But what exactly are MLMs? It turns out they include those great all-American corporations you've vaguely heard about from the distant past, but which are apparently still major players in our economy, including Amway and Mary Kay. It turns out they -- Amway specifically -- are the source of the DeVos family fortune that has bankrolled Republican politics in this country for the last half-century; that has staffed the Chamber of Commerce; that put my family's home town of Grand Rapids, MI on the map; and that catapulted our current Secretary of Education into a cabinet-level position. They are the companies that have won accolades and swelling praise from the likes of Donald Trump (no surprise there), George W. Bush, Bill Clinton, George H.W. Bush, Ronald Reagan, Gerald Ford, Richard Nixon...
They are also -- the podcast persuades us --essentially pyramid schemes. Frauds, in short. Since the late 1970s they have managed to dodge FTC enforcement through having friends in high places and concerted lobbying efforts, but even today they are sufficiently conscious of the possibility that they might be vulnerable to a future crackdown, by less friendly administrations, that they are trying to pass legislation that would redefine illegal pyramid schemes so as to carve out an exception for their business model...
Maybe all of this isn't news to anyone else, but it certainly left my jaw hanging open.
Of course, these companies are savvy enough to adopt a somewhat more complex form of the basic pyramid scheme structure than the plain and blatant frauds. It is helpful to review the classical model of the pyramid scheme, however, in order to see how the MLMs resemble it as a kind of permutation and evolution.
To accomplish this, the podcast starts with an episode about one of the more obviously illegal scams that flourished in the countercultural milieu of the '70s: the "Airplane Game." The premise is that a person at the center of the scheme, the "pilot," recruits passengers who pay them $1500. They are encouraged to fork over this sum in exchange for... nothing at all.
Why would anyone sign up? Well, because they can then go out and recruit "passengers" of their own, eventually working their way up to the captaincy, and the passengers can eventually pursue the same aspiration.
It doesn't actually make any sense. It's an elaborate way of re-appropriating money without any actual goods and services being exchanged. But it "works," so long as new people can be found who are willing to be recruited -- to divest themselves of $1500 here and now on the promise that they will be able to go out and find other recruits who will give the same to them in turn.
Of course, this cannot go on forever, and when the process inevitably breaks down, when the end of the chain is reached, it is always the most recent recruits who are left in the hole. In this sense, the pyramid resembled a Ponzi scheme -- both of which depend on the false theory of the "infinite chain" -- i.e., that new people can always be found to come in at the lowest rungs. (In a Ponzi scheme, the capital put up by the most recent investors is simply funneled up the ladder to the people who bought in earlier, fueling their false belief that they are seeing real returns. Just as in the "Airplane Game," money is being shuffled around with no actual value being created.)
MLMs operate with a similar recruitment structure, but they add to it what would appear at first sight to be a crucial difference: namely, an actual product. The question that The Dream probes, however, is whether sales of these products to consumers is actually the source of these companies' revenues.
For the most part, they conclude, they are not. The real money is made through recruiting distributors, who need to buy the product in bulk from the supplier in order to sell it. More often that not, the new distributors are often unable to interest people in these products sufficiently to earn a profit on the original down payment that was required to become a distributor, and so they are forced in turn to earn their revenues through recruiting additional distributors, who will buy the product from them, and thence allow them to climb the ladder of earnings and privileges within the distribution hierarchy.
It is essentially the "Airplane Game" writ large. New "passengers" must go out and fill up "planes" of their own, if they are to have any hope of recovering their initial investment. There may be a product involved in this case, unlike in the former, but the money entering the system is not primarily coming from anyone actually wanting to buy and possess the product for themselves. In this sense, it has the same fundamental flaw in its structure from the beginning -- no actual new wealth is being generated, it is just being moved from the newest entrants up the chain to the oldest. This is called, the podcast tells us, a "closed system."
It would seem that such a scheme is fraudulent and must be confined to the illicit and hidden sectors of our economy, rather than forming the basic business model of mainstream corporations -- corporations that have been, moreover, among the most influential in one of the two main political parties in this country since the mid-twentieth century (and which even won the endorsement -- the podcast shows us -- of one William Jefferson Clinton, who, it turns out, will do absolutely anything). We must surely recognize that there is something iffy and a bit mysterious in a business model in which some people seem to be getting rich without anyone actually wanting to buy what the company has to sell.
Yet, the model makes sense to us -- it seems to "work" -- precisely because of its family resemblance to another system we find equally mysterious and counterintuitive -- namely, capitalism itself. There has always been what seems a kind of alchemical transmutation at work in the basic structure of capitalism -- one that most of us find just as baffling as the promises of the MLM scheme, so we are entirely predisposed to accept it at face value when MLM companies present themselves to us as being just another "business opportunity."
To realize how this is so, it's good to step back for a moment and try to re-assume a naive posture toward the capitalist economy. It is rather strange, after all -- however familiar it has become -- that money seems to come out of nowhere in this system. One can leave it sitting somewhere, and nevertheless it expands geometrically through compound interest -- the "snowball" of Warren Buffett's analogy.
The "Airplane Game" plays off of the apparent magic of this formula -- it doesn't have to make sense, it's enough to know that it works! Look at all the other rich people in our society who are doing nothing at all, yet they keep getting richer!
It's a puzzle that that shouldn't be too readily dismissed; it was recondite enough to perplex great economic thinkers of the past like Böhm-Bawerk over many hundreds of pages. Where exactly does interest come from? Why does capital seem to reproduce itself, without trying? How is wealth continuing to accumulate in a person's coffers without them ever putting hammer to nail? Isn't this just as much a "closed system" as the classic pyramid scheme, or its more evolved form of the MLM?
Böhm-Bawerk offered many competing theories to explain the mystery of interest, but the one that seems the most plausible to me is simply that interest is the rent that is paid for the temporary use of capital, which is put toward enterprises that make things or offer services that are worth enough to people that they will pay more for them than it cost to produce each given unit.
The crucial difference with the MLM model, then, is that at some stage of the process, someone is actually buying something they want for themselves and their families, not just looking to transfer the cost to someone else. Value is being created overall, as they say. The capitalist receives an income because they offered something that someone wanted, further down the chain, and that person got it.
This may sound, of course, like an exceptionally rosy, starry-eyed view of capitalism -- everybody wins! It has at first chew, you may think, the mealy consistency of something cooked up in the laboratories of the Heritage Foundation.
Quite to the contrary, however. This is actually a fairly liberal, Keynesian, even social democratic view of how the capitalist system works, especially because it is more than compatible with the notion that the (potentially) mutually beneficial aspects of the system are reinforced by significant wealth redistribution through social programs and transfer payments, as these enable consumption of the products on which the capitalist's profits depend. Ultimately, then, the capitalist has as much a stake as anyone in mass prosperity, a broad distribution of income, and demand-side growth, and if the system works well (according to this theory) everyone really can benefit.
The conservative economic philosophy that has dominated the Republican party since the days of Goldwater, however, actually has a far darker view of capitalism -- despite its claims to be the epitome of free-enterprise thinking. The post-Goldwater philosophy doesn't believe that everybody can win in capitalism, and -- crucially -- it doesn't want them to. The moral system undergirding it is rooted in a fundamentalist theology of sin and punishment (however implausible Goldwater himself may have been as a conduit for such a belief system), according to which the virtues of hard work and delayed gratification ought to be rewarded, and the absence of these qualities ought to be punished.
As George Lakoff, Richard Hofstadter, and others have convincingly argued, the "punishment" in this system is therefore seen as every inch as "moral" -- every bit as essential to the preservation of the overall system and moral order -- as the reward. For the economy to function properly -- morally -- it cannot make everyone a winner. Some people must bear the consequences of their supposed indolence and lack of foresight.
Such a philosophy of course has nothing at all to do with capitalism, which gives people "something for nothing" each day, and seems to pull wealth down as if from the clouds, and allows people to make a profit without ever sweating a day in their lives for it -- features of the system that have always outraged left-wing social critics from Marx and Henry George on just as much as they violate the core tenets of the post-Goldwater conservative philosophy. The Republican party and capitalism have no reason to get along.
What's something that looks sort of like capitalism, though, but that corrects for this feature -- this basic design flaw from the conservative point of view -- of ultimately rewarding all its participants (or at least, of containing the potential of rewarding everyone)? What's an economic system that truly fits the post-Goldwater zero-sum mentality, in which some people must fail -- the "bad" people -- otherwise it would deprive the good people of the very worth and moral foundation of their own relative success? What's a business model that ensures that only some of the people who enter the system will come out winners, and the vast majority will always be worse off, in absolute terms, than they were before?
Aha! We have it: the pyramid scheme. It all fits! No wonder the MLM industry has been at the heart of the Republican party and its fundraising for the last half-century -- roughly the same time period of that party's transformation into an embodiment of the post-Goldwater philosophy. No wonder Reagan spoke at Amway events! No wonder Bill Clinton, in his tireless effort to sound more and more like the Republicans, so as not to be replaced in office by one, ended up shilling for the MLM industry's lobbying arm. No wonder Donald Trump -- the ultimate MLM-style president -- has added his bloated name and brand to numerous MLM schemes in the past. No wonder that Utah -- that solid voting block for the post-Goldwater conservative philosophy -- is also (the podcast tells us) home to the largest cluster of MLM distributors of anywhere else in the country.
It's not just that Republicans have drunk the Kool-aid that MLMs aren't actually pyramid schemes. It's that the whole pyramid structure is exactly how they think the economy does and should work! If you got in on the scheme earlier -- like Richard DeVos -- you deserve to enjoy the proceeds from your wisdom and foresight. If you were enough of a sap to join late, by contrast, you have no one to blame but yourself.
We don't need to get into the chicken-and-egg game here of the direction of causality -- that is, did the MLM industry buy up influence in the Republican party, and that's why the latter has come increasingly to embody the pyramid scheme philosophy in word and deed, or did the post-Goldwater Republicans simply tout a philosophy that then made them a natural home for the MLM-ers? In either case, the result is the same. We have between the two a match made in heaven.
If we were forced to address the question of causality, however, I'm inclined to the Weberian belief that ideas often precede (and make possible) material and social realities, rather than the other way around. In this case, as the podcast explains, the underlying belief system that paved the way for the MLM industry (and other more blatant pyramid schemes) was that of so-called "New Thought," which emphasizes the idea that we create our own reality and our degree of success and happiness in life through our own consciousness -- the "power of positive thinking," and that sort of thing.
If there is any one quintessential American idea -- some ingredient that our national character plopped into the global ideological stew that was not there before -- this, surely, is it. It keeps coming up time and again in our history, and lies at the root of so much of what is distinctive about us as a people. William James -- that most American of American philosophers -- regarded it as the epitome of "healthy-minded" belief systems. It has fed such seemingly disparate currents in our national life as the countercultural "New Age" and "human potential" movements, the craze for the Paulo Coelho novel The Alchemist, Oprah Winfrey and The Secret, Norman Vincent Peale (and through him, sadly, our current President), the Prosperity Gospel movement, and Multi-Level Marketing.
As evidence of just how long "New Thought" has been with us -- and how little its underlying belief system has changed from the early twentieth century to now -- turn to literature. In F. Scott Fitzgerald's The Beautiful and Damned, first published in 1922, the protagonist Anthony Patch at one point joins something that appears to be a sort of MLM scheme (he quickly abandons it -- as do the vast majority of MLM recruits -- after it proves nearly impossible to make a sale).
During his own recruitment, Patch hears a pitch that might as well have come from any of the MLM impresarios operating in the field today, many of whom are featured in The Dream podcast. As the recruiter harangues Patch and the rest of the crowd:
"Now my job isn't to make a success of you, because every man is born a success, he makes himself a failure; it's not to teach you how to talk, because each man is a natural orator and only makes himself a clam; my business is to tell you one thing in a way that will make you know it—it's to tell you that you and you and you have the heritage of money and prosperity waiting for you to come and claim it."
New Thought is in many ways the origin of all the clichés we tend to think of as defining American aspiration: "Just follow your dreams, and your dreams will come true." "Believe in yourself." That sort of thing. For this reason, we are prone to identify New Thought with idealism itself. When we encounter it in our political or business lives -- as a slogan for a candidate, say, or as a pitch to become a distributer for an MLM -- it seems to us safe and familiar. We are immensely vulnerable to being taken in by it.
Moreover, this identification of New Thought with the "American Dream" itself, and all that we hold dear, crosses all ideological boundaries. Even many progressives who would never set foot in a prosperity gospel church or tune in to a televangelist's sermon, or who would forswear any affinity to post-Goldwater "free-market" ideology (so called) -- will nonetheless tote around their copies of Coelho and subscribe to New Age magazines.
The cultural trope of the anti-war hippie flower child has forever forged in our mind the facially implausible notion that left-wing politics and New Thought have something to do with each other. In truth, however, the belief in the power of mere consciousness to reshape reality is profoundly conservative and inimical to left-wing projects for social change. (The "hippie" movement was, after all, largely distinct from the 1960s New Left, and has mostly just been conflated with it through the polemics of later cultural critics.)
In MLM schemes and the modern Republican party, by contrast, New Thought has found a far more natural home.
The fact that New Thought is really not as "idealistic" as it appears can be illustrated not only with examples of the effects it has wrought in the world, however (such as those featured in the podcast) but from the necessary consequences of its own ideas. If the reality we experience is a product of our own inner state, after all -- if, as the recruiter trumpets in Fitzgerald's novel -- "every man is born a success, he makes himself a failure" -- then if you find yourself a failure, it is your own damned fault.
The Dream podcast includes one example after another of professional MLM recruiters today who are willing to say exactly this. While paying their own bills through the money that has been forked over to them by new recruits, they nonetheless have the savage temerity to tell all of the distributors in their downline that it is due to their own lack of will and gumption that they have so far failed to move any products.
Even beyond this obvious victim-blaming mentality, however, there is the fundamental problem that fulfilling one's "dream" of wealth and power in a social system must -- by definition -- depend upon other people, who presumably have goals and preferences of their own. Wealth and power are inherently social. They assume the recognition of others in order to mean anything at all. Thus, a person who is capable of "creating their own reality" through sheer conscious intention will necessarily have to be pressing others into the service of this vision. The necessary corollary to one person's total mental freedom through "New Thought" is the mental and physical slavery of another.
A line in Josephine Hart's novel Damage makes this point best. The protagonist is recollecting his father, an iron-fisted business man, who was the epitome of the proponent of the post-Goldwater ideology, with a strong seasoning of New Thought and Norman Vincent Peale. "Will, the total power of will, was his fundamental credo," writes Hart. "But [... w]hat of the will of others, subordinated to his own?"
New Thought, even when it seems most innocent, inevitably takes this dark form. This is not because it is vulnerable to "abuse," like any other belief system, but because of the inherent and inescapable logic of its ideas. There's a reason why even relatively harmless Paulo Coelho turned out to be the favorite author of the notorious Theranos fraudster Elizabeth Holmes. There's a reason why jolly and good-natured old Norman Vincent Peale shaped the worldview of that world-historical creep who is currently sitting President of this troubled and MLM-stricken land.
There is nothing the least bit admirable or idealist about people simply "following their dreams," in short. So much depends on what dreams those are.
Feeling myself in a mood this week -- touched off by the podcast -- to contemplate the mystery of the American Dream -- and why it feeds so easily into the MLM nightmare -- I thought I'd finally get around to reading Arthur Miller's Death of a Salesman. And indeed, in that immensely affecting play, one finds a great deal that explains us to ourselves.
Like Willy Loman, we believe ourselves to be innocent. We believe we deserve it all. The fact is, however, that many of the ways one can enrich oneself in this world (such as through joining an MLM) depend in their nature on taking something away from someone else. You fulfilling your dream may mean crushing one's neighbor.
Miller's play describes the death of one of the people who are crushed in the hopeless world of sales, but who dreamed of being one of the crushers. His younger son, Happy, is still, by the end of the play, setting off in frantic pursuit of the same chimera. "It's the only dream you can have," he says, "-- to come out the number-one man." Biff, the older son, is aware that not everyone can come out number-one man, rather by definition. As Willy's wife, Linda, puts the thought: "Why must everyone conquer the world?"
Biff's solution at last is to accept that he does not need to be a "leader of men." He does not need to pursue the titanic wealth that his father is convinced, until his dying day, Biff is destined to attain, and from which he has only held himself back in order to spite and punish his father for a discovered transgression. Biff finds he can accept ordinariness and decency as his lot -- the kind of simple, honest work with his hands that he has always preferred to do. "I saw the things that I love in this world," he says, resolving at the end of the play to return to his life as a farm-hand in Texas, "The work and the food and time to sit and smoke."
Most of us in our late-young adulthood face something like Biff's realization. Whatever position we have gotten to in life, it is probably somewhat less exalted than we might have imagined in our teenage years. Even if we are doing well in the eyes of the world, we are probably doing less well than what our fifteen-year-old selves would have projected for us. This is what gives Miller's play so much of its lasting emotional power, especially in this society. However much we may have "made good," we will still feel at age thirty, as Biff does, that "I've always made a point of not wasting my life, and [...] here I know that all I've done is to waste it."
As Nicholson Baker's protagonist Howie (from The Mezzanine) puts the same fundamental realization that Biff is having -- the realization we all go through sometime toward the end of our twenties -- "I was a man, but I was not nearly the magnitude of man I hoped I might be."
Willy's solution to this alarming realization is to deny it -- to retreat into a world of fantasy in which he lives by projecting impossible hopes and expectations onto his oldest son. He follows the unicorn -- the dream of sudden fabulous success ("what am I always telling you? Wonderful things can happen!"). Willy is following the same the deep-rooted cultural longing in our society that the MLM industry has learned to exploit to such advantage, in order to drive thousands of innocent people into debt and funnel their hard-earned money up the chain to recruiters and corporate bosses -- and he follows it to the same end of bitter defeat.
At the end of the play, Linda is left wondering why they didn't have enough for him. Why couldn't he have found a way to be content? They had finally managed to pay off their mortgage, the day after Willy's suicide. "I can't understand it," she says.
The possibility Biff and Linda hold out is that one can accept one's own limitations for what they are, without ending up an abject failure. One can forego the impossible vision of total wealth and power, while still living a decent life (more decent, in fact).
As a dream, it may be less exciting that the Icarian flights of an Elizabeth Holmes or a Richard DeVos. But it is one far less likely to burn oneself and others.
As a life solution, it is rather like the vision of Henry VI, as he describes it in a beautiful soliloquy in one of Shakespeare's earliest works. Tiring of the relentless, cruel, and murderous quest for the crown of England, which only one head can ever wear at a time, Henry imagines a bucolic future that would have appealed no doubt to Biff, contemplating his return West to the cattle ranches and a clear conscience:
O God! methinks it were a happy life,
To be no better than a homely swain;
To sit upon a hill, as I do now,
To carve out dials quaintly, point by point,
Thereby to see the minutes how they run,
How many make the hour full complete;
How many hours bring about the day;
How many days will finish up the year;
How many years a mortal man may live. [...]
So minutes, hours, days, months, and years,
Pass'd over to the end they were created,
Would bring white hairs unto a quiet grave.
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