Max Ehrenfreund has a big investigative piece about multilevel marketing companies, which recruit salespeople with the promise that you can make a tidy profit selling chocolate, or protein drinks, or other products. But it doesn't always work out:
Enrique Martinez didn't like chocolate, but he was eating as many as 10 pieces a day, drinking chocolate protein shakes and rubbing a chocolate-based skin cream on his face. It was expensive chocolate, too. Martinez and his wife, Michelle, were going through $2,000 in chocolate a month.
The debt they accumulated this way — more than $100,000 over five years — is now with a consolidation company. Their credit is ruined. There is a crack in the driveway at their home in Albuquerque from a 14-wheeler that once delivered 12,000 cans of chocolate energy drinks to their garage. [Washington Post]
These companies are often compared to pyramid schemes, but there is a key difference. A pyramid scheme is an outright fraud where new investors are used to pay existing ones, so if the supply of new recruits ever dries up, or the reality of the situation leaks out, it collapses immediately. These companies, by contrast, are structured around selling actual products, so they are often perfectly legal — and they make the recruits complicit in perpetuating the business, because otherwise they'll have no chance of making good on their investment.
But sadly, according to a legal expert interviewed by Ehrenfreund, up to 99 percent of multilevel marketing recruits will end up taking a loss. The whole story of Martinez and his wife is really worth reading in full.
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