<p>I've been doing lots of research on pyramid schemes, and the rebranding and institutionalization of the industry in the 1980s with trade groups, heavy investment in politics, etc.</p>
<p>The term &quot;multilevel marketing&quot; (MLM) has been adopted as a legitimate class of business in the United States, since being created by verifiable pyramid schemes as a term used to legitimize their work and distance themselves from the earlier (and legally problematic) term of &quot;pyramid scheme&quot;.</p>
<p>I'm wondering, are there are any MLM companies that are not also pyramid schemes?</p>

CC BY-SA 4.0
2020-12-12T20:57:46.243Z
You need to define “pyramid scheme.” If it’s based off a legal definition, then that depends upon the legal jurisdiction.
Brian Romanchuk
CC BY-SA 4.0
2020-12-12T21:02:09.370Z
That's an excellent point @BrianRomanchuk and I think part of what makes an answer nontrivial. Let's go with the "value creation" definition, that a legitimate company, as opposed to a pyramid scheme, creates a product or products that outperform(s) other products, or is more efficient in some way, while a pyramid scheme is just money transfer
TheEnvironmentalist
CC BY-SA 4.0
2020-12-12T21:20:13.427Z
If it’s just a money transfer, that would run afoul of the law in many countries (based on my understanding). Most MLM’s operate within the bounds of the law - otherwise they would be ex-MLM’s.
Brian Romanchuk
CC BY-SA 4.0
2020-12-12T21:27:28.450Z
@BrianRomanchuk Plenty of businesses run afoul of the law, but given finite resources to pursue litigation against them, it's not very helpful to use which are pursued as an indicator of which are illegal
TheEnvironmentalist
CC BY-SA 4.0
2020-12-13T03:10:59.187Z
You ask “ are any MLM companies that are not also pyramid schemes?”. If they haven’t been shut down, in what sense are they a pyramid scheme? I don’t see how an economics Q&A website can make determinations of that sort.
Brian Romanchuk
CC BY-SA 4.0
2020-12-13T06:51:54.910Z
@BrianRomanchuk A pyramid scheme earns its revenue primarily through recruiting additional members, with the key source of income being those brought into the fold. Because each member needs to recruit a certain number of members below them, and the earth has a finite number of people, this is inherently unstable and doomed to eventual collapse regardless of the products being sold, though it may take awhile. A legitimate business, meanwhile, is stable, capable of surviving so long as it creates value through the production and sale of new, valuable products. That's a determination we can make
TheEnvironmentalist
CC BY-SA 4.0
2020-12-13T12:31:17.943Z
That’s why you need to give a definition in the question. Such a scheme would probably be illegal in North America. Any well-known MLM that has been around for awhile (I know of a couple) will have already been investigated, and not qualify as a “pyramid scheme.”
Brian Romanchuk
<definition><value>
Are there multilevel marketing companies that aren't pyramid schemes?
TheEnvironmentalist
# Are there multilevel marketing companies that aren't pyramid schemes?

(Asked by: username_0 on 2020-12-12)

I've been doing lots of research on pyramid schemes, and the rebranding and institutionalization of the industry in the 1980s with trade groups, heavy investment in politics, etc.

The term "multilevel marketing" (MLM) has been adopted as a legitimate class of business in the United States, since being created by verifiable pyramid schemes as a term used to legitimize their work and distance themselves from the earlier (and legally problematic) term of "pyramid scheme".

I'm wondering, are there are any MLM companies that are not also pyramid schemes?

**Tags:** definition, value
> **Comments:**
> **username_1**: You need to define “pyramid scheme.” If it’s based off a legal definition, then that depends upon the legal jurisdiction.  
> **username_0**: That's an excellent point @BrianRomanchuk and I think part of what makes an answer nontrivial. Let's go with the "value creation" definition, that a legitimate company, as opposed to a pyramid scheme, creates a product or products that outperform(s) other products, or is more efficient in some way, while a pyramid scheme is just money transfer  
> **username_1**: If it’s just a money transfer, that would run afoul of the law in many countries (based on my understanding). Most MLM’s operate within the bounds of the law - otherwise they would be ex-MLM’s.  
> **username_0**: @BrianRomanchuk Plenty of businesses run afoul of the law, but given finite resources to pursue litigation against them, it's not very helpful to use which are pursued as an indicator of which are illegal  
> **username_1**: You ask “ are any MLM companies that are not also pyramid schemes?”. If they haven’t been shut down, in what sense are they a pyramid scheme? I don’t see how an economics Q&A website can make determinations of that sort.  
> **username_0**: @BrianRomanchuk A pyramid scheme earns its revenue primarily through recruiting additional members, with the key source of income being those brought into the fold. Because each member needs to recruit a certain number of members below them, and the earth has a finite number of people, this is inherently unstable and doomed to eventual collapse regardless of the products being sold, though it may take awhile. A legitimate business, meanwhile, is stable, capable of surviving so long as it creates value through the production and sale of new, valuable products. That's a determination we can make  
> **username_1**: That’s why you need to give a definition in the question. Such a scheme would probably be illegal in North America. Any well-known MLM that has been around for awhile (I know of a couple) will have already been investigated, and not qualify as a “pyramid scheme.”  

---

## 0 answers

