Completely different concept. In economics payday loans are about discriminatory pricing. You can read about the economics about them here: http://freakonomics.com/podcast/payday-loans/ It's different because demand for them is inelastic. This is not the case for MLM. MLM is driven by greed, the same thing that drives posters on this site. How can I make as much money as possible doing as little work as possible. MLM people think they can make big bucks. They go into it voluntarily. Just as traders do. People actually enjoy it. I know my father loved it. Don't ask me why. But discriminatory pricing is different. If you have diabetes, and you need my drug to survive, I can charge whatever the market will bear. Same for payday loans. If you need money NOW, and you have no credit, then your demand curve is highly inelastic. These two situations are not even remotely similar. MLM has more in common with trading except on avg, MLM people make more money then traders in the long run, which isn't saying much. So sle, let me ask you something, is trading a scam? Are the posters on this site victims? Think of all the deadweight loss to society that comes from trading. Maybe we should stop this evil business of trading. Afterall, the failure rate some say is near 90%. Some people lose their entire life savings. Think of all the poor hungry children that go without food when daddy shorts the ES and holds it for 6 months while blowing out. Think of all the reckless option buyers and sellers out there. Surely we must do something to stop this. Maybe we should start by going after the owner of this site. He is complicit no? He makes over 7 figures running this site that enables vendors to peddle the get rich quick dream to unsuspecting newbies who think trading is the easy way to get rich. All it takes is the right charting or signal service right? Something must be done! LOL.
I will just say this, and I concede it's going off at a tangent. When I hear the line about Land of the Free in your national anthem, I laugh. PDT rules and FX limitations? I'm an expat so by a huge streak of fortune, I escape the rules at home and am not subject to the rules that apply to locals where I live. Just magic. Yeah, I can still trade FX with IB, though I prefer Oanda because the interface is straight to the point. When my Yank expat buddies can't open bank accounts here because the banks just don't want to deal with all the American rules on overseas accounts, I can only feel sorry for them. Yanks are giving up citizenship because of that. Land of the free?
I have read a few detailed analysis on the payday loans (by serious economists), it's a very complex issue. Regardless, there is a variety of predatory or semi-predatory business practices. I think that there is no black and white, it's the proverbial 50 shades of brown. HLF might a shade better then say payday loans (nobody forces those people to take the very first loan either), but it certainly is not the cleanest shirt in the drawer. I am sure if you look at the statistics of the participants, it will paint a rather disturbing picture. While HLF themselfs does not release the numbers, I've heard estimates north of 99% losing participants. Amusement aside, if the 99% loser figures are true for MLM schemes, traders/investors actually do a little better. Do you really believe that 99 out of a hundred investors out there will lose? Plus, there is a variety of safeguards in place for the financial markets and the financial authorities do go after the predatory retail practices (e.g. forex bucket shops). On the other hand, FTC is pretty happy to sit on their hands. Look, I realize that 'a fool and his money are soon parted' and that it's one of the founding principles of capitalism. I just wish there were enough checks and balances along the way.
Sle, I'm the last guy that is going to defend MLM in general, but there is no way that 99% figure is true. I have friends that actually make a living at it. My father pulled money out of every MLM he ever did and he did many. The issue is the money you make is a far cry from the dream they sell you which is mansions, fancy cars and never working again. Sound familiar? I certainly would never advocate anyone to go into MLM as a career choice. Of course I would also never advocate anyone to daytrade the ES mini for a living either. I would argue that 50% of MLM participants make money their first year. SMALL money. Maybe 10% 20% in year two and probably low single digits after that. There is certainly attrition at work here. But the success rate is way higher then retail traders that is for sure. I know a lot about this business Sle. That's a bad thing btw because it comes from bad personal experience. And while you may respond that it's anecdotal, I know many people now involved in various MLMs. Making money in them is actually easy in the beginning. What most people don't see is that in the long run, what allows Walmart to make so much money is their supply chain and distribution network. We all have only so many friends and family to sell to, but Walmart sells shit to everyone on the planet and they don't have to know them. But for a lot of people lacking education and opportunity, they chase the dream, again not all that different from trading. I just get aggravated by the use of the word scam on this website. People call IB a scam, FX bucket shops a scam, hedge funds are a scam, financial advisors are a scam, prop firms are a scam. If a company is providing a good or service and they tell you what it is and how much it costs and you buy it, and they deliver that good or service to you, then it's not a scam. It's a transaction. Even if the quality of that product is bad, even if the customer service is bad, even if the cost of that good or service is too much it's still not a scam. No one is forcing anyone to purchase it. Just because the members of HLF are not becoming the billionaires they thought they would become, it still is not a scam.
It's a tricky question. Obviously, a business that delivers a real service is usually not a scam. We are too lose in using that word. However, if naiveté of the customers is a crucial component of the business model, it can safely be called a scam. Let's take a concrete example. Someone goes out and buys a potion that is supposed to make him irresistible with the ladies. For a couple of dollars he gets a little flagon of smelly water. The web site has "testimonials from the satisfied customers" on the web site and scientific explanations to why it's effective. Except, of course, it's all due to a placebo effect (so it even works, sometimes). They certainly deliver the goods, they don't even misrepresent anything (a page-long disclaimer in size 1 font has all the right legalities) and the price is right there. Technically, they are not doing anything illegal, but you'd be hard-pressed to say that it's not a scam.
Agreed. Let's use another example. I go out and buy toilet paper at whole sale from HLF. I sell it to you for $5. It's perfectly normal toilet paper. I get a .50 commission from the sale. You got what you wanted and I got a commish. That is what MLM is. I think where you are going astray is you think the scam is in the product like they are selling a cream that cures male pattern baldness. That doesn't work in the MLM world. The way MLM works is by selling common everyday goods that people need and will continue purchasing. That's the only way anyone can make money. The products are usually off brand and in fact are usually the specific brand of the company. For example, Amway had their own brand of soap and dishwasher detergent and paper towels, etc. It's a stupid business model, but not a scam. It does not need anyone to be naive. The concept is very simple and straightforward to understand. I think what most people fail to understand, and this won't be shocking, is that it actually does require a lot of work. Just like trading or buying real estate with no money down. Sure, people are greedy. But my God, we would have to ban everything if people's greed was a determining factor in something being a scam.