Reseña de Little Bosses Everywhere por Josh

This is an interesting and well researched survey of pyramid schemes/MLM.

For Read's purposes, a pyramid scheme is a system where the salespeople focus more on attracting new salespeople than on selling to end users. She discusses famous examples such as Nutralife, Mary Kay, Amway, and the now defunct godfather of the industry, Holiday Magic.

Read discusses the surprising persistence and continued flourishing of these companies. Commentators had traditionally supposed that pyramid schemes bore the seeds of their own destruction. Eventually the masses at the bottom get sick of not making any money and realize that they have no chance to move up because the pool of suckers has been tapped out. There is strong evidence for this basic lifecycle, as pyramid schemes rapidly flit in and out of existence.

But, several big pyramids have been around for decades and remain lucrative for those at the top. One reason is that the original model of how these schemes work assumes high transmissibility. The pyramid grows rapidly as long as people at the bottom rung have a ready supply of new prospects who they can quickly convert (but who readily become disillusioned and quit).

Turns out, recruiting people to join pyramid schemes is tough, but once they join they tend to stick with the scheme long after an outside observer could have told them they wouldn't make any money. Part of the reason for this is that most schemes have loads of expensive training materials that is supposed to teach them the secrets of the system and of sales. New members are encouraged to suppose that if they can't sell it because they have yet to fully master the complex system.

Read also suggests that the American pyramid selling industry was spared in part by the emergence of new markets (China, Russia and Latam) in the 1990s. These markets were historically either too closed or too poor and unstable to support MLMs. In the 90s and 00s they became hot new growth areas for businesses whose home markets were saturated and increasing skeptical.

The reason pyramid schemes tend to be fraudulent is that they don't make a lot of a sense as a go-to-market strategy for companies with truly desirable products. Apple could adopt an MLM strategy with dozens of layers of sellers each receiving a cut on their sales and those of their downlines. But this would just be a transfer of income from the corporate level to a distribution systems where most of the participants weren't adding any economic value. Apple has no incentive to employ an aggressive sales compensation scheme because their sales team isn't what drives demand for their product.

MLM's tend to be concentrated in industries where quality is perceived to be important and variable, but isn't directly perceivable by the customer. This gives them significant pricing flexibility, enabling them to maintain the profit margins to pay their many sales layers. To be fair, non-MLMs in these domains (e.g. L'Oreal) enjoy the same high margins, but spend the money on advertising instead of herds of salespeople.

Most of the MLMs Read discusses have cult-like characteristics. Indeed, China essentially treats them as cults - seeing both as disruptive non-state actors. MLMs tend to have systems of ranks and titles, and big events to celebrate people moving up in the system. One former Mary Kay consultant recounts how when she made it to a certain rank she was invited to the company's 14 story HQ along with other women who had recently moved up and the entire company staff came out to applaud as they entered the building and praised them for their accomplishment of buying a lot of Mary Kay products.

Tony Robbins and his ilk have long played a key role in motivating and training the troops. At many MLMs the middle and upper ranks can make more from selling training materials to their downlines as they make from selling products.

Of course, sales training programs are also popular outside MLM. But, MLMs are arguably the most purely sales driven organizations. The emphasis on sales training also emphasizes that if you fail to make money (which you probably will) it's your fault not that of the system. You didn't work hard enough or you didn't follow the system closely enough - if you did you'd be as successful as Tony Robbins.

As Read discusses briefly at the end of the book, reducing the ability of MLMs to take advantage of desperate people wouldn't be difficult but it seems very unlikely under a Trump presidency. One relatively simple change would be simply to mandate greater transparency by regulating MLMs as franchise businesses. Franchises are required to share detailed financial disclosures with prospective franchisees, revealing actual financial results of current franchisees. If comparable information were clearly disclosed to prospective MLM sellers it would likely be much more difficult for them to recruit. Another potential change would be greater regulation of of health claims for health su