3 Things You Lose By Joining an MLM

You almost certainly know someone who is involved with an MLM, or multi-level marketing company. You've seen their endless posts on social media. Maybe you've attended a "party". You might even have bought an item or two out of politeness, curiosity, or social obligation.

They seem happy, don't they? They appear to be making money, having fun, building friendships...

Maybe you've even thought - why not join them? What do I have to lose?

The answer: More than you think. 

Here are the three biggest costs to joining an MLM:

1. You will lose money.

MLM salespeople will often push the "opportunity" as hard as the product itself. There is a good reason for this. Their real product is not mascara or essential oils. It's you. In the MLM business structure, the primary customers are the consultants. 

When MLM companies disclose the earnings of their salespeople, look carefully for two caveats. First, you will note that less than one percent are making any kind of a significant income. This is common enough knowledge.

What less people realize is that these income statements do not reflect the consultant's own spending with the company. Much of the income reported is a consultant's commission on sales to themselves. Overall, this results in a loss of money if the consultant can not move the product - and sometimes even when they can. 

Please, urge your MLM friends to keep track not only of the cash coming into their business, but also their own spending. Encourage them to make a spreadsheet. The losses are harder to deny in black and white.

Even those "reward cars" come with lease stipulations that often leave consultants in the red.

2. You will lose social capital.

Social capital is the most important resource you don't realize you have. It accumulates at both personal and societal levels. We call them "nice people" and "good communities". For this point we are examining personal social capital - the thing that measures your value within your community.

Social capital is not the same thing as popularity. It has more to do with trust, cooperation, and reciprocity. A person with a high level of social capital can easily ask for a favor. They have proven themselves to be helpful and generous in the past - not necessarily to the person they are asking, but to the community. Mentors, leaders, volunteers, and those in the helping professions produce a high level of social capital for themselves and their communities.

We respect them. We like them. We would be proud if our children grew up to become them.

A person who constantly pesters their friends for their own monetary gain is more than annoying - they're a drain people actively try to avoid. MLM consultants are essentially trading away their own social capital for cash.

In the end, they will most likely end up short on both.

3. You will lose perspective.

It's amazing what people will do to save face - even from themselves. Fear of failure breeds desperation. Desperate people lose perspective and make big lapses in judgement they later regret. Before admitting their mistake, many people will dive in deeper by trying to fix it themselves.

In the MLM world, this means doubling down on the concepts above. Many consultants convince themselves that it's a good idea to invest more money, time, and social capital into their failing business. In doing so, the consultant becomes complicit in turning a blind eye towards MLM's inherently predatory business model.

This dynamic is called the sunk cost fallacy. People tend to double down on a bad investment, rather than admitting it's a failure and moving on. As humans, we refuse to believe all that money, time, and social capital we've invested is truly lost. We want to think it just hasn't paid off yet - and so we invest more. This is the same concept that keeps gambling addicts from walking away from a slot machine they've put hundreds of dollars into.

If you have the drive, ambition, and social capital to succeed in a multi-level marketing schematic, you are wasting your potential there. You'll earn more money - and respect - without them. Create your own product. Market your own skills. Channel your unique strengths to create a business you can truly call your own. You'll earn so much more than cash when it succeeds.