MLM just like stockmarket investments

Multi Level Marketing (MLM) seems to be the bugbear these days; a kind of goblin used to incite fear in the minds of the public.
MLM is a scam they say, and most investors are told they will ultimately lose their initial deposit. It is almost like the feeling we had in those early days of the Colombo Stock Market (about losing money) – when one bought shares at a par value of Rs. 10 only to find it tumbling to Rs. 1 in next to no time. The question then was – who was to blame for the loss? The humble investor was told that it was his decision so he was the one to carry the blame. Read the prospectus, get market information and develop a nose for the good stock and then you can make money on the share market – was what the investment gurus told the ordinary investor at that time.

This was before Sri Lankans even knew about white collar crime like cherry picking and front running. Today we have regulators to oversee the operations in the stock market, it was not as if the stock market shut down because people lost money.

These days it is MLM that is caught in the crossfire and labelled as scams. For example the Amway company has been targeted as a con by some watchdog agency – but what they have not bothered to say is that this is a company of very high repute, involved in direct sales all over the world. Amway Malaysia for example is a quoted company on the Kuala Lumpur Stock Exchange and has the stamp of approval from the Syariah Advisory Council (SAC) of the Securities Commission of Malaysia who’s approved list of securities are highly scrutinized so as to exclude securities based on criteria such as involvement in gambling, questionable public perception and image, etc.

The Malaysian SEC when classifying companies gather information from different sources such as annual financial responses to surveys and inquiries made from the respective company’s management. They also continue to monitor the activities of companies that are already on their list. Can a company with this reputation be involved in a scam?

I am not in anyway against the authorities having rules and regulations against scams but authorities shifting the goal post and being on a witch hunt - going so far as to label all MLM companies as dubious is definitely unfair.

MLM companies are truly global companies that draw on the collective strength of the populace with no boundaries whether it’s cast, creed, colour or nationality. It is like a marketing network that retails products or services and much more - it is more like a free hold organization that grows through personal contact.

And now the most important question – will you lose money through MLM? Sometimes. Yes, and that is if you don’t understand the principles of the operation. Thirty years ago if we were told that we could be watching a screen at home and making money on the stock market we would have put it down to science fiction – today that is exactly what margin traders do. And would you believe it if I told you that you can make money on the stock market when the market indices are sliding – you will surely call it a scam. But that is what derivatives are all about and its done in developed markets all over the world – India is a not a very far away example.

Today even the traditional way that people work is changing and that’s true for Sri Lanka too. No longer do people stay in one job all their lives, or even believe in permanent contracts with employers. It is a time for people to look for special opportunities to get ahead using what talent they have (legally of course). MLM is the average man’s window of opportunity to make wealth with minimal startup capital and by using what he has in abundance -social connections.

MLM is understood and used in many parts of the world and has very legal tender. For example it is a way of developing tourism in a country. There are many MLM companies that sell tourism packages and destinations through their networks. Since MLM marketing is a form of direct marketing this method has proved to be very effective, especially when it comes to selling time share.

There must be unscrupulous elements using multi level market to operate scams and these must be exposed, but to paint every MLM company with the same brush does not seem fair. As in every market scenario there must be regulators who can arrest irregularities and see that a healthy market develops. MLM is all about nexus building and that is all a part of any business.

V. Vilvarajan
Colombo 4.