No. The end. OK fine, I’ll tell you my embarrassing story and walk you through exactly why the network marketing group I joined isn’t worth it, and why MLMs are things to avoid.

The Network Marketing Cult Of World Financial Group (WFG)

If you know me, you know I’m greedy AF. There was a period where I’d join a lot of local Meetups that are finance-related so I can learn more about making money.

But of course, when you’re a fish, there will be people who will poach you.

I went to this “Rich Dad” board game meetup and was poached soon afterwards to join a “meeting” of which I had no clue about. I joined the meeting, and it was basically a very convincing salespitch (if you’re a stupid idiot like I was at the time) – it was something along the lines of:

“We have great systems to make you rich. You can make as much money as a CEO and it’ll be as easy as pressing a button as a fry cook at McDonald’s.”

Here’s a pro-tip: if anyone tries to sell you the dream of ‘something for nothing,’ it’s a lie. To path of winning in business, and anything else in life, is hell. To insinuate anything worth having is remotely easy is a scam.

With that in mind, I was pressured heavily to join after the brainwashing session, so I did.

WFG’s products are trash so it almost doesn’t warrant any text in this post, but for the curious: they sell insurance and they used to market themselves as part of Transamerica.

Why Network Marketing Isn’t Worth It: You Won’t Earn Much

After I signed up, I took and aced an insurance license test. And after which, you’ll have the opportunity to join brainwashing sessions twice a week. In these brainwashing sessions, they’ll tell you how great their insurance products are, but most importantly you have to recruit people in your downline.

Every time you recruit people in these pyramid schemes, you can have someone underneath you that you “override.” If an insurance agent under you makes a sale, you get to keep a percentage of the sale. And if that insurance agent recruits another insurance agent under him, you’ll get to override him as well.

This is a very convoluted way to sell insurance. And to be honest if you get a kick out of taking a slice of other people’s work, just invest in real estate where you’d override 30% of your tenant’s income.

Anyway, something seemed off even though the math seemed “OK” to me. You override people but even the people at the bottom of the pyramid should theoretically be able to make money.

Except they didn’t.

And in fact, in the annual conference that they held in Vegas, they’d show the leaderboard of how much money people were making. It turns out the top 1% of performers made $15K that year.

That’s impressive! Impressively bad, that is.

So on an abstract level, this opportunity was really bad because these brainwashing sessions always felt “off,” and I never got why in each of those meetings they focused so much on telling us to ‘build a team,’ as opposed to teach us how to sell the product. After all, it’s the product that is the foundation of all revenue, whether or not you have a team. If you have a large team but none of them can close an insurance policy, what’s the point?

On the concrete level, top 1% making less than minimum wage was pathetic and that was the camel that broke the back for me. You could just actually work at McDonald’s as a fry cook and you’ll have a 99% chance of making more than you would at WFG. To me, this definitely makes WFT (and network marketing in general) not worth it, as I’ll explain down the post.

MLMs Use Trickery To Try And Convince You To Buy Their Crap Products

Now that I’m older and suck slightly less at math, I see how much one of their flagship products sucks.

Their main product (and most lucrative product) they wanted us to sell was “universal life” insurance. It’s basically a product that mixes life insurance with investment savings, so you’ll never get the best of both worlds.

In the brainwashing sessions, they’d market the product to us and tell us to buy it. And they’d market it to us by anchoring their logic to Warren Buffett so it sounds like they have authority. They’d say there’s 2 rules from Warren Buffett:

1. Never lose money.
2. Never forget rule #1.

The context of this is that in the insurance policy, there’s always a downside protection. For example, if you invest in Universal Life, they’d index your returns so that if the market crashes, you’re still guaranteed to make something like 0.5% (I don’t recall this number specifically but it doesn’t matter for this discussion). This way, you’ll always preserve your capital and follow Warren’s rules.

Well, you’re not Warren Buffet, and there’s a very large caveat with Universal Life which is this: they would cap your returns at 15%. For example, if the market went up 33% this year, you’d only get 15% and the insurance company will keep the other 18%.

This is huge! Their marketing is focused on capital preservation but the capital preservation is at an enormous opportunity cost. While the above might not sound that bad: “Hey, I get to keep upside and keep my capital, what’s so bad about that?” Consider the following study from Putnam Investments:

If you started with a capital of $10K in December 31, 2005 and kept it invested, it’d be worth $41.1K in December 31, 2020. However, if you missed the 10 best days (out of 15 years!) of the S&P500, you’d lose out on $22,270 of those gains, so you’d only end up with 18,829. And if you lose out on the best 20 days, you actually only end up with $11,400 (a measily 10% return over 15 years).

(source: https://www.putnam.com/literature/pdf/II508-ec7166a52bb89b4621f3d2525199b64b.pdf)

Why is this relevant?

Intuitively, what the above study is saying is that the vast majority of your investment gains happen in a very short amount of time that’s extremely hard to time. The rest of the time your money’s in the market…it’s basically not doing much. But for those few vital days your money is in the market, you’re going to make a killing.

But if Universal Life caps your gains at 15% annually, something like this will happen: the 10 best days for the next 15 years happen in year 5, so instead of making a 227% return, you make a 15% return.

This completely nullifies downside protection, because:

1. The market is skewed bullish. Over time, the market will rise. So if you don’t sell your investment when the market dips like a complete moron, you will absolutely make money in the long-run, guaranteed (OK, not guaranteed if the entire US dollar is out of existence and we’re in a nuclear war with Russia and/or China – but you’ll have bigger issues then).
2. If you really wanted to get downside-protection, you can just put some part of your portfolio in inflation-protected bonds anyway.

So all Universal Life does is this: in exchange for a term life you can get for super-cheap, you’ll now pay way more so you can get a downside protection that’s inherently not useful in a market that generally goes up and never participate materially in the upside when the market does skyrocket. It’s a scam!

But they’ll market this to vulnerable old people who have 2 things top-of-mind: capital preservation and death. And they’ll exploit the shit out of them so they can keep all the upside when it happens while offering downside protection they can literally get anywhere else.

In other words: the flagship product for WFG is shit. The way they emphasize recruiting over having good products and how to sell good products is shit. The brainwashing sessions are shit. And the predatory marketing they do is also shit. And MLMs are shit.

Networking marketing isn’t worth it, and buying products from network marketers is not worth it. So don’t waste your time.

But *We’re* Different!

After I cut my ties with WFG, I’d still network and try to learn from other folks.

On occasion, I run into guys in other insurance-MLM organizations, that’d say things like “we’re different!”

One such organization is called PFA (Premiere Financial Alliance). They’d be very vague about what they do, and try to be very flashy to seem like an authority, and they’d beat around the bush about their earnings, etc. But at the end of the day, they still shill the same garbage: Universal Life.

Herbalife? Get a normal protein shake. Or better yet, cook whole foods.

Kangen Water? Get a reverse-osmosis water filter. Or just drink tap – you won’t die.

Amway? Just buy your supplements off Amazon, instead of joining a cult.

So, no, if you’re already in an MLM, your MLM isn’t different. It’s a mediocore or shit product with a lot of marketing and unnecessary complexity injected into it.

In summary: why spend extraordinarily effort selling a mediocore product to make someone else rich? Also: I don’t mind embarrassing myself in front of friends/family when I’m right — but when I join a network marketing company, it’s not worth it because I’ll just be one of those annoying friends / relatives that’s constantly trying to shill a shit product and is just flat out on the wrong side of history.

So…I Should Definitely Join An MLM?

Yes, network marketing is worth it…if you can’t read.

Is it physically possible for an MLM to be good? Sure. If Palantir or Tesla started an MLM, those MLMs could be classified as “good” since they’d have a good product underneath.

But why would good companies ever start an MLM? They can already sell the product without the complex overhead of creating a pyramid-scheme structure.

The fact that MLMs require a convoluted pyramid scheme structure to work is a huge red flag: it preys on human greed instead of a good product/service in order to make it work.

Think about it: if a company had a killer product, they can have a lot less expenses doing conventional marketing to scale – why would a successful company ever complicate their operations, increase overhead, and jeopardize something that’s already working by introducing a complex pyramid scheme structure to their business model? Maybe it’s because they don’t have a good product so they need to have marketing gimmicks that prey on the lowest common denominator in order to make it work.

In MLMs, their business is marketing a bad product to make it look like a good one, and spinning bad math to make it look like good math. So as someone who’s participating in an MLM, you’re not part of their team – you’re their marks.

Therein lies the biggest risk of MLMs: you might not understand fundamentally why a product (or why the MLM structure) is bad until it’s too late and you’ve invested a lot of time and money into it. In fact, that’s their entire goal: to use trickery and smoke and mirrors to obfuscate the downside so it’s really, really hard to see. That’s what they’re good at.

So my advice is in line with homeland security’s: “If you see something, say something.”

If you see an MLM, tell all your friends not to join and run the other way.

P.S.: This is a new blog and if you’ve found this helpful at all, it would mean the world to me if you were to share this post to someone that you think this post might benefit. It would also be immensely helpful to me if you could give me any feedback on the content at hello@goodmoneygoodlife.com