Beyond legal interpretations, the justification for prosecuting the non-retailing companies
also rests on simple math that any consumer can understand. The math referred to by the is important to the data and conclusions of this Pyramid Scheme Alert report on the MLM "income opportunity." Obscuring this math is another important element of maintaining the myth of MLM income.
The math factor can be illustrated in a simple 6-level chain in which each person recruits just 5 people. At least three levels of recruits (5 + 25 +125 = 155) are needed for each participant to begin to achieve a profit based on override commissions from the purchases of the "downline."
Since only those with three levels below them are profitable, only the Top Level person and the individuals in levels #2 and #3 qualify. Each of the people in next three levels below does not have enough "downline" to generate a profit.
(Those in Level #4 each only have 25 in their downlines. Those in Level #5 each have only 5 people, and those in Level #6 at the bottom have none. This means that only 31 out of 3,906, or less than one percentage in the six-level chain, have as many as three levels below them and are profitable. More than 99% are unprofitable based on their position.
This basic formula holds true no matter how much further the chain extends. Approximately 99% are at the bottom of the chain where profit is not possible. For example, if the scheme recruited one more level, Level #7, another 15,625 participants would join. The total would now be 19,531. The number in profitable positions, Top, and the individuals in Levels #2, #3, and #4, would grow to 156, and this number would still equate to less than 1% of 15,625-person organization.
The big numbers, which are cited by the scheme's promoter as providing "extraordinary income potential," are based on overrides from the deepest level of the "downline." Only a tiny few can ever recruit to this level. This is mathematically predetermined from the start by the MLM structure and pay plan. The pay plan itself dooms the vast majority to financial losses, not factors of "hard work" or "following the plan."
The trick of the scheme is to cover up this reality and to convince each and every enrollee that he/she can succeed by building this large and deep downline. Recruits are told that the program is a formula for wealth that "anyone can do."
also rests on simple math that any consumer can understand. The math referred to by the is important to the data and conclusions of this Pyramid Scheme Alert report on the MLM "income opportunity." Obscuring this math is another important element of maintaining the myth of MLM income.
The math factor can be illustrated in a simple 6-level chain in which each person recruits just 5 people. At least three levels of recruits (5 + 25 +125 = 155) are needed for each participant to begin to achieve a profit based on override commissions from the purchases of the "downline."
Since only those with three levels below them are profitable, only the Top Level person and the individuals in levels #2 and #3 qualify. Each of the people in next three levels below does not have enough "downline" to generate a profit.
(Those in Level #4 each only have 25 in their downlines. Those in Level #5 each have only 5 people, and those in Level #6 at the bottom have none. This means that only 31 out of 3,906, or less than one percentage in the six-level chain, have as many as three levels below them and are profitable. More than 99% are unprofitable based on their position.
This basic formula holds true no matter how much further the chain extends. Approximately 99% are at the bottom of the chain where profit is not possible. For example, if the scheme recruited one more level, Level #7, another 15,625 participants would join. The total would now be 19,531. The number in profitable positions, Top, and the individuals in Levels #2, #3, and #4, would grow to 156, and this number would still equate to less than 1% of 15,625-person organization.
The big numbers, which are cited by the scheme's promoter as providing "extraordinary income potential," are based on overrides from the deepest level of the "downline." Only a tiny few can ever recruit to this level. This is mathematically predetermined from the start by the MLM structure and pay plan. The pay plan itself dooms the vast majority to financial losses, not factors of "hard work" or "following the plan."
The trick of the scheme is to cover up this reality and to convince each and every enrollee that he/she can succeed by building this large and deep downline. Recruits are told that the program is a formula for wealth that "anyone can do."