Latest / Computer Says Maybe / Gotcha! How MLMs Ate the Economy w/ Bridget Read

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Gotcha! How MLMs Ate the Economy w/ Bridget Read · Computer Says Maybe

• Alice: [00:00:00] If you go to X, you're seeing porn, you're seeing crypto ads, you're seeing like supplements. You're seeing all of these like scam adjacent things. Mark: The defining feature of that system is basically a way for wealthy Cory: people to control their money with impunity platforms start to hemorrhage users, and then they panic, although they call it pivoting and they do all kinds of really dumb shit, Bridget: and we're taught that it. Bridget: Good because we're all, you know, doing it together Lana: looking at a history of scams is really looking at a shadow history of the economy and a shadow history of our communication systems. Alix: This is Gotcha. A four part series on scams, how they work and how technology is supercharging them. Alix: this week I'm speaking to Bridget Read, the author of Little Bosses Everywhere, to talk about the history of multi-level marketing. Alix: I think it's probably the most successful type of scam at scale. I hope that's not a libelous thing to say. We wanted to take a step back from sort of where we are now. When you think about things like [00:01:00] cryptocurrency and robo calling to sort of, how did we get here? How did we get to the point where individuals are expected to fend for themselves in a very scammy. Alix: Speculative economy and that that individual precarity is actually kind of pitched as like some path to salvation. It has this kind of religious ideological tinge to it. Like if you're good enough, if you work hard enough, you will, you know, get a top of this multi-level marketing scheme and be able to, to exploit others by being exploited by others is a frame that Bridget uses, which I think is really powerful. Alix: And so by, I think looking back at this history, um, and getting Bridget's take on how that history leads us up to this moment, I think it's a really helpful foundation to lay for thinking about scams and our current casino E economy. So with that, let's jump in it with Bridget Reed. Bridget: I'm Bridget Reed. I'm the author of Little Bosses Everywhere. How the Pyramid Scheme Shaped America. The reading line is pretty much self-explanatory. Hopefully [00:02:00] read it and you'll understand all about pyramid schemes and I am features writer at New York Magazine. That's my day job when I'm not talking about this book, Alix: there's so many good stories in the book of like how some weird, overly ambitious. Alix: Crank figured out a strategy for like, uh, launching some version of these weird things. Bridget: Who did it first? So, the first multilevel marketing company was called Nutrilite. It was started by a charlatan vitamin maker in the twenties and thirties. This guy was a failed salesman. He had tried his hand at all manner of products and rolls. Bridget: He tried selling carnation milk in China, which is hilarious if you know that Chinese people are largely biologically lactose intolerant and settled on vitamins in the thirties. Started his own homemade outfit, but it was really not taking off. [00:03:00] Even in that era, while vitamins were still a sort of nascent wellness product, people didn't really know what they were. Bridget: We still had Bayer, Merck. Big corporate companies were already making vitamins, you know, manufacturing vitamins at scale. So this was not like some sort of new product that he could break into very easily. So he had a regular door to door selling operation. Two other salesmen also kind of struggling in the forties happened upon his business and sort of realized that it was the perfect cover essentially for their new business, which was to import the mechanics of a Ponzi scheme into door-to-door sales. Bridget: So, um. If we back up a little bit. When you think of a traditional door-to-door selling company, there was Fuller Brush, that's a big one, Avon, which started as books, but became makeup and cosmetics. Those are some of the oldest American sales companies in the world. They were started at the end of the 19th [00:04:00] century, and in that model, it's very simple. Bridget: You are a salesman, you. Buy products at a discount and you sell them at retail and you pocket the difference. And then sometimes you get a bonus based on your sales. Maybe you move up the ladder and you're running a branch. And so that's like a very classic Americana figure, the salesman. And so if you wanna think of death of a salesman, that's the role we're talking about. Bridget: So this is not a world where people are making a lot of money. It's not a world where there's a lot of joy, um, by the forties, right? When this company is founded. These two gentlemen, one of whom was a Stanford trained psychologist who was also a prominent eugenics working with Louis Truman at Stanford, the inventor of the IQ test. Bridget: And the other one was a funeral plot salesman, which was also a notoriously scammy industry long before MLM was scamming people. So this is somebody who like went into people's homes and convinced them to buy like the most expensive funeral plot so that in afterlife they were, you know, next to a river or whatever. Bridget: Once [00:05:00] they came upon Ren Borg, the vitamin guy, his business in 1945 in Southern California, they saw. Oh my gosh. We can take this product and we can import it into our new sales business. And so what this business purported to do was take the kind of mechanism that normally powers direct selling, which is that buying the products and selling them at retail, that core transaction. Bridget: Basically do away with it and say, instead, what we're gonna do is allow salesmen to also be recruiters and bring in people behind them in teams. And if you are a salesman with Nutrilite, instead of just being one of many salesmen and we are taking a cut of all your commissions and that's that you can also bring in salesmen with you and get a cut of what they're doing as well. Bridget: And the core transformation of this business model that makes MLM different from regular door door selling is that. Recruitment and what people were making was based on what [00:06:00] everyone in their group was buying. Wholesale not selling as a product. So that's the thing that most people don't understand about MLM. Bridget: You're not getting a cut of all the people under you, what they're selling to real customers. These guys invented something called purchase volume. So in an MLM, you know, say I buy a bunch of vitamins, then I bring in someone with me, they're in what's called my downline. I become their upline. They buy a bunch of vitamins too. Bridget: I'm getting paid on what we are all buying together. And then they're calling that retail sales as if they go out and sell them to a bunch of people. And it makes it look like we have this robust vitamin business. But what's really happening is everybody's just being rewarded on growing the scheme, and that is functionally no different from a Ponzi, and that already existed. Bridget: So once they invented this. Once the MLM has been around for a few years, it becomes a pyramid scheme. So we actually get the concept of a pyramid scheme, which is a product-based Ponzi from MLM. This has all sort of been like separated [00:07:00] and obfuscated over the years by the industry lore, which is that there's something different. Bridget: Called MLM, multi marketing, direct selling, and then there's something called the Pyramid Scheme. My book argues that there is no difference, one begat the other, and all this is just legitimizing an industry that's fundamentally fraudulent, but that's like the quick and dirty history of where MLM comes from. Bridget: I also think you land the plane Alix: with that argument in your book. For what it's worth. I'm good. Um, it's interesting how the structural setup of these things hasn't changed very much, but that the kind of way that they're framed by the people who manage them, they've kind of had to like squirm and shift and like reshape how they talk about it. Alix: Because of regulators coming after them at different points for different reasons. It feels like it's like a cat and mouse game that went on, has gone on for like, I don't know, almost a hundred years where these organizations have changed based on what a particular regulator has gone after them. For first, it was like the vitamins aren't good enough, and then it was like, you're selling tactics aren't legal.[00:08:00] Alix: Like why haven't these become illegal, I Bridget: guess. When MLM was invented, Ponzi schemes obviously existed, right? We get the name Ponzi from Charles Ponzi. That scam, which occurred in Boston in the early 20th century, was already, you know, over 20 years old. By the time. 1945 comes around and other financial scams of this nature of a ponzis nature were very well known financial frauds. Bridget: So by that we mean anything that's growing just by getting other marks into the scheme, so robbing Peter to pay Paul. It's the same whether you're Charles Ponzi or Bernie. So that's the very fundamental financial fraud where you're bringing in new investors to a scheme, paying out old ones, making it seem like you have some sort of engine of growth that doesn't exist. Bridget: So when Tinger Ren, Borg and Castleberry, these sales guys invented multiple marketing, which they called very ominously the plan [00:09:00] in 1945, and they were very open about it. They called it a profits pyramid. Because at the time, what they were sort of arguing and you could go back and forth and assign more sort of nefarious intentions if you wanted to. Bridget: And I think you could in 1945 say, well, maybe they truly believed that all of these people who were buying vitamins would go out and find these customers and that this market was real. So even though they were just compensating people based on bringing others in, so they essentially took what was one Ponzi guy at the top taking investments? Bridget: Right now, every single person in an MLM is running their own Ponzi essentially because you're bringing in people under you that engine of expansion and like promoting the scam. When you know that you don't have a real market under it, now you've put that incentive under every single person. So it's like really nefarious. Bridget: But you could argue that maybe they thought the United States was in the midst of so much growth, right? Where World War II is over, we're [00:10:00] about to enter this sort of golden era of American Empire. Really. You know, the leave it to Beaver Eisenhower era of abundance, right where the suburbs are. Expanding. Bridget: California is growing. We are exploding in population, right? We have the baby boom. So there's really all this fervor about consumer products and consumer products really going to power a huge amount of prosperity and, and a boom in the middle class. So you could maybe. See how they could argue that the scam was really, actually just a really optimistic vision of, of prosperity in the United States. Bridget: But anyway, so when they invented it, regulators knew what a Ponzi was. They knew what a chain letter is, which is a Ponzi that gets run in the mail, right? You get a letter that's like, if you pay a dollar, eventually you're gonna get paid out, blah, blah, blah. Same thing. A chain letter is a Ponzi run in the mail system. Bridget: We had mail fraud that existed, right? But they had never encountered a Ponzi that was [00:11:00] covered up by this idea that there were products being sold. So by the time Nutrilite, the first MLM is 10 years old in 1955, they just see this little homemade vitamin company making millions of dollars in sales to vitamins, because that's what the founders called them. Bridget: They didn't say, oh, we're selling. Millions of vitamins to our salesmen. They said we're selling millions of vitamins, and they, they just estimated those retail sales. It was entirely speculative market, which is really amazing. When you think about now how much technology is sold on speculation, right? MLM kind of pioneered really faking it till you make it. Bridget: Like faking it, like lying till you make it. But anyway, so they didn't really know what was going on. So it takes at least 20 years to kind of catch up. So the first federal agency to sue Neutral, it was not the FTC, which regulates trade and goes after Ponzi schemes and then Pyramid receives. It was the FDA because they were making crazy claims about the vitamins.[00:12:00] Bridget: MLM products almost always have to be some sort of transformative product because A, they're really expensive. That's how the company makes so much that's selling them to the salesman because they're already selling like an incredibly marked up product. So it's always something like an amazing vitamin that can cure cancer or you know, a patch that you put on your arm nowadays that like cleans your blood or whatever it. Bridget: The claims are so wild, and so by then we had the Food and Drug Act, and so the FDA was going after people making, you know, quackery claims. And so that's the first lawsuit, not the FTC. It takes a long time for the FTC to actually get going, and that doesn't happen until the seventies when MLM has spread so much around the country. Bridget: These guys are just taking the plan and copying it and starting their new companies. They only in the seventies finally start. Shutting them down. State laws start cropping up against chain selling pyramid, selling these different names for these operations. And then finally, in 1974, the FTC Sues Amway, which by then is the [00:13:00] biggest, most powerful and most influential multiple marketing company founded by. Bridget: J Van Andel and Richard Devoss, as in Betsy DeVos's father-in-law, and once the FTC Sues Amway. Amway has become so politically influential that they basically, through political pressure, help secure a favorable decision by the FTC in this case, where the FTC kind of. Goes after Amway for a few antitrust violations. Bridget: But what they do is they legitimize the business model. And even though they've shut down other companies in the seventies that are doing this exact same thing, they say, okay, fine. Amway has rules in place that keep it from being a pyramid scheme. We're gonna say a company that uses these Amway rules is legitimate. Bridget: We're gonna call it legitimate multiple marketing. Other companies that are bad apples, doing pyramid, selling pyramid schemes, that's something different. And so that decision unfortunately set up in 1979 when, when the decision was made is the only real regulation we've ever [00:14:00] had on MLM. And since it has spread all over the world. Bridget: So all a company has to do is say, oh, we adopt the Amway rules. That really keeps them from being regulated even when they are regulated. Like for example, Herbalife, you know, was sued by Obama's FTC in 2016. They were fined a historic amount, but they got to keep the business model too because of this idea that multiple marketing can somehow exist without being fraud. Alix: There's a part that you describe in the book during the policy mania in the FDR administration of sort of changing the way we conceptualize labor protection. So thinking about social security, thinking about these like big entitlement programs that were really essential to protecting every American against the precarity of things like the Great Depression, the advocacy and lobbying that MLMs did to make a carve out. Alix: Do you wanna describe what happened? Like why is it that these. Companies can treat these people so badly, partly because they don't have to technically Bridget: employ them. Even before [00:15:00] multilevel marketing existed. What's interesting about MLM is that it's built on this bedrock of exploitation already, which is independent contractor status. Bridget: So long before these guys got together and invented their scam, direct selling companies, the ones I was talking about, the more traditional ones, fuller Brush Avon, they relied on incredibly precarious. Exploitative contract labor independent contractors. So that didn't really matter until we get the new deal after the depression, because what the new deal did was transform the relationship between labor and capitalist America employers. Bridget: Reigned in those employers tremendously with lots of caveats where a lot of people feel like the new deal was itself sort of diminished in many ways in order to get it done. But the creation of social security, the creation of the payroll, tax paying benefits, all of this relied [00:16:00] on. Defining who was an employee, what kind of workers got these amazing protections that were secured by the New Deal, which of course only could have happened after the depression because the depression was so bad. Bridget: Capitalism really suffered tremendously in terms of PR, right during the Depression. So it really helped create the pressure, the public consensus that allowed the new deal to be created, but many different. Forms of capital resisted the new deal, like domestic workers, agricultural workers. All of these workers were left out of many of the new deals, protections, and one major part of that were direct sellers, were door to door salesmen. Bridget: Those companies also flipped out like their counterparts in the south who were employing domestics and agricultural workers and everything. They were part of that coalition because they said our door to door salesman. Are not our employees. We don't have them clock in. We don't watch them. They can work whenever they want. Bridget: That was their argument. These people are way too [00:17:00] independent to be full-time workers. Now, what they also didn't want was to have to. Pay benefits on these people. So they helped usher in the official designation of a worker that is fully left out of the protections of the new deal. We're gonna call them independent contractors, and we're gonna say that, oh, they're not. Bridget: Being exploited, right? These are not people who are working without sick pay, without disability who aren't paying into Social Security, right? We're actually gonna say that they're more free than full-time workers. They don't have someone watching them. They have flexible hours, and we're gonna call it independent contracting. Bridget: So that happens in 19 33, 19 35, when the new deal is being finalized, various parts of it. So by the time the MLM ventures come in, they have this amazing. Sales world that they have realized is perfect to import. This fraud because no one's watching salesmen. They basically used [00:18:00] the gray area that independent contracting allowed to occur in terms of labor oversight and decided this was a perfect place to bring in a ton of people who were looking to make money, looking to make an income, but who they wanted to basically. Bridget: We are working in the shadows of the economy. So MLM really pioneered this idea that people could be working for a company, but the company was not beholden to them in any way. And so, you know, when you look at like an Uber driver and this argument that Uber makes, which is that Uber drivers are free to set their own schedules. Bridget: We're doing 'em a favor by giving them this flexible work, but then many times the status of that. Independent contractor has been challenged because Uber drivers are very much under the control of Uber. And the same thing goes for MLM. Like these companies have a huge amount of control over these people. Bridget: They can terminate their contracts quickly, they can keep money from them. There's all kinds of. Reasons that these people should [00:19:00] be full-time employees. It just means that there's really so much less oversight and control that the federal government has, or state governments for that matter, over MLM work. Bridget: So it has allowed the fraud to really flourish. Alix: I was looking for this quote in the book where you talk about how people were deemed independent rather than neglected or exploited. There's also, you talked, I can't remember the historian's name in the book, but you, you were talking about how there's like this transition from. Alix: American ethos being one of industrial hard work, um, and like a work ethic into one that's entrepreneurial and risk-taking and basically, but Eric Bigger. Yeah, he's great. His book just came out. Yeah. There's this turning point, which I feel like has affected kind of American self-conception of like how one generates value in the world, like how you. Alix: Make it essentially. And I wonder if you could talk a little bit about how the American dream and the, like the framing of the kind of I cultural ideology was kind of almost like weaponized or part of the recruitment drive and how people get sucked into these things. Do you wanna talk a little bit about how they get [00:20:00] pitched as this entrepreneurial journey that you can go on that makes you more American and like drives you towards this true ideal? Bridget: From the very beginning, the. MLM. Inventors certainly politically would have identified themselves as conservative, but they also dabbled in this sort of what used to be a fringe on the right, which is now unfortunately much more mainstream. Which is like free enterprise radicalism. So market fundamentalists, essentially they were sympathetic to the idea that the New Deal was incredibly destructive, was a threat to the very foundation of this country, was a door opening to socialism and communism and that even the, the. Bridget: Protections of the New deal. Were totally untenable and were going to undo American capitalism and threatened, you know, total overthrow of the social order. The [00:21:00] groundwork for that movement was laid immediately during and by the New deal because all kinds of industrialists got together. You know, most American companies got on board. Bridget: With Roosevelt and said, we're we're okay with this because the depression was so bad. And then of course you had World War ii, which was extremely distracting for the whole country, and capitalism really motorized itself to help the war effort. So then once the war is over. That nascent movement of industrialists who really reacted against the new deal, start literally planning for its demise, start trying to undo that bulwark that has just been established by, you know, the previous two decades. Bridget: So, long story short, the guys that started MLM, they gave money to some of these think tanks. They very much early on were sympathizers to this movement. The people that were really the biggest sympathizers were the Amway founders. So they were not just Republicans. They [00:22:00] helped import some of these ideas, which eventually become trickle down economics become. Bridget: Neo-conservatism. Now these movements are really familiar to us, right? People who wanna undo social security, people who don't believe in the welfare state, don't just think it should be small, truly don't believe it should exist. People who want to dismantle public education, right? And so they really start building the reaction that then becomes the Reagan right after that becomes like the evangelical, right? Bridget: And now we can see in Donald Trump and in this like incredibly hard right turn. So. MLM from the very beginning is propaganda for all those ideas that you are going to be the most productive self you can be when you have no restrictions on you, right? There's no regulation keeping you down. Uh, your taxes are part of that, right? Bridget: They want you to pay the lowest taxes possible. They want nobody to be paying taxes, and you are. Truly working in this like perfect [00:23:00] free market where the only thing holding you back is yourself. Like that's the story being told in multiple marketing, that when you join, you can build a team as big as you are able to build. Bridget: The only limits on what you're able to accomplish is yourself. It's incredibly individualistic, but it's a lie. If what's actually happening is the structure of the business relies on this massive group of people at the bottom. Making nothing. You know, which definition does by definition, right? Yeah. By definition, the way that someone at the top can make a lot of money is bringing a lot of people in who have very little chance of making money. Alix: Yeah. It's just so interesting how the messaging is so different from the money, like where the money's going versus. Who's being told they're gonna become successful and this kind of yin and yang of exploitation and transformation. Even just the verbiage that the different people through the century used to describe the like opportunity. Alix: It just was so [00:24:00] clever and powerful and like focused on individuals that weren't just interested in making money. They were interested in changing their lives and just get like super hooked in this machine that's just like. Designed to take everything they have and I just, it's such a hypocritical, yin and yang that just felt so potent and familiar to like other aspects of the economy, but I don't know. Alix: Did any, as you were writing this, obviously these people were doing this on purpose and this was, they knew that this messaging was super potent and that they could continue to like get people to buy into something that had nothing to do with the economic fundamentals of the overall structure like this was. Alix: On purpose, Bridget: it's a lot of doublespeak, and the double speak goes back to from the very beginning. This project being about truly propaganda for capitalism at times that it needed it even back in 1945, not just the MLM guys were talking about how to invent a market for something that wasn't selling these vitamins. Bridget: Right. [00:25:00] Eisenhower himself before that, Harry Truman in speeches, they are talking about how. Americans need to create and help be part of the demand for this consumer economy. Like already, there's a lot of doubt whether the incredible growth that the United States enjoyed in the last century, right, during industrialization, when there really was like. Bridget: An unbelievable amount of growth so much that the whole country changed, right? We go from an agrarian society to an a rapidly industrialized society with cities, people's entire lives and sense of selves changed. That happened and already sustaining that level of growth was encountering. Trouble, it was faltering and that the depression was the ultimate moment of doubt. Bridget: Whether we could sustain that incredible level of growth and whether if we did have that incredible level of growth, maybe it will come with like tremendous inequality and tremendous pain. Seeds were [00:26:00] planted in American minds of like, maybe this isn't how we should structure society, maybe. Having incredibly rich people is not going to be the way that we all win. Bridget: And so from the very beginning, MLM comes at a moment where. We really need to be like telling a better story and how do we get people on board with this idea that fundamentally in the United States, people are going to be allowed to accrue tremendous amounts of wealth. We're gonna really structure protections. Bridget: Benefits regulation around that. The regulation that we do have is still going to like fundamentally allow people to have private property and private wealth. That's really what we do. The new deal did not change that. So from the very beginning, they're having to invent, like reinvent sales as something that is really gonna help us all. Bridget: And so they create this vocabulary that is a lie. You know, they call consumption production. When you buy something in MLM, they [00:27:00] immediately flip it and call it sales. It's a very literal kind of transformation. They're trying to tell you that you are doing something fundamentally extractive. You're paying for a product, and they're trying to tell you that you're contributing something. Bridget: You're producing something valuable. It is totally gaslighting. In the service of like convincing us all that buying more and more shit is somehow producing something in a marketplace. And again, you can see now where we're in a world again, where right now we are being sold on something that truly the benefits to us right now, and I'm talking about AI, just to be clear, are not clear to us, right? Bridget: To regular people. But we are being told that regulation is gonna hold. Any of those benefits back, and that if we try to get ahead of any of this and put our arms around it in any way, we're gonna keep ourselves from this like incredible imagined future of riches. MLM has been doing that for so much [00:28:00] longer, you know, that like. Bridget: If these companies lived in a world where they actually had to crack open their books, they would fall apart because it's all fraudulent. They sold it as No, no, no. It's because then you're keeping these like single moms and struggling entrepreneurs. You're, you're holding us back with your waste and burden and you know, all these arguments that are really familiar to us now. Alix: Why did you write this book? Is it because you were like, how did we get here? Or were you like, MLMs are so weird and interesting and I wanna spend a lot of time working on it? Like was it because it feels like the foundation and context of everything that feels shit now. Bridget: Honestly, no. When I started the project, I, I really didn't know how deep it went. Bridget: I knew somewhat because there are, you know, other people who have delved into this and have gone pretty deep. And the fact that Betsy DeVos comes from this family that makes a product you've never heard of. Writing on the wall was sort of already there. One MLM skeptic that's been around the longest [00:29:00] is Bob Fitzpatrick and he wrote this book, PON Genomics, which is a great primer for all of this. Bridget: And he really is one of the first people to even go back to like the Ren Borg days. You know, for so long, people reported on MLM and they just kind of started with Amway. They didn't go back further. They didn't look up that it was like. Started by this guy who pretended to be a scientist and a vitamin maker. Bridget: You know that it's turtles all the way down kind of thing. So I had an inkling, but I did not know, I don't think at all how truly deep it went. So I really just wanted to know what is this thing? And a journalist had not looked at. At, in a book length, really in depth before. And so in the end it had to be a book because of the amount of material that went Alix: into Bridget: it. Alix: So what do you see now? I mean, like, I feel like there's so many corollaries that we could draw on, like crypto, on ai, on like the financialization and digitization of everything, and like [00:30:00] monopolies and like gig workers, like the are, are right now. Everything feels so. Connected to these logics and patterns, but do you wanna talk a little bit about like when you hear about. Alix: Open AI saying, Hey, we're gonna revolutionize X. Like, are you just constantly, like it's all in MLM or like what, how do you see these things being connected? Bridget: The thing I think that everyone is trying to figure out right now, whether you're on the left or the right or rich, poor or whatever, is, where is this going? Bridget: And you know, how are we going to address this? And I think what MLM does for me, that's very helpful but also really depressing and terrifying is. It very uncomfortably brings up the sort of shape of our country right now and lays bare for me where it comes from. And for some people, they don't really wanna admit that it's shaped that way. Bridget: And by the shape, I mean is a [00:31:00] pyramid, right? They don't wanna acknowledge that it's shaped that way on purpose. What I mean is when we look at a company like Amazon. That's a really good example to me because it is a company where there's one person at the top making exponentially more than the people that work at Amazon, many of whom are gig workers. Bridget: And so doing this independent contractor thing, you look at a company like Amazon and there are some people, loud people in this country that wanna say, that's fair because Jeff Bezos. Did something different than all of us, right? He figured it out. That's the market. That's competition. He won what I look at it. Bridget: C is that he cannot win without a giant group of people being exploited. It is rigged in that way. I mean that very just, you know, pedantically, I don't mean it in a, like a wr rigged, I mean it just like very literally, if people [00:32:00] were treated more fairly the way. Amazon would run, would not make Jeff Bezos the near trillionaire he is, you know, and so what do we do with that? Bridget: And there is one version of that story, like I said, that is like the way that you have to make that fair. Is that he somehow deserves that position because of some kind of perfect world where everybody just gets what they work hard for. And that is the American dream story, right? That we just work hard. Bridget: And if you work hard, you'll get what you deserve. So what I see MLM doing is just putting it out there that these people. Getting to the top by scamming others, by hurting others, by exploiting others, by being overly extractive and they know it. And I think a lot of people just don't want to discuss what we do with [00:33:00] that. Bridget: Then, you know, if this is something that like we can't keep. Going on a path of growth, whether it's Amazon or whether it's our whole economy that has now been yoked to the growth of companies like Amazon, because we're now all reliant on this system of constant growth and the valuations of all of these companies, right? Bridget: And this is where we could get into AI if we don't all keep buying into the constant growth. We have a huge problem, and so what are you gonna do if people start to pick up on the fact that your growth relies on my, my exploitation relies on me and belief. Exactly. Yeah. And like my nose to the grindstone, if I suddenly stop buying into this, the whole thing is gonna collapse. Bridget: That's where a Ponzi a pyramid is really helpful in terms of putting that structure into very real terms. We've moved so far beyond material exploitation. We're being asked to. Buy into something, we don't even understand the contract [00:34:00] we're being sold. You know, like it's one thing to think about, like an exploitative contract with like a bank. Bridget: Maybe there are parts of it that are exploitative between the customer and the bank, but at least you sort of know your relationship when you're a customer and you're a bank. Now, what's so insidious about MLM and gig work in general is that you're supposed to be a worker. You're supposed to be making an income. Bridget: You're supposed to be an employee and have an employer. But now the, the relationship has been so muddied where we are now consumers. Being sold that we are producers, Alix: you know? Totally. I interviewed David Seligman, who is running for Attorney General of Colorado, um, and works on worker power and wage theft and like exploitation. Alix: Um, and he has this really powerful conception of like, basically the problem of the modern economy is that workers or pitted against consumers when in fact those are two of the same type of people. Um, and that the actual people with structural power we just don't fight with because we're like, not [00:35:00] actually. Alix: Quite able to, and I think that's a really powerful way of thinking about it. I think it's interesting, like what I'm hearing you say is that MLMs not necessarily as a direct corollary or like re repeating business, but like a geometry that it like lays out how the economy's structured in a way that repeats itself and is really useful and is just getting more and more exaggerated and that it's like. Alix: This mechanism that it's like zero sum between the exploited and the exploiters, I think is something that has become more and more obvious. And I think you're right that like now the question is like, what do we do about it? Uh, 'cause to do something about it would disrupt the overinflated valuation of lots of companies and it would essentially like bring down the entire economy, which is like where pensions are invested and everyday people's money is put. Alix: We take on a shared risk, but we don't actually take on a shared reward in a way that is really disturbing. Bridget: Yeah, and I think what gig work before started to do, and what AI is doing now is that [00:36:00] again and again, this goes back to what MLM did already, is to articulate that risk as somehow. Our benefit somehow something good for us, because it means that we get to be bosses. Bridget: We are in charge of ourselves. That's the like thing that we are being told. That's, that's why we're supposed to accept this new world. You know, if before it was, oh, you can be an Uber driver and also be a songwriter, or however they. Sold it in like the golden era in like 2011 when we were all taking Ubers and being like, oh, this is cool. Bridget: I remember when it seemed sort of optimistic and I had friends who were kind of flex workers and and used it, and they were doing that thing where they were paying them fake money. But anyway, now with ai, the idea is like, oh, this is gonna totally get rid of all of our jobs. But because AI agents are gonna take over everybody's job and no one needs you anymore. Bridget: But now we're gonna be free to like do our own thing and be bosses, entrepreneurs. Yeah. And be bosses, right? That we're [00:37:00] gonna be like freed from the nine to five into this like incredible world where we can all just like take advantage of the incredible technology and change the world together as if we all. Bridget: Are equally staked in this new world, right? Not that it's just gonna enable companies to hoard more because they don't have to pay the people they were already paying. That to me is, is very MLM, because you are a worker and you are at the bottom of someone else's pyramid. But it's okay because you can start your own pyramid and be the top a boss at the same time build a pyramid under you. Bridget: That is literally what MLM does, right? Like when you're, when you're brought in, if I bring you into my downline, you're at the bottom of someone's pyramid. But I do it by telling you, you can build your own pyramid. I mean, it is literally. A story [00:38:00] about exploitation and selling that exploitation, MLMs, you literally call recruiting people into the business. Bridget: Sharing it is a spin on instead of selling, being something kind of icky and this transaction that. In the olden days, salesmen were icky. You know, it was gross. It was a transaction that was not supposed to be your family member, your friend. It was not supposed to exist in your sort of intimate life. And now everybody is selling something to everybody and we're taught that it's good because we're all doing it together. Bridget: But again, all of it is to serve in what I feel to obfuscate the fundamental relationship of labor and capital. It is all to cover up. The oldest thing in the book, which is there are owners and there are people that don't own, and that has not changed fundamentally. In fact, it's way worse than it ever was, right? Bridget: The owners have way more than they ever had, and so. It's like [00:39:00] an incredibly powerful story to be told in the new world of ai. We're all gonna be like employing our own AI bots to like, I don't know, do email marketing. Like I don't, I dunno. How so? Like, sell a coaching program or something? Yeah. Right. Bridget: We're just gonna be freed to sell our own stuff. It's like, well, how is everyone making? I don't money do. Yeah, exactly. But that's, that's even my question is like, how, how will anybody have enough. Of their own income to buy what we're all selling each other like. Alix: But so, so I wanna touch just quickly on a part of our kind of digital now that feels like actually the same thing as an MLM, like ai. Alix: I think there's like a metaphorical. Similarities. But like crypto seems like, oh yes. Yeah. It is an MLM. Yes. Like are there hundred percent? Yeah. Are there? I think so. Yeah. Are there crossover? I mean like how would say more about why you think it's the case and also are there MLM people that now are like boosting NFTs and like Bitcoin? Alix: Oh, a hundred percent Bitcoin. Oh yes. Bridget: And some of the guys who were involved in, who are involved in world. [00:40:00] Liberty Financial Trump's crypto operation come from the MLM world for sure. These other guys in Trump world come from MLM and are doing crypto, but the thing that crypto does that MLM. Has always run on and very explicitly started running on in the eighties and nineties was promotion, right? Bridget: So what happened in the seventies and beyond is MLM operators realized that they didn't have to sell a product, that the product could be self-help. That it could be self-development. So the first MLM products were all wellness vitamins and stuff, and then the next week was physical products. And now it's like was cosmetics with like Mary Kay in the sixties and then already by the seventies. Bridget: Tracking along the human potential movement and you know, the sort of woo woo, new age stuff that was all over the country in the seventies, MLM Sellers realized that they could build MLMs around those kinds of products. The first one was called Dare to Be Great, [00:41:00] and it was this guy's selling tapes and records and books and stuff. Bridget: He's a fascinating figure. This guy Glenn Turner. And then in the eighties and nineties, Amway did the same thing in addition to selling Amway products. These kingpins, the big Amway downlines created their own, what they called tool systems. And they were selling a secondary market of tapes, books, motivational crap. Bridget: And that was what was powering their businesses, not their Amway business. And it became a scandal within Amway where these guys who were supposedly making all of their incredible wealth on selling soap Amway products, were actually had these like huge tape manufacturing businesses where they were selling like millions of their own public speaking tapes because their downlines were required to buy them. Bridget: That was what was powering all their money, you know, was the recruitment, was the growth. So they're selling this idea that they're making their money on sales, but what they're really [00:42:00] making their money on is selling the selling. So this promotion aspect, and of course that just like. Balloons on social media, like if before it was maybe a little harder to like, record your tape, record your video. Bridget: I mean, imagine what the internet did for that promotion aspect, which is why, for example, Herbalife grows tremendously on the internet because you can make videos about how rich you are and disseminate them really easily on the internet. A business that relies on the promotion of the business while the actual engine of growth. Bridget: Is just other people getting in on it. Again, we have defined that as a pyramid scheme, so imagine where the engine of growth is now a currency system where you're inflating the currency based on how many people are buying into it. Not different at all. It's just that now the, instead of a product being sold on a retail market, the product is getting [00:43:00] people into the people are the products, right? Bridget: The people are the commodity that are being encouraged and passed among each other. When a crypto person. That's like the nicest thing you could say. A crypto person. When a crypto scammer like creates a meme coin or does a rug pull the commodity? Is the mark? Is the guy buying in because he thinks that he's joining some incredible new currency, new whatever, but what's really happening is. Bridget: Exactly what Ponzi did, getting a bunch of investors cashing out as soon as they can, and then people are left holding the bag. We have Bitcoin. The rug has not been pulled yet, but it's the same thing. The value of the coin is only because of other participants. There's no actual material. Product, right? Bridget: There's no material resource at the core of Bitcoin. And of course, crypto uses the same rhetoric of like, we're decentralizing the MLM idea that you're getting out of the nine to five grind that you're in charge of yourself. We see the same echoes in [00:44:00] crypto, right, of like we're getting out of big banks and it's all for the little guy. Bridget: And it enables people who don't have access to like mainstream whatever, can build their own wealth. Like we're building generational wealth. You know, MLMs go after black and brown Americans who, who might be vulnerable to that pitch, just like crypto services do, right? Like certain MLMs say, you know, we're gonna help black people build generational wealth who haven't had the same access to education or getting up a career ladder. Bridget: It's incredibly similar. I see crypto and the concession, not only Trump, but like the concession that the Biden administration made. I think to the crypto industry and to cryptocurrency in general to the NFT thing. I mean, all of that was Biden. It was not during the Trump era. So you know, poor Elizabeth Warren. Bridget: Yeah. I mean screaming her Alix: head off this whole time. Yes. Bridget: Yeah. So like, you know, there were these competing things where like [00:45:00] we got, you know, Lena Kahn during the Biden admin, and I think we can think. Liz, Warren and Bernie for that and like the influence of that wing. But we also just got this like incredible capitulation to this idea that like, we're gonna open the door first. Bridget: Then we will like try to regulate the worst parts later. Yeah. Alix: All the while with sand bankman freed as like this pinnacle scammer after they all were like into him and then got burned by him, and then rather than reconfiguring how we think about crypto, it was just like, I don't know. I thought that was a beautiful window of opportunity to like reframe the role that crypto should play in society or, and they did not seize it. Bridget: And I think MLM is like a canary in the coal mine for all of that. I mean, in some ways it's different because it is very obviously a fraud, I think. But I do think. That something so harmful has been around for so long and at every point really what we fall [00:46:00] back on is not just the regulatory precedent, which sucks this Amway rules I was talking about, but also this idea that individuals are responsible for themselves and that like the people that get into it, it's their own fault. Bridget: This really Darwinian and upsetting. Idea of what we owe each other in a society. It speaks very poorly of where we're going in terms of our relationships and the idea that like if you join something like this, you know, we're gonna put a government website that says, you know, maybe you shouldn't, you know, if you look up MLM on the FTC website, it might have changed for this administration. Bridget: Um, but before that it's probably, it's probably just redirects to Amway's website. Right, right. But before that, it basically said, you know, I wouldn't do this if I were you. That's the extent of what our taxpayer dollars, like the [00:47:00] social contract and like what we think the government should be for. Alix: I also think that's like one of the most beautiful parts of the book is the way that you intertwine the kind of current histories of someone that. Alix: Is experiencing participating in one of these MLMs while you're telling the history of them. I think it was a really powerful way of, of kind of interweaving the personal stories of people that are stuck within these systems and like how they got there and how like, like how it evolves for them while also telling the story of the people that made all of this kind of exploitative infrastructure possible. Alix: It's a really cool way of writing a book. Bridget: It's nice to, I guess you could argue against this, but like. In writing the book, I kind of arrived at a really beautiful truth, which is like people do know that life is worth more than money. You know, people do know that and we all know that, and it's truth. It is this like very hard truth that human beings mean more to each other than, you know, on a balance sheet, and it's just [00:48:00] really upsetting. Bridget: That the world continues to deprioritize that truth, you know, to act like the idea that we all wanna live in some sort of fascist authoritarian society where a bunch of people make a lot of money and like everyone else doesn't. No one wants that. Of course. No, thank you. So once, right Once you can like get through all the garbage of the propaganda you're being fed. Bridget: And see that that's where this is going. People do it every day. In MLM, they see that the person at the top of this MLM knows that they're being stolen from, basically knows that they never had a chance to make money from selling these shitty products. The products are a lie, and I just think the lie that we're all being sold in terms of the way the economy is structured is so much deeper and harder to kind of come out of. Bridget: But I do have hope that that people can, yeah. Alix: I think they will. I hope so. We kind of all depend on each other [00:49:00] to have that awakening. 'cause otherwise we're all screwed. Um, cool. Well thank you so much for laying out the book and kind of walking us through those histories and thank you for writing the book. Alix: It's really, really good. And we will plug it in the show notes and everybody that listens should read it. But thank you. This was great. Thanks for having me. Alix: All right, so next week in part three of the series, we're gonna be looking at how generative AI has kind of created a step change in the scammer industrial complex. We're gonna be doing that deep dive with Alice Marwick from Data and Society, and Lana Swartz from University of Virginia. They wrote an excellent primer on. Alix: They call it scam, GPT. Uh, but essentially the questions we should be asking and what we know about the effect that generative AI is having on these big infrastructures of scams. And also, we just did a live show in New York. If you missed it, you can watch it on YouTube and we will link to that in the show notes. Alix: It was fantastic. Thank you for those of you who managed to make it in person. Um, and for all of you that joined us on the live stream, it really was great to have you there. All right. Thank you Georgia [00:50:00] Iacovou and Sarah Myles. For putting this episode and this series together. And with that, we will see you next week.