Navigating through Poverty and the Allure of MLM Schemes

By: Rachel Knepp

Growing up poor is difficult, traveling through family generations, a relentless beast trying to devour. If you are lucky, as a child, you don’t fully understand what is going on around you. It is your “normal”. You sense that the adults in your life are stressed about something. You never went on vacation, the food supply was meager, and the cars were old, breaking down often. You don’t understand that you’re poor unless you had parents like mine who had to share their money problems and stress with their children. Even when I was seven years old, my father would tell us how much he made, a paycheck that barely made the rent for the month. Anxiety over the future became the undercurrent within the family dynamic. 

My father was a Vietnam veteran, honorably discharged after two tours and suffering from post traumatic stress disorder from experiences on the battlefield. He went undiagnosed for a long time, suffering through the results without knowing why. There were very few veteran benefits. It was an unpopular war and things were different back then. 

When he met my mother, he was working for one of the railroads, in the union, a manual laborer. My mother, a daughter of German immigrants, was very young when they met, twenty years old, with no career goals. They got married within six months. Soon she was a stay-at-home mom, eventually working the occasional part-time job. Looking back, you could say we were part of a socio-economic class called the working poor. Until my dad had an accident at work. While digging a ditch, it caved in on him, breaking his clavicle. His personality destroyed everything. I remember him wearing his brace and yelling over the phone then complaining about the conversations he had with the union rep and others. This is when we stumbled just being poor. Poor with no job that held things together from paycheck to paycheck.

Around this time my father discovered Amway and my mom found Ava Care, two multi-level marketing companies who offered a bright future to those who worked hard enough. With a little effort you can be rich and all your problems go away. My father could no longer say the word job, he had to spell it out. It became a four-letter word. Under the Amway influence, you didn’t trade your time for money, it was something shameful. With my mother it was a bit different. She told me that she started with Ava Care because of their product, Aloe Vera juice. Their juice was special, nothing like the ones you got in the stores. A whole room, my brother’s room, had been turned into an Ava Care office, filled with products. It was not just aloe vera juice, they even had their own line of makeup just like Melaleuca, a MLM company that is still around. Everything was of course superior to anything you would find in the store. Meanwhile, with no income other than the unemployment payments, we relied on the government and my grandparents, my mom’s mom and dad. My grandparents both exchanged time for money with jobs. My grandfather was a carpenter in the Carpenter’s union and my grandmother worked full-time as a manager in a deli. They were not rich people but they were working to support two families. I didn’t realize it at the time because I was so young, but this had to be a struggle for them both at the time. They were stuck. They loved my mom, their daughter, and they didn’t want their grandchildren going hungry. 

Very few people succeed at MLMs so quickly both my parents failed at getting rich with their MLM business. According to my mom, they were just not pushy enough. There is usually a lot of shame that comes when an MLM business fails. You feel like a failure and your upline will guilt you, but when someone fails, it isn’t their fault. 

This was not the last time MLM’s had come into my life, offering the hope of getting rich with just a little bit of effort. 

In 1959, Rich DeVos and Jay Van Andel started Amway. A direct marketing company that provided many different products to customers through representatives who signed up as an independent contractor. You sign up under another representative. The story of Amway can be different according to the one who is sharing it. The company grew but eventually lawsuits were brought claiming that it operated as a pyramid scheme, and other issues. In 1979, the court ruled that Amway wasn’t a pyramid scheme because it met the set criteria for direct selling. They had to focus on the product, not  recruitment. This is the loophole that MLMs continue to use to operate under the radar and is hotly debated with those who are anti-MLM. Amway has always focused on recruitment and “tool” buying. These tools are inspirational books and videos of people helping you get others under you as recruits. Some call them “tool scams”. Representatives within the company create these tools to help others with their business of recruiting. Through these tools is where they are actually making their money and not through recruitment and definitely not through product selling. It’s shameful but Amway is still around, protected by political interests and powerful lobbyists. 

Today there are 1000s of MLM’s operating in the world, protected by the legal definition loop-hole created by Amway in the 1970s. Again, they have to focus on the product not recruitment because if they have a product they sell it is direct selling and not a pyramid scheme. But, attend any team meeting over zoom or in person and the topic is always getting more recruits and nothing about product knowledge. Many of those who join the companies would like to have product knowledge because their intention is to sell the product. Frustration is felt because that is not the reality of the company. 

Another point, when you look at the structure of how the money is distributed, it is quite revealing. Money goes up the line. When someone creates a downline, as those beneath them buy products, the upline gets a percentage of their sale as a part of their income. There is constant pressure by the upline for the new ones to keep buying because it affects their income. They tell them that they need “to be a product of the product”. Many companies have a minimum amount that you need to purchase through an auto-ship. You have to meet that minimum to stay active. 

The promise is always the same – work hard you can make it to the top. What they don’t tell you is that only .01% actually make it to the top and receive a liveable wage. That .01% is seeing their success because everyone beneath them is struggling trying to live the dream. They try and try until they fail. That is the reality. This is the MLM business structure. 

I don’t remember big portions of my childhood. I have learned it is a part of dealing with trauma, being emotionally detached. Everything happening around me didn’t feel real. I have some vivid memories, but it includes context by stories told to me by the adults that were present at the time. It makes more sense when you get older.

After the secure union job, my father went from one job to the next. My mother numbered them because it was ridiculous. She counted about 35 jobs, each only lasting for short periods of time. I just remember the complaining and the wish to make it big selling things, belts, solar, and water filters, etc. The result was usually the same. He would get fired because of personality conflicts. I had it explained to me that when a person has post-traumatic stress disorder, it takes what you are before trauma and then amplifies it. If you’re already a broken person through abuse or neglect like my father, afterwards you become a shattered one. He is an indescribably difficult man to be around. He may appear “normal” at first, but if you spend any significant amount of time in his presence you realize he is far from “normal”. He’s a narcissistic sociopath, per his therapist.

This inability to hold a job made us continually dependent on government assistance and my grandparents. Our mortgage for a little house in Modesto, California in the 1990s was $500. My grandparents bought the house for my mom and their grandchildren and probably to get us all out of their house. They usually had to pay the mortgage, while my dad, in between his myriad of jobs, sat on his bed watching golf or gone playing golf with his buddies. His friends would buy him meals and we were home going hungry. He would often state that soon his railroad retirements would start coming in. We waited. At this time too I heard people say “oh, poor Frank having to deal with that family of his.” During this time he was also eligible for veteran benefits but of course he wasn’t aware of them because he didn’t ask anyone. 

For years, we lived on food stamps and other government benefits like the food bank. At the beginning of the month, my mother would get our allotted food stamps, go food shopping, mostly snacks, and my brother would eat it all by the end of the week. I was left with tortillas or toast with strawberry jam. One of my sisters ran away at fourteen years old and my other sister would eat cat food. This time period is also mostly a blur probably because of how upsetting it was to go through, and now it makes me feel angry and guilty. My father continued to spell out the word job because of the shame, making fun of anyone having one, talking about how he will make it big someday with something quick and easy. Of course when something failed he blamed my mom and us for his failures. We didn’t believe in him. It just makes me want to scream.  

The rich get richer and the poor, poorer. Stuck in the same situation through the years of struggle. The promise of getting rich quickly is alluring. It gives you a hope of a better life. So you are an easy target for an MLM. You can be down to your very last $100 and they will want you to put that money into the MLM for your own “business”. “You need to invest in yourself if you want to be successful. You want to be a success, don’t you?” Those high up in your upline know all the tag lines to manipulate prospect recruits. The slogans started with Amway and haven’t changed. They have just evolved with today’s world – i.e. social media. A new generation of people who are innocent and lack knowledge of the MLM scam. Their members will staunchly defend themselves when confronted by those in the anti-mlm community. They will reply, “pyramid schemes are illegal so the company wouldn’t exist if it was a pyramid scheme.” Technically, murder is illegal, but people still do it. Or they say we are “just haters. They couldn’t make it so they are jealous.” Yes, some people hate scams and those who willfully scam people. Many who join don’t realize that they are being scammed and are scamming people. There is so much information now within the anti-mlm community that exposes the dark reality of MLMs, all in the effort to spread awareness for those inside and those who support them. They need to know the reality of MLMs. They need to know that when they fail, it is not their fault and that it is okay to fail at something that is meant to fail.

My grandparents are Germans who lived in Germany during World War II. They had dreams before the war but the war stopped everything. Living in a country at war is very difficult. Two world wars would be devastating and I couldn’t blame anyone for wanting to immigrate somewhere that seems peaceful and calm.

I find it fascinating how the trauma of war affects people differently. My father was unable to function but it made my grandmother stronger. While my father stared blankly at the TV screen, my grandmother walked to work every day for minimum wage to support two families. They were both mentally scarred from watching people die all around them, but they dealt with their past in different ways. 

I lived like most people, completely ignorant of the realities of MLMs until one day a documentary came out on Hulu. “Lula Rich”. It is all about the rise and fall of LuLaRoe, the MLM clothing company. The cost to join was very expensive, $3000 to $5000. Potential recruits were encouraged to get the money by any means necessary – credit cards, beg, or borrow. When I watched this documentary, it sent me into a rabbit hole of anti-mlm content on YouTube. So many ex-huns who were now spreading the word about the realities of MLM companies by exposing the truth behind the facade and their tactics in getting recruits, including the promise of a six-figure income for everyone who works hard enough. Failure came when you didn’t work hard enough including having to sacrifice your time with your family and money. “It is worth it in the end.” Women talked about the truth behind the facade. Those who were at the top who realized it was an illusion. Interviews with those who lost everything, bankrupt and sometimes homeless. It opened my eyes to all the lies spread from MLMs. It sickened me thinking about the way my dad would spell out the word it was a dirty word. If my dad would have traded his time for money, maybe I wouldn’t have gone hungry.

Another red flag you see is by examining their income statements. They don’t talk about it. If the company doesn’t have one, that is a huge red flag. Most that I have seen show that over 90% of people in the organization made between $0-$100 annually or each year. That income statement doesn’t include the required monthly purchase to stay active. Imagine working so hard to get recruits, spending all that time and money and the result is no income. Exchanging that time for money seems better to me. Statistically, the odds are greater to win at gambling than joining a MLM, making it to the top of the pyramid. The poor get poorer. 

Life came full circle when I had children. My husband and I, both from poor families, remained poor. Sometimes destitute. I chose not to discuss finances with my kids to ease their burden. I didn’t want to add to their stress with the knowledge  of how difficult life was raising them. I walked in their shoes and quietly bore the burden of reality so they could be happy. They probably figured it out though. Kids aren’t dumb.

We were on welfare and much of the time unable to pay rent. My husband did work. Unlike both of our fathers, he tried to support his family, despite his mental issues and I tried to help as much as I could as well by working part-time as a massage therapist just to bring in a little extra income. It’s hard to find childcare that is affordable for one let alone four children. I had friends in multi-level marketing companies and I tried a couple but, like my mother, I just can’t push people into joining my team. There was something fundamentally wrong about the concept of paying a company with the intention of “getting a better price” or selling it to others but really just pushed into getting even more recruits. It felt wrong. 

If you are born into a poor family you will likely stay poor, unless you are someone like Andrew Carnegie or Oprah Winfrey. They have personality traits that many don’t have in their personality. My entire family still struggles with their finances. They have no college education or even trade school. I am the first with a college degree and heard all the time while I was in college that I was going to have a bright future with my education but even getting a degree didn’t help me either. I am currently under-employed but I am not alone. That’s the world we live in right now. Most likely I will continue being poor, but the idea of getting rich quickly has no hold on me. I know better. The promises in MLMs are lies and half-truths, and it has nothing to do with my mindset. They are meant for people to fail. I’ve seen and continue to watch my friends struggle to “grow their business”, but they don’t believe me. They think that they will make it. So I can only share what I know and watch them continue to struggle. And despite the trauma from the past, I persevere working and providing for my family the best way I can, in the most honest of work – the J.O.B. – with a few benefits, like eating and having a roof over my head. For now, as I work hard for the little successes in life, they are sweet because they are earned through blood, sweat, and many, many tears.

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