about the question "aren't pyramids illegal?" The answer is "yes, they are." But why do you relate network marketing to an illegal pyramid—because it structurally looks like this?

Okay, I understand how you could think that initially. But once you know that you can surpass anyone above you in rank, title, and pay and that the compensation is awarded primarily on the movement of products and not signing people up, then you know that it cannot be a pyramid, regardless of the direction the people are laid out. So maybe the structure could be drawn differently so that it isn't shaped like a pyramid—circular like this (or perhaps horizontal instead of vertical):

Don't let the image of a pyramid confuse the issue. In closing, I want you to think about it this way. The first image I shared of how most network marketing companies present their business looks like a pyramid, since it is triangular in shape. There is nothing wrong with pyramids—the Egyptians built some that are standing thousands of years later, and they outlived the world powers from that day. But considering the definition of an illegal "pyramid" scheme, isn't that the structure of most companies today? Here, take another look:

You have the CEO at the top, and he makes more money than anyone else in the organization. No one can surpass him in title, rank, or pay. He makes money off the work that everyone under him does. Hmmm? Sounds exactly like an illegal pyramid to me! But people don't mind going in to work every day to support the massive pyramid scheme, and the first time they see an opportunity that resembles free enterprise, personal accountability, and pay for performance, they freak out and declare that it must be illegal! If you want to get mad about anything, get mad about that! Government needs you to be employed because employees pay more in taxes than any other entity or individual! They want to encourage entrepreneurship, but not too much—only in moderation.

Do you realize that before the world wars, the vast majority of people in America were business owners? Immigrants understand this, which is why statistics say they are 10 times more likely to become millionaires than natural born citizens! Employment is a new phenomenon of the 1940/50s and the Industrial Revolution. What network marketing provides is an opportunity to use the most powerful principles of success and wealth on planet earth: leverage and compounding.

As business owners and members of a broader team, we leverage each other's time and strengths. I cannot be in 100 places at once, but I can have a team of 100 people in 100 places at once. I can't be in every time zone building an enterprise 24/7, but I can have a team in every time zone. That's what one of the wealthiest men to have lived in the modern era, J. Paul Getty, meant when he said, "I'd rather have 1% of the effort of 100 men than 100% of my own." See, if I got sick or incapacitated, my income would stop. But if I have leveraged other people, even 1% of their effort, then if I am forced to stop, I've only lost 1% and still have 99% of my income. I may be weak in certain areas (i.e. prospecting, follow up, presentation, etc.), but I can surround myself with people who are strong in my weak areas and still win. And when most people think of compounding, they think of money—compound interest. The principle of compounding works in nature as well. Compounding is an energy that becomes systematically uncontrollable. The question is are you compounding positively or negatively? The effort of others not only produces leverage, but it also compounds the activity. It exponentially compounds the results.

I love you and believe in you!

RR2