The following article is one of a two-part series discussing the pros and cons of multi-level marketing companies from the perspective of BYUH faculty and community members. The other article, which explains the positives of some MLMs, can be found here. This article addresses the dangers of such companies, and the opinions expressed reflect that of those who expressed them and are in no way endorsed by the Ke Alaka‘i or BYU-Hawaii.
Elder M. Russell Ballard warned LDS members of speculation in get-rich quick schemes in his Oct. 2017 General Conference address.
"Do not listen to those who entice you with get-rich-quick schemes," said Ballard.
He lamented, "Our members have lost far too much money, so be careful."
Faculty from the Willes Center for International Entrepreneurship and community members disagreed on whether or not multi-level marketing companies, known as MLMs, are a scheme.
Jason Earl, director of the Willes Centers, said he believes Ballard was referring to network marketing companies, known as MLMs, which he said are popular in Utah.
"I'm just so glad Elder Ballard said this. I think students need to be aware of these things. Even on this campus it's a major problem. We even have some of these companies coming to our campus to recruit students," said Earl.
"If you look at the level of fraud, whether it's through MLMs or Ponzi schemes, Utah is off the charts. They are number one by far and there’s a number of reasons why that’s the case, but it’s a big problem and they’re finally addressing it.
“To get beaten up so much over the last 10 years for pointing out the evils of get-rich-quick schemes and then to finally have an apostle say, 'This is bad.' I'm just grateful.
"I think it could be like that great conference talk that president Hinckley said about multiple earrings. There are stories of women there in the conference meeting taking out their second pair of earrings. You don’t need time to think about this and rationalize. If we are getting direction this is a bad idea and to get out, I would just get out.”
Earl said students should look at companies’ legitimacy and sales tactics before signing up with a MLM company and should evaluate the financial risk of an investment when speculating.
"I can justify some of these [MLM] companies because it's a real company, and they pay their employees. They provide a real service," said Earl. "But where I really struggle and what I fight against is these companies who are completely dishonest and completely illegitimate in a really, really bad way."
Earl said students should check the legitimacy of a company’s products and they should also research the sales techniques to make sure they are honest.
David Waite, an assistant professor at the Willes Center, said students should trust their gut instincts when they are approached with MLM business opportunities.
"It’s a few limited people that always scare me," said Waite. "It scares me because if it's good for everyone to see, then why can’t we let everyone see it? If only a few people are getting in, [then] why? Why would they choose me? Why am I the lucky guy? Why didn’t you go to a bank? Why is it me a random stranger and I can’t talk about it?"
Waite advised students to develop an inner circle of friends who they can call for advice when they are approached with investment opportunities.
"I don't mean business experts," Waite clarified. "Sometimes you're just looking for people who will give you an honest reaction."
Waite said other ways students can evaluate a company and product is by comparing them to similar items sold online. He also said students should look at financial statements and financial forecasts.
Question "anybody offering guaranteed returns greater than a banks returns," Waite advised.
When approached by a company with a network marketing strategy, Earl said students should ask the following questions: how much product do they have to buy? and how are they supposed to make income?
Earl said the blend of sales skills along with LDS Church cultural norms of trusting and obeying authority and wanting to be successful makes Utah "a ground zero for MLMs."
"The reason this is so prevalent in the church is people trust each other. We listen to authority. If someone of position says something, we believe them. We trust them and we can get ourselves into a bad situation."
Waite said the problem he believes Ballard was trying to address is more human nature than church culture.
"Generally you can go anywhere in the world and people will want to look good, and they want to make a lot of money."
Waite added, "If we focus on those two things, it takes our eyes off the most important things. Our end goal still needs to be our Savior."
Earl said the drive to be successful causes some church members to participate in business practices that are dishonest.
"In the church we've been told so many things we can't do. The one area we've not been told not to do something is make a ton of money and make it quick. In fact, there is a weird correlation that we see between prosperity and righteousness. In a conscious or unconscious way, members often seem to think, “Oh, they have a nice house or a nice car – they must be really righteous!”
Earl emphasized he is not against people making money but is "against get-rich-quick schemes, such as ‘How to Make 6 Figures in 6 Months,’ which encourage people to use their missionary skills in order to sell a product."
"We want students to be successful and we want them to make money. We think making money is great and we'll teach you how to do it, but there is the right way and then there is the dark side to this. You need to be honest."
Earl said students who find themselves in an MLM and want to quit but are afraid should "get out as quick as possible."
"If you know it's wrong, stop doing it. The better MLM companies will allow you [to] return the inventory and get some of your money back," continued Earl. "Then I would sit down and write a whole bunch of apology cards. All of the people you’ve sucked into this, I would just say, 'I’m not doing this anymore and here are the reasons why.'"