SCHEMING

Watch: John Oliver has started the pyramid scheme to end all pyramid schemes

Multi-level marketing companies such as Herbalife and Mary Kay present a polished pitch, with celebrities such as athlete Drew Brees and even former US secretary of state Madeline Albright endorsing them.

But many of their sales agents end up thousands of dollars out of pocket, comedian and political commentator John Oliver pointed out in a rant against the companies yesterday. And their business models—in which recruits earn money by signing up more people to sell the products, and then taking a cut of those sales—are essentially pyramid schemes, he argued on HBO’s Last Week Tonight with John Oliver on Nov. 6.

“MLMs may present themselves as a great opportunities, but your chance of success is actually remote,” said Oliver.

Oliver’s segment cited extensive reporting and government probes that have found that although these schemes purport to be vehicles to sell high-quality products outside a retail environment, it’s really only through recruiting that their salespeople stand a chance to make money.

“You don’t make money from selling product,” said Sharon Shea, a former Herbalife distributor interviewed by CNBC. “You make a little. Not much. Not enough to pay the bills that are racking up. You make money from signing people up.”

To amplify his point, Oliver decided to use these companies’ sales practices against them. He started his own version of a pyramid scheme during the episode—one designed to end all pyramid schemes.

Oliver asked for every person who watched the segment to share a web video of it with five more people (preferably friends who are considering joining pyramid schemes), and asked them, in turn, to share it with five more people, and so on and so forth, until everyone in the world has watched the video. The video had almost a quarter million views on YouTube as of noon US Eastern time on Monday. (Of course, beyond the public service this might provide, this “pyramid scheme” also could help Oliver’s clip to go viral.)

This common multi-level marketing firm technique of recruiting five people to each recruit five more people, can only last about 13 cycles before it exceeds the population of the earth, Oliver said, citing Robert Fitzpatrick, a multi-level marketing critic interviewed by CNBC.

That’s partly why the logic behind these business models is fundamentally flawed. Within 14 recruiting cycles, the company would employ more people than currently exist on the planet. And even if every person on earth agreed to sign up, there would be no people left to sell to.

Herbalife and other multi-level marketing firms are expanding globally, and some are targeting US Latinos, Oliver said, citing a recent documentary called Betting on Zero. HBO posted a version of Oliver’s segment with Spanish subtitles on YouTube, in which the pyramid scheme bit was performed in Spanish by Jane the Virgin’s Jaime Camil, for Latino viewers.

“We are in a pyramid,” Oliver and Camil shouted together in the English version. “Share this video.”

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