The two reasons why people don’t leave MLMs – even when they know the facts

Business

Ever wonder why an MLM rep continues to believe in – and lose money to – an MLM even after being presented with the facts? Find out why two psychological phenomenons, belief bias and groupthink, are to blame.

I’ve been investigating and writing about the MLM industry for almost five years now. And over that time I have often wondered why, even when faced with overwhelming evidence that the ‘business opportunity’ they are signed up to won’t work, people stay with their MLM. And, in many cases, continue to lose money.

And when I say ‘overwhelming evidence’ I don’t just mean articles written by MLM critics like us, documentaries like Betting On Zero, TV segments like this brilliant one by John Oliver, or anti-MLM videos on social media. Or even this research, published on the FTC website, that demonstrates how 99.6% of people who join an MLM will, on average, lose money once business expenses are taken into account.

I mean income disclosures published by the MLM companies themselves.

For example, even when LuLaRoe admitted in their court-enforced income disclosure statement that “the median earnings were $0.00”, they continued to successfully recruit and retain independent retailers.

Their income disclosure statement also shows that 18.6% of all LuLaRoe Retailers retailers made a LOSS in 2020. 16.7% lost up to $4,999, 1.2% lost between $5,000 and $9,999 and 0.7% lost over $10,000. And that was BEFORE deducting business expenses, which LuLaRoe admit “can be several hundred dollars or thousands of dollars annually.”

LuLaRoe isn’t the only company who knowingly shares evidence that most people don’t make money in their income disclosure statements, while continuing to promote their ‘business opportunity’ as a way to do just that. Herbalife, Nu Skin and Arbonne all publish income disclosure statements that show that most people don’t earn money with them.

And Valentus go as far as to say this in their policies and procedures document: “Most Independent Representatives earn less money each month in the compensation program than they are paying for their products.”

I understand why MLM companies (and top reps) are willing to engage in this level of cognitive dissonance. In our opinion they know that most people will lose money when they join them, but they don’t care because THEY make money off the products reps pay to remain active, and the investment they make in the mindset ‘tools’ they are convinced they need to succeed. (The DSA also appears happy to lie and deceive in our opinion.)

But why do people fall for it? How can they be able to discard a proven fact – often proven by the company themselves – and yet STILL fall for the recruitment lies? And when recruited, remain with the company despite losing money?

MLMs prey on vulnerable people – and sell them hope

I was aware that the answer to this question lies partly in the type of people MLMs typically prey on. They like financially vulnerable people who have few, if any alternative options. Single parents. Immigrants. People struggling with mental health. Carers. People in debt. Students. Stay at home mums.

MLMs lure people in and retain these people by selling them hope. And that hope is powerful.

When people join an MLM they desperately hope that what they are sold, the dream that you can make good money part time working from home for a tiny or even zero start up cost, is true. And confronting the fact that MLM doesn’t work means giving up on that hope.

If you have few, or no other alternatives to place your hope in, then you can see why people choose to continue to believe the lies they are told (as we believe they are).

So yes, I am aware of how MLMs leverage the power of hope to attract and retain recruits. But I still couldn’t understand how people could maintain that hope in the face of overwhelming facts that proved the opportunity they were pursuing was probably not going to make them money, and could even lead them into debt.

That was until I listened to the podcast The Dropout about Elizabeth Holmes and Theranos. When I did, I finally understood two of the psychological phenomenons that were really keeping MLM victims stuck: belief bias and groupthink.

In this article I’ll explore each of them and explain how they work so powerfully to keep MLM reps trapped in a business that isn’t working for them. And I’ll share examples of the kind of messaging MLM reps are exposed to, which we believe reinforces these mind games.

What is belief bias?

There’s a chance that you’ve heard of cognitive bias, a subconscious error in thinking that causes you to misinterpret information from the world around you, and impacts the rationality and accuracy of your decisions and judgments. But fewer people are aware of belief bias.

Belief bias is actually one of the most common forms of cognitive bias, and something we all have fallen prey to at some time. 

With belief bias, you are more likely to accept the outcome of something if it matches your belief system. It can also lead you to agreeing to do something, or sticking with it, even if it makes no logical sense, or even when you are presented with facts that disprove it (such as income disclosure statements).

Belief bias uses a ‘logical’ argument known as a syllogism in which a conclusion is reached based on two premises. For example:

  • All mammals are animals.
  • A cat is a mammal.
  • Therefore a cat is an animal.

Sometimes these conclusions are correct, but other times they are incorrect and can lead to a false outcome. For example:

  • All fish live in water.
  • A dolphin lives in water.
  • Therefore a dolphin is a fish.

Syllogisms allow people to perpetuate a belief in the face of overwhelming facts to the contrary because the believer holds an alternative set of ‘facts’ that align with their belief. Here are some incorrect syllogisms that enable people to remain in an MLM even when presented with facts it doesn’t work, and even after failing themselves:

  • A business opportunity is a way to make money.
  • MLM is a business opportunity.
  • Therefore you can make money in an MLM.

And:

  • My upline is nice to me.
  • Nice people don’t lie.
  • Therefore my upline wouldn’t lie to me.

And:

  • My upline drives an expensive car.
  • Rich, successful people drive expensive cars.
  • Therefore my upline is rich and successful.

(This particular syllogism is why MLM reps are so fond of leasing expensive cars, and why MLMs have car plans.)

Belief bias is also how MLM reps are able to get away with sidestepping facts and when, if presented with logical arguments, simply respond with an emotional defence.

For example, if an MLM rep is challenged with a fact like, “Your own income disclosure statement shows that over 80% of people never make any money,” rather than address it directly they are likely to respond with a rebuttal like, “You just don’t want people to succeed. We’re offering an amazing opportunity and all you can do is pull other people down.”

To someone without belief bias the response does not match up to, nor address the point put to them. But to someone who is predisposed to believe, this response is acceptable. And – importantly – it enables them to retain that all-important hope that the MLM will ultimately work for them.

How belief bias works in MLMs and why it’s so powerful

Let’s look at exactly how we believe belief bias plays out in an MLM, and why it’s so powerful – based on many conversations with ex-MLM reps.

Think about what happens emotionally when someone joins an MLM. They need money, and are sold the dream that the business they have joined will work for them. They can see the lifestyles enjoyed by successful reps and are told they too can achieve it. This dream is highly desirable and they want to believe it.

Once in an MLM, they are usually love bombed by their upline and team to cement the relationship, and may even subjected to similar brainwashing to cults and abusive relationships. This brainwashing is designed to discredit any alternative thinking or criticism of the MLM.

The new recruit to the MLM then invests money, time and hope in the business, and often makes sacrifices such as cutting off relationships with people who are unsupportive, and instead spending their time with other people in the business.

When the MLM fails to work for them a few things kick in. Firstly there’s the brainwashing and groupthink (we’ll come to groupthink shortly) that discourages speaking out, or even thinking negative thoughts. Then there’s sunk cost fallacy; they have already invested so much in the business and are reluctant to see that go to waste. It’s like the gambler who throws good money after bad hoping – despite clear evidence otherwise – they’ll hit the jackpot and win it all back.

They may well also feel shame at the idea of quitting, especially if they’ve hyped the business opportunity up to friends and family, and blasted their enthusiasm and confidence in it all over social media – as MLM reps are trained to do.

The result of all this is that their desire to believe that they made the right decision is incredibly powerful, and certainly outweighs their motivation to admit defeat.

This is when belief bias is triggered as a self-protection device. In order for them to avoid the pain of walking away and accepting the loss, they refute facts and instead continue in their belief, hanging onto syllogisms like the examples above.

It’s why MLM reps continue to fall for easily disproved lies and deceptions such as these. Why MLM reps can be registered bankrupt and be pursued by HMRC for eye watering debts and STILL be worshipped on stage as success stories to be emulated.

It’s how people with zero prior business experience can borrow money from wealthy parents to buy their way to the top of an MLM (and still owe a significant debt to HMRC), or be placed there by a parent, and then promote themselves as coaches who can share the secret of going from rags to riches.

How can you counteract belief bias in MLM reps?

So how can you counteract belief bias when trying to help someone trapped in an MLM, and enable them to see what is happening? Here are some suggestions of approaches to try:

  • Talk to them about belief bias and how it works, and give them examples that are relevant to their situation.
  • Ask them if they might experiencing belief bias. If they say no, ask them why they think not.
  • Ask them if their reasoning might be influenced by a belief they hold about the MLM. If they say no, ask them why they think not.
  • Encourage them to slow down their reasoning process, and spend time really thinking through the the information.
  • Ask them to explain their reasoning clearly and explicitly.
  • Ask them to just consider an alternative perspective.
  • Point out specific issues in their reasoning and ask them to explain them. For example, ‘If your upline is so successful, why do their accounts on Companies House show they are in debt?’

It’s important to use these techniques in a calm manner and without accusation. If the person you are talking to feels like they are being attacked they will be on the defensive and close down. But if you can ask questions in a genuinely curious way, without making them feel they are being tricked, attacked or judged, you stand a chance of getting them to at least consider the potential of an alternative view.

You can then build on that gently with more facts that back up the truth, and help them deconstruct the reality they have built and guide them to a new path forward.

Please be aware though that anything you say and any realisations you may help them come to will be robustly challenged once they speak to anyone in their MLM. It takes a strong, resolved person to stand up to that and not be swayed. Because this is when groupthink kicks in…

What is groupthink?

As we mentioned, there’s another powerful psychological phenomenon that binds people to MLMs, and that is groupthink. Groupthink occurs in a group of people when the desire to conform results in irrational or dysfunctional decision-making. And it’s a psychological tool that is used with powerful effect in MLMs, in our opinion.

From a survival perspective, groupthink makes sense. In a tribe you can’t afford dissent – all your lives depend on sticking and working together in harmony. So any individual thinking is discouraged, and instead complete trust and belief is placed in your leader. If a member of your group expresses doubt they are encouraged by the group to give up their individual thoughts and conform.

But we’re no longer cavemen risking imminent danger if we leave or are cast out from our tribe. And what originated as a logical survival strategy can be used today to manipulate people into actions that suit others.

How groupthink traps people in MLMs

So how does groupthink trap people in MLMs? To answer this you first need to understand the basics of how MLMs work. When you join an MLM you usually join at the bottom (unless you are given help) and the theory is that you make money through retail sales and building a team.

We know from our own calculations and from speaking to former MLM reps that it’s pretty much impossible to make money from retail sales in most MLMs, so your focus is on recruiting and retaining others to build your own team. We also know that MLMs usually have a high churn rate at the bottom (for example, Herbalife lose as many as 90% of distributors who are not supervisors, and 60% of supervisors a year).

So MLM companies need to find ways to keep people in and continue to recruit new people. And how do they do that? By placing pressure on their reps.

That’s why the money you earn as you climb up an MLM is usually based on the volume of your team sales and the number of people you have at each level of the compensation plan. It’s also why bonuses such as the ‘free car‘ come with so many strings attached.

The reality is that once you start to climb the ladder in an MLM there is an immense amount of pressure on you to maintain and grow your team. If you don’t, you lose money and potentially your rank.

So, given the high churn rate and difficulty making MLMs work (remember, research shows that as many as 99.6% of people who join an MLM will lose money after business expenses are deducted) you have a tough job. You can’t fall back on facts, so you’re left with emotionally manipulating people into staying.

MLM teams usually turn on anyone expressing doubts

And this is where groupthink come into play. Let’s say you have a team of 20 people. You need these people because if they leave you’ll lose your car bonus and will need to make the monthly payments yourself as the car lease is in your name.

But then, one of your team starts to express doubts. She’s a single mum and she’s struggling to make ends meet. She’s begun to question whether the business works and whether she can afford to continue investing time and money in it.

This woman has now become a problem for you. If others start listening to her, they may too look at their situation and lack of income and also question whether the business really works. And if they start leaving, you’ll lose your bonus.

So rather than listen to this woman and honestly address her concerns, groupthink kicks in. You talk to the group about the danger of negativity, and how positive thinking is the only route to success. You connect doubts with lack of effort and a ‘loser mindset’, and maybe even directly name and shame this woman for her lack of positive thinking and success mindset.

Your team want to believe the business will work for them, after all they’ve invested a lot in it already, they also don’t want to anger their leader nor be seen as a dissenter. So the group turn on the woman who has doubts. They reiterate the message from their leader and either, in effect, bully the woman out of the business, or back into line with the groupthink.

To ensure this type of dissent doesn’t happen again, a team leader may use the doubter as an example, isolating and bullying them. This sends a powerful message to anyone else in the group who is thinking about speaking up.

Another reason why groupthink works is that we WANT to believe someone has the answers, and belong to a group of fellow believers. We’re relieved when we have a narrative we can buy. When the person telling the story is charismatic and compelling and pulls at our underlying values, we have faith we are headed in the right direction, even if we have no facts confirming it works.

Symptoms of groupthink

So how can you tell if groupthink is being used? According to Yale research psychologist Irving Janis there are eight symptoms indicative of groupthink:

Type I: Overestimations of the group – its power and morality

  • Illusions of invulnerability creating excessive optimism and encouraging risk taking.
  • Unquestioned belief in the morality of the group, causing members to ignore the consequences of their actions.

Type II: Closed-mindedness

  • Rationalizing warnings that might challenge the group’s assumptions.
  • Stereotyping those who are opposed to the group as weak, evil, biased, spiteful, impotent, or stupid.

Type III: Pressures toward uniformity

  • Self-censorship of ideas that deviate from the apparent group consensus.
  • Illusions of unanimity among group members, silence is viewed as agreement.
  • Direct pressure to conform placed on any member who questions the group, couched in terms of “disloyalty”
  • Mindguards – self-appointed members who shield the group from dissenting information.

These strategies are all commonly employed in MLMs, in our opinion.

Another groupthink tool that is often employed is to create a common enemy to unite people against. And if someone dissents, they are accused to being duped by that enemy.

For example, in MLMs they often use traditional corporations as the enemy. They’ll refer to jobs as J.O.B.s and claim it stands for ‘just over broke’. They’ll point out that you need to ask for time off work when employed, rather than be master of your own destiny (omitting the fact that you get sick and holiday pay in a J.O.B., unlike an MLM!).

They’ll also point out that any business is a pyramid scheme because the bosses earn more than the workers. Like this example:

Even Susannah Schofield, the Director General of the UK Direct Selling Association (DSA), made this claim on BBC Radio 4’s Woman’s Hour.

But again, this is a gross misrepresentation as MLM reps (and Susannah) fail to point out that everyone in a proper business gets paid for their time, and their business expenses are largely covered – unlike an MLM.

You also have legal protections when you are employed, which is not the case in an MLM in which you are, in effect, an unpaid freelance sales person. (You can read more about the construction of MLMs and why they are SO different from ethical businesses here.)

Creating this common enemy narrative helps to reinforce groupthink, with an ‘us against them’ mindset and shames anyone who challenges this mindset as a traitor to the group, and a gullible fool to fall for a mug’s game like paid employment.

How can you challenge mind games like groupthink?

So what can you do if you want to help someone you believe is trapped in an MLM? It’s very difficult to challenge groupthink as an outsider, as you are not party to that groupthink and will be automatically positioned by the leader of the group as an enemy and not to be trusted.

I recommend using the same line of questioning we share above for challenging belief bias, and keeping your relationship with that person open. This may involve not openly challenging the MLM but rather encouraging independent thought.

It is also important to spend time with the person to ensure they maintain influences in their life outside of their MLM team, and encourage wider interests in life than just their MLM business. The more isolated and preoccupied someone becomes with their MLM business, the more groupthink can take hold, and the less they think they have to leave for, if doubts start creeping in.

It’s not easy to change the mind of an MLM rep

In my experience the brainwashing that happens in MLM can occur surprisingly quickly. I was once contacted by a financially vulnerable person who said that she was anti-MLM but had been approached by an Usborne Books at Home rep who told her that it was a ‘different’ and ‘better’ type of MLM.

She asked me if this was true and I said I would look into the company as I didn’t know much about it. By the time I published this article, just two weeks later, the woman had not only already joined the company, but was “disappointed” in my article. In an email to me she listed just about every MLM-apologist cliche in defence of Usborne and didn’t address a single fact from the article (taken from Usborne’s own website).

Sadly I was unable to help that woman, and many others I have spoken to over the years. But having researched this article I understand more now about why that is. It’s very difficult, if not frequently impossible to fight emotions with logic. And, in our opinion, MLMs very cleverly use emotion to lure and trap people, and leverage psychological phenomenons like belief bias and groupthink.

So if you too can’t work out why you’re not able to convince or help someone in an MLM, despite presenting them with overwhelming facts, you now maybe have an answer.

More examples of the kind of ‘brainwashing’ MLM reps are exposed to

To give you an example of the kind of emotional manipulation and brainwashing we believe MLM reps are exposed to, and why this brainwashing makes it so hard for them to escape, here are a collection of motivational social media posts by an influencer who claims to have achieved success in an MLM, and now charges money to coach others – and why we believe they are so problematic.

MLMs love to perpetuate the myth that anyone can make money at an MLM (but only if they want it enough and work hard enough). To us, posts like this make it seem as if making money is easy, so by extension if you are unable to, it’s not the MLMs’ fault, it’s YOU:

The next few posts liken jobs to an unpleasant trap that you should want to avoid, and compare honest employment to a pyramid scheme. Ignoring the fact that everyone who works for a traditional business gets paid for their time, unlike an MLM:

We know from speaking to people who have left an MLM that they are recruited with the promise that they can work around their family. But once in are expected to work almost every waking hour… even when they are on the toilet! And many are regretful of the time they missed with their children when they finally escape.

This mum even shares how she had to leave her young daughter’s birthday lunch for a team call. In our opinion, posts like this one are an attempt to normalise this ‘neglect’ and make it fine to ignore your children to work on your MLM:

MLMs know that their recruits will get pressure from friends and family – people who care about them – to leave because they can see that their loved one has changed personality and is working hard and possibly losing money. So they address this issue by telling you that your friends and family are just jealous and holding you back if they don’t support you.

This helps to reduce the influence of real people in an MLM rep’s life and isolate them, leaving them more reliant on their new MLM ‘family’, making it even harder to leave:

And to counter the videos and articles (like ours) that people may find when searching for information about their MLM online, MLM reps and influencers love to position critics, much like friends and family, as jealous losers who have either failed at MLMs or who aren’t smart enough to join:

To shame you into staying in your MLM (and staying quiet about any lack of success), MLM reps are also very fond of pushing the narrative that only losers who don’t work hard enough fail, blatantly ignoring the clear facts (including from MLM companies themselves) that most people DON’T make money with them, no matter how hard they work:

And finally, MLMs often cause problems in a marriage when one partner (in this case the wife) can almost change personality, and spend a significant amount of money and time on their MLM. And when the husband raises concerns, the MLM rep is told that HE has the problem.

To quote this blog, “Marriages become the target of MLM scrutiny, because marriages can directly interfere with the MLM “business”.” So it’s not surprising to see motivational posts that encourage you not to involve or listen to your partner:

Read more about MLMs

If you’d like to learn more about how MLMs work, and why most people who join apparently lose money, we recommend reading these articles:

And these:

And these:

Photo by Noah Buscher