4

Everyone Is (Usually) Just This Side of Legal

eccolo74/iStock/Getty Images

Technically, there is a difference between a pyramid scheme and a MLM, although I'm using the names interchangeably in this article because there is A LOT of overlap between the two. Pyramid schemes, in theory, emphasize recruiting new sellers over actually selling product, but in the end, they do both. MLMs supposedly emphasize selling product over recruiting people, but in the end, they also do both. You can see why this gets confusing.

IgorIgorevich/iStock/Getty Images

But pyramid schemes are illegal in most states, while MLMs are not. And everyone, from the participants to the people who wrote the actual laws, is really confused about where the line is between the two. This results in a lot of lawsuits against supposedly on-the-level companies. In November, Herbalife agreed to pay $15 million to settle a class-action lawsuit about their discounting and recruiting process, things that made them look like one of those gosh darn illegal pyramid schemes. It's not the first time their policies have been called into question, and even after the settlement, the Federal Trade Commission is still investigating them. They are far from the only MLM to cross the line and get in trouble for it. Companies have been sued for everything from failure to accept refunds to false advertising to friggin' fraud and racketeering.

3

Some of Them Are Actually Evil

stevanovicigor/iStock/Getty Images

While the rules may be a bit fuzzy in America, in other countries, these schemes are often free to do what they want, and mostly what they want to do are bad things. In China, members of a group working to rescue people from pyramid schemes have actually been physically attacked by the ringleaders of said schemes. In Albania, two-thirds of the country invested in combination pyramid / Ponzi schemes that were tacitly approved by the government, leading to a rebellion in 1997 after everyone lost their money.

But even stateside there are really scary companies. Amway has been called everything from a cult to a "private political army" for the creepy devotion of its participants and its right-wing Christian theology. But while political and religious views aren't a crime, talking shit about your competitors can be. Over the last two decades, some Amway distributors have been spreading a rumor that Proctor & Gamble is satanic.

snopes.com

2

Market Saturation Happens Faster Than You Think

Digital Vision./Digital Vision/Getty Images

Because I am ancient in Internet years, I am old enough to remember the 1980s. And that means I remember when Heather Locklear was selling shampoo, encouraging us all to try Faberge Organics, and then tell two friends, who would each tell two friends, "and so on and so on and so on." The idea was that, eventually, everyone in the world would be using this amazing shampoo, and the owner of Faberge would have enough money to die by shoving an actual Faberge egg full of cocaine up his or her butt.

Jemal Countess/Getty Images Entertainment/Getty Images

This progression works wonderfully when only a handful of people are making all the money from it. If everyone in your town uses one shampoo, no one loses out and you all have fabulous hair. But MLM programs mean that instead of just recommending your friends try a new nail polish or jewelry or essential oil, you actually need to encourage them to sell these things as well in order to make money from them. And they need to encourage more people. And so on and so on and so on.

1

NO ONE Makes Money

moodboard/moodboard/Getty Images

Hand on heart, no matter how many amazing stories you read online about people making thousands and their spouse retiring and sending their kids to private school, I promise that you will not make money from these companies.

Here, let's make a bet. If you are an agent for one of these schemes and you make money out of it after, say, a year, I will give you $100. But if you lose money, you have to give me $100. For simplicity's sake, I'll let 100 of you get in on this bet. Do you know how much money one government report says I will have after that year? $9,800. That's because 99 of you will have paid me, and I will only have to shell out to one of you. So basically, by sitting on my ass and gambling, I will have made almost $10,000 more than anyone who worked their butt off for a year for one of these companies. According to that report, even ACTUAL gambling that isn't heavily stacked in my favor would still be a better bet (pun intended) than joining a MLM scheme.

NinaMalyna/iStock/Getty Images

Herbalife, the company getting lawsuited all over the place that we discussed above? Of all their sellers, 99.92 percent lose money. And that is just when you are a part of the scheme. When I asked friends about their experiences working for these types of businesses, most of them said they had hundreds, even thousands of dollars' worth of stock left after they finally got out. The companies were not about to buy that back -- they just had to add the loss to their other ones.

I get the attraction. You can stay at home with your kids and go off to girly get-togethers at night and drink wine, and it seems like the perfect way to supplement your income. That's why these things have been around and popular for almost 100 years. But there are flexible part-time jobs, even work from home jobs that pay regularly and don't require you to invest your own money.

So, please. Learn from the mistakes of those who went before you. There is no get-rich-quick scheme that works, and these companies virtually always leave you worse off than before.

Kathy wrote a very funny book called FUNERALS TO DIE FOR and you can buy it here. Or follow her on Facebook, tumblr, and twitter.

For more from Kathy, check out 5 Eerily Familiar Things Animals Do When They're Drunk and 4 Everyday Things That Caused Huge Panics When They Were New.

Are you on reddit? Check it: We are too! Click on over to our best of Cracked subreddit.