[transcript] Last Week Tonight: Multilevel Marketing

This is my first time to make a transcript.
I’m an ESL learner, so I do it in order to improve my English.
This transcript might include some errors in it.
Let me know if there’s something wrong.
Any advice is highly appreciated.


I would like to talk to you about an exciting opportunity. I just need 30 minutes of your time to explain it but it has the potential to transform your life. I’m talking about multilevel marketing companies, or MLMs. Companies like Mary Kay, Rodan + Fields, Nu Skin, Amway, and Herbalife. They sell different products but generally MLMs have two main things in common. First, you don’t see them on store shelfs. You buy them from distributors from like friends, family, and co-workers. And secondly, those distributors are always looking for more people to join them, and I have a pretty attractive message.

Why Herbalife?
Because you get to be your own boss.
Earn extra money.
Work from home.
Raise your own children.
You can name your own hours.
Make part-time or full-time money.
Paying the bill.
Share this video with 10 people
That you care about, that you love, that you adore, that you admire.
20 people. 30 people.
C’mon, what are you waiting for?
A hundred people. Share with everybody. They want what we have. We got it.

OK, hold on. I’m supposed to share that with people I love, adore, and admire. That’s a tough ask. Let’s see. There’re the judges on this season of Project Runway. That’s three. Oh, there’s a Tim Gunn. That’s bviously four. If you count Tim Gunn twice. That’s five. But I’m still five short and I am out now. Before you brush this industry off, you should know collectively it did around 36 billion dollars in retail sales last year in the US. You probably know someone who is considering joining an MLM or who already has and is posting about it ten times a day on Facebook and Instagram. And if you do know someone like that or have considered signing up yourself. This story is important. Because let me explain how the system is supposed to work. Generally distributors have two main ways to make money, sell the product itself, whether it’s a makeup, vitamins, or health shakes, and earn money on those sales; and, this is a key, recruit other people into the company and get money based on their sales and sales of people they recruit in turn. Just look at Vemma, a few years ago a hidden camera record a distributable that company, working a prospective recruit through just how easy it can be.

Let’s say you signed up three friends. Then you and I would help those three friends, sign up their three friends and get their $700. Now there’s nine people right? Then we help those nine people sign up their three friends and they get their seven…So everyone kind of gets their money back.

Wait. You kind of get your money back. That’s reassuring is here your doctor says he kind of knows where your appendix is. That’s probably near the spleen. And if you’re thinking, hold on,that business structure sounds familiar. Isn’t that a pyramid scheme? Although there was a journalist waiting outside to ask the exact same question.

It’s not an illegal pyramid scheme. It’s a direct selling network marketing company.
Is it like a shape of pyramid? The business structure…
It is like a pyramid, yes.
But you’re saying it’s not an illegal pyramid scheme.
It’s not an illegal pyramid scheme.

Oh, I get it. So it’s not a pyramid. It’s just pyramid shaped. You know like a Dorito, or an angry bird, or just a pile of bullshit. But let’s put that pyramid question aside for a moment because from the outside these companies do have trappings of legitimacy, many have high profile celebrity endorses. Vemma had noted science experts Jenny McCarthy, AdvoCare had esteemed ball thrower Drew Brees, and an MLM called Max International has this guy.

After more than a year due diligence, Gin and I join Max International as home-based distributors and media spokespersons.

Ought to be a fly on the wall while Gina and Chuck were poring over the numbers during that year long due diligence session. Gina with an adding machine and Chuck randomly kicking stuff. And be like watching Lennon and McCartney write Sgt. Pepper. Still for many MLMs the biggest celebrity is their founder who can enjoy cult-like status. Just look at JR Ridinger, CEO of Market America, and company conferences the guy makes quite an entrance.

(music)

OK, fourth-string wedding chapel Elvis, calm the fuck down. And that’s just his welcome. Once he gets going he puts on a real show, demonstrating how you can pump money, dramatizing the rat race by sweatily running around in giant wheel, and screaming at the gravestone of Joe Nobody who never fulfill his true potential.

Joe, Com’on man, the dreams you told me about we can actually do them now. We don’t have to wait, man. It worked and I’m doing it, and I want to help you do it because it’s so good. Joe, this is amazing. We can have vacations and sailboats, and we can have multiple homes, and you can get your wife the jewelry that she deserves then you’re gonna be a hero. C’mon Joe, let’s do it. Get up, Joe, get up. Before it’s too late, get up.

Holy shit. All I can say is thank goodness funerals don’t have a speak now or forever hold your peace section because he would be every cemetery delivering motivational speeches: she lived a good life, fuck you, your grandmother died a loser, come back to life, Seethal, you can still have a yards, come back to life. And the dangling of vast lifestyle improvements is at the heart of the MLM pitch. A material feature flashy cars and luxury travel that you can achieve and just watch the distributor of Youngevity walking through a future dream scenario in exquisite detail.

In two years this is what’s gonna happen to you. You’re gonna…you’re gonna drive to your work. You’re gonna walk into your boss’s office. You’re gonna sit down and you’re gonna quit your job. You’re gonna explain that little pyramid shame thing that you almost got terminated for last year. You’re now an entrepreneur and you’re gonna be doing that full time.

Whoa, whoa, whoa, whoa. Back up, back up, back up. Did you just say pyramid scheme and them almost got terminated.

And then you’re going to go out to the parking lot. You’re gonna get in your silver Mercedes that Youngevity has paid for and you’re gonna drive home. Oh, no, wait. Actually, first you’re gonna drive to the bank.

I’m…I’m sorry. I hate to dwell on this but you definitely said pyramid scheme back then. But I’m sorry now we’re suddenly going to the bank.

And you’re gonna walk into the bank and you’re gonna deposit your coding bonus. And the lady’s gonna say, “Will that be checking or savings?" And you’re gonna say, “I don’t really care. I get this all the time."

And the lady’s gonna say, “Haha, that’s fantastic, but I actually need to know which account this goes into." And you’re gonna say, “Makes no difference to me." And she’s gonna say, “But I can’t deposit this unless you specify which account is policy." And you’re gonna say, “It’s all gravy." And she’s gonna say, “How about checking?" And you’re gonna say, “I’m loving it." And she’s gonna say, “Do I need to get security?" And you’re gonna say, “The account ending in 8424, please." Now Youngevity told us that woman’s claims are not authorized by the company and are against Youngevity policy which forbids income claims. Although that video was taken in one of their official events and the woman Denice Chenault is featured with her husband on the company website with the words “Denice and Tom Chenault ARE Youngevity." C’mon, you don’t let someone embody your company if you don’t agree with them. If Flo turned out to run a dog fighting, Progressive would wipe off their website immediately. And by the way, you know that’s coming you can see in her eyes. There’re a dead dogs dancing in there. But you cannot deny the picture that she paints is enticing. Who doesn’t want to tell their boss to go fuck themselves? Half my staff would do it right now if they could. But MLMs hold out the hope that if you work hard, you can take control of you life, start your own business, and help your family. But how real is the opportunity? Well, let’s take a look at just one of these companies in depth. Herbalife. You saw its pitch earlier. It was the one who was supposed to send to 10, 20, 100 people. It sells nutritional supplements like shakes and vitamins and it’s one of the biggest MLMs around with net sales of 4.5 billion dollars last year. It has a celebrities who talked up its benefits from superstar athletes like Cristiano Ronaldo to pretty much the last person you’re expecting to see in this piece.

Well, first of all, we have a great product. That makes all the difference.
Then we got to tell our body you’re a product of the product.
Well, I am a product of the product. And it has every combination of the things that I like. It’s a very good product delivered by really good people.

Yes, that is Madeline Albright talking to Herbalife CEO claiming she’s a product of the product. So forget studying at Columbia and Johns Hopkins. If you want to be like the first female Secretary of State, just chug a couple of vanilla adjacent nutrition shakes a day and thank her in the morning. Oh, and about those products in its early days Herbalife was accused of overstating their health benefits, claiming in the 80′ that the one product help to leave everything from venereal disease to tumors, to bed wetting. And back then, their founder Mark Hughes was asked by a Senate subcommittee to answer experts who called his diet products into questions and this is his response.

I think if they’re so expert at weight loss, why would they so fat yesterday? It seems to me, I’m not trying to make any jokes, but I do think they ought to use our product.

First, he seems great. But second, why would anyone in the 80′ seek Herbalife to lose weight. They had cocaine. Come to think of it. We also have cocaine. The point is cocaine is an effective weight-loss option. It’s not where I thought I was going with this but it is where we have ended up. Now to be fair, that was 30 years ago and a lot has changed at the company since then. Although when ABC news filmed some Herbalife distributors just two years ago, they found some claims that seemed to echoed the company’s past.

This Herbalife distributor in the New York City told us the story of a woman who overcame an inoperable brain tumor thanks to Herbalife.
Whatever it is that the product did it helped her a lot.
New recruits were told Hebalife products help to treat heart disease.
24 years ago I had early congestive heart failure. Nothing worked.
Even helped one woman get pregnant.
So, I’m 40 years old and I have my first pregnancy.

Well, that is obviously bullshit. Nutritional shakes cannot help you get pregnant. There are only three liquids that can do that. A glass of Merlot, the honey smooth music of Sade, and good old-fashioned jizz. And people might be making claims like that because they are desperate to move excess product. You see, broadly speaking, under Herbalife system a distributors can get bonuses and massive discount on products based on how much they buy which can be huge incentive to buy in bulk. For instance, let’s say you’re selling Herbalife disgusting creamy chicken soup powder for 13.35 a box. The cheaper you can buy it from Herbalife, the more profit you could make. But to stay qualified for those higher discounts, you have to keep buying product and it might not be easy to sell that extra soup because A) it’s a little pricy; and B) we actually tried it and it tastes like the wood shavings inside the gerbil cage. And as one form a top distributor will tell you if you are just accumulating product that can lead to a problem common enough to have a special name.

We call it garage qualified. That would stack much product as they can in their garage. And at some point they would realize that they have to quit.
So people buy product more than they can sell. It sits in the garage. When happens? There’s gonna be an end point here, at some point.
When they run out of money, there’s an end point.

Exactly. So Herbalife may be an industry leader in worthless crap that people stick in there garage. Along with, of course, a PT cruiser, the car that looks like a sporty version of a hearse. And as a distributor, it is not easy to figure out exactly how you are going to make money. Just watch this Herbalife video from a few years ago explaining one narrow part of their insanely convoluted compensation plan.

OK. Here we go. Take a look at this example. Now when E places a 4,000 volume points order at 42%, this count is personal volume for you. But since this qualifies E, the supervisor, with a one month qualification, that volume now becomes encumbered for everyone in the upline. Remember each upline distributor need to accumulate 1,000 an incumbent volume points if they want to qualify for supervisor as well.

It’s simple. And if you accumulate 10,000 unencumbered volume points, those are grouped into an unencumbered batch which qualifies Benedict Cumberbatch for one unencumbered cucumber cummerbund. And well, yes, that is absolutely nonsense. It makes exactly as much sense as everything that came before it. In fact, to hear another former Herbalife distributor tell it your main focus in the business might be less on products than on the people below you.

You don’t make money from selling products. You make a little, not much, not enough to pay the bills that you’re racking up. You make money from signing people up.

Of course. It’s like the famous salesmanship motto from Glengarry Glen Ross ABSTCOSTOS, always be selling the concept of selling to other salespeople. And at this point, that pyramid scheme question that we set aside earlier has to be addressed. Because in broad terms if distributor’s earnings come primarily from selling products to extra costumers outside of the company, that is probably a legitimate business. But if those earnings come primarily from selling product to the distributors you’ve recruited below you and they sell the products to the distributors they’ve recruited below them, all within the company, that’s maybe a pyramid scheme. And any business is set up that way has a big problem for a reason that, and I will warn you, does involve math.

Almost all these schemes tell you that you can make money by just recruiting there, or four, five, let’s say five, then you let the five do their five that gives you 25. What they don’t show you is that you can only do that 13 cycles and you would exceed the population of the earth.

It’s true. Within 14 cycles you run out of people and that is assuming that everyone on earth wants to be a protein shake distributor. And I can think of a list of a few people who have better things to do, Alan Alder, for instance, or Malala Yousafzai, or Morten Harket, lead singer of A-ha, the guy is still swimming in Take on Me money, he doesn’t need this shit. And Herbalife CEO Michael Johnson has an interesting way of deflecting that whole pyramid shame question.

I go back to any company. I started in Disney as a director and I went to be an executive vice president, and then president of the international entity of becoming. So I moved up six or seven levels and at the top was sitting the CEO of the company, Michael Eisner. Is that a pyramid? Is that any different to what we’re doing here?

Yes. It is completely different. Disney is a corporate ladder. Those were all salary positions with benefits. The company wasn’t banking on you personally, filling your garage with cases of unsold DVDs of The Lion King II: Simba’s Pride. But Johnson could’ve made a stronger non-pyramid case in that interview if he could’ve just shown how much money distributors get from selling product to actual retail costumers. But conveniently, Herbalife didn’t keep the records of those figures. Now unfortunately for them, the FTC recently finished a multi-year investigation in to the company and filed a blistering complaint walking up right to the line that of outright calling it a pyramid scheme. They alleged Herbalife’s compensation program doesn’t incentivize retail sales. But rather, recruiting of additional participants who fuel the enterprise by making wholesales purchases of product, which sounds like, you know, how pyramid schemes work. And when people point this out, the FTC chair made an amazing statement.

It sounds like what you’re saying is that this company had all the hallmarks of pyramid scheme, isn’t that right?
You know our focus isn’t on the label. The word the pyramid does not appear in our complaint that is true. They were not determined not to have been a pyramid.

Think about what she just said that. Not determined not to be a pyramid. How is not that a huge waring sign? If the FDA announce we have not determined cotton candy not to be clown pubes, you would never risk eating that shit ever again. Now who knows why the FTC stopped short? Perhaps it ensured Herbalife agrees to a settlement in which they need admitted no denied wrongdoing, but did pay 200 million dollars and agree to significant new changes. But the contents of this complaint are mind-blowing. The FTC claims that overwhelming majority of Herbalife distributors who pursue the business opportunity make little or no money and a substantial percentage lose money. In fact, the FTC even stated Herbalife is going to start operating legitimately, which implies they hadn’t been until then. And yet amazingly, Michael Johnson characterize this as a victory.

Hey, we’ve got great news. Reached an agreement with the US Trade Commission that ensures our mission to improve people’s lives will continue to thrive. I have to tell you this is really good news and it comes at a time when our business is growing bigger and better than ever before.

Oh, fuck you. He didn’t just pull this style turds. He put it in a bottle and convince people that they can make a fortune selling nutritional turds in there spare time. But look, whether Herbalife is a pyramid, not a pyramid, or not not a pyramid, it is true that Herbalife is growing and a lot of that growth has come from Latino community where Herbalife has been aggressively expanding for years. They even bought a sponsorship on the hit telenovela La Fea Más Bella. It is very subtle, just see if you can spot it.

Look it’s called Herbalife. This is going to help you have more energy and it’s also going to help you face all the problems you have. Believe me.
Really?
I drink it every day. And besides, it’s delicious.

If that is happening on the show, I can’t imagine the real drama happening in the commercials. Mr. Geico lizard, I want to save 15% on car insurance. But how can I when you are sleeping with my wife? And the fact that a large percentage of Herbalife business comes from Latinos is a point of pride for Michael Johnson.

We call it Herbalife our family. We’re not ashamed of that. We’re proud of that. The Latino, the blood, if you will, you know, if it’s in this company and it feels great.

Oh, I love the blood of the Latino community. I just wanna bathe in it. I want to bathe in your blood, Latinos. How is this sales pitch going? I feel like it’s going bueno. But to those supplying that Latino blood it can feel less than great. As this community meeting of those who feel burned by Herbalife shows.

[in Spanish]
In this business I lost a total of $22,000.
In nine months I lost $16,000.
Her husband continuously reminds her about that $8,000 that she owes to them.
The product expires. So if you don’t get rid of it and sell it at the price you bought it, it’s a big loss. She knew I didn’t have that money. And she was supposed to be my friend. And later when I asked her, “What happened that I don’t see any profit?" She said, “You have to put people under you so that you can profit." And I told her, “You know what, that’s where you got it wrong." I’m not going to swindle anyone. I lost but no one else is going to lose because of me.

You know what, now might be a good time to point out when someone says the blood is in me and it feels great, that is what a fucking vampire says. And friends of yours may say, well that’s just Herbalife, my MLM is different, but there are echoes of what you’ve seen across this industry. For instance, Herbalife is far from the only company that has made bold product claims regarding health.

When I started my body was 37.5 and now it’s right around 16, 17.
The pain and the lethargy that go along with fibromyalgia is gone.
Three days into the experience, I was feeling like 25 years younger.
When I found out they had a pet formulation of good biocell, that’s when I knew I has something very exclusive. After putting Rembrandt on liquid biocell pet for three months, he started walking again.

OK, first of all, obviously good boy, Rembrandt. But second, are you sure he didn’t just summon the energy to walk because he is desperate to get away from the eye drop of liquid nonsense you were shoving in your pet’s mouth. And just like Herbalife, MLMs can often have scientology like level for you to send through. With Usana you might have gone from sharer to believer, to builder, to achiever and beyond. And Kyäni you pass through a series of ranks with the names of gemstones as one distributor explained at a company conference.

I want to talk about the millionaire mindset because you got involved in Kyäni become a jade, you’re selling yourself short. If you got involved in Kyäni become a diamond, you are not thinking big enough yet. If you already visualize yourself a double black diamond, you need to kick yourself in the rear.

Now double black diamond is technically a ski term for particularly dangerous slopes. And I’m thinking maybe you shouldn’t choose a term that basically says if you even try this, you’ll go down hell fast and may end up in a fucking ditch. And the garage qualified issue is not exclusive in Herbalife, either. It’s come up multiple MLMs, including Mary Kay.

I saw with my own two eyes that warehousing of the product, meaning that have basements full of it, closets full of it, garage full of it.
Take a look at this. Inventory from a consultant who is leaving the company. She agreed to show us boxes of product she said she bought to keep her status.

Whoa, so it seems some distributors may be a bit more costumer than salesperson. That’s why you found out Jamie Lee Curtis was actually the one eating all the Activia. I eat 140 containers a day and I shit like a machine gun. Mary Kay and Herbalife will tell you that stock piling is uncommon and you can return unsold product for a refund. But you should know the refund can be partial or may involve resigning. The point is MLMs may present themselves as a great of opportunity but your chance of success is actually remote. Just look at the income disclosure statements. Kyäni’s shows just under 40% of active distributors receive their $10 or more, meaning the most didn’t even make that. And Nu Skin’s says around 18% of active distributors earned a commission check, which is actually worse than it sounds because active distributors represent only around 36% of total distributors. So if you do the math, which they conveniently didn’t, that would mean the 93% of all Nu Skin distributors receive zero commissions from the company in an average month. So even if you’ve never heard of Nu Skin before, it may be paying you just as much as 93% of all its distributors. Now MLMs will insist those percentages are misleading. They will tell you many of their distributors are in the business to make money, they just went to that all trouble of signing up to get their discounts on their amazing rhino ejaculate, or they call it soup. They’ll say individual distributors like that Vemma guy and those Herbalife reps don’t speak for them and their claims are against company policies and violates get disciplined, and most importantly they’ll all insist they are not pyramids, and no one claims that more spectacular manner than JR Ridinger, who has an airtight case based on spelling the word pyramid backwards.

We’re actually an anti-pyramid, the reverse pyramid. The dimaryp. We are in a dimaryp.

He sounds like a cult leader about to demand his followers to drink poison. And it frankly doesn’t help that he looks like Jim Jones to a genuinely creepy degree. But it is hard for FTC to investigate this company. The industry is large and opaque and pursuing a case is a long arduous process. They’ve only brought around two dozens pyramid scheme cases against MLMs in the last four decades. And MLMs have surprising lobbying strength. There’s actually a direct selling caucus in congress with more than 40 bipartisan members, including Jason Chaffetz who worked at Nu Skin for more than a decade. As for Herbalife, it has gone to a remarkable length to protect his name. In Washington it’s recruited two former FTC officials to work for the company and it’s willing to be an incredibly petty as well. Because you remember that clip of Herbalife victims, that is from an upcoming documentary called Betting on Zero. And when it played on the DC Film Festival earlier this year, the screening has 173 empty seats, because Herbalife lobbying firm reportedly bought them out. And that’s not just petty, it’s stupid. If you don’t want people to see a movie, you don’t need to buy out seats, just put up posters saying starring Shia LaBeouf. Done. Chop done. Nobody’s there. But even if the government did suddenly decide to crack down on this industry, which seems unlikely, many MLMs have been expanding overseas. Here is a video from India.

We are changing people’s lives.
You are the brand.
We are growing every day.
Let’s muster with 1 million, 1 billion, 1 region.
[singing] Herbarlife round the world. Come together. We are one. Herbalife.

They are lucky Gandhi isn’t alive to hear that song because it would really test his belief in non-violent protests. You know what, fuck it. Everybody pick up a rock and meet me at Herbalife headquarters. That song was unforgivable. Just look online you can find videos of gigantic Herbalife events around the world. Here is the one in South Africa. Here is the one in Mongolia. Her is the one in Venezuela. Here is the one in Malaysia. And here is Michael Johnson in Mexico doing this.

[singing]

OK. I don’t say this lightly but that is douchebaggery at a double black diamond level. So the point is what can we do, because good hard-working people are going to keep getting caught up in these companies. There has to be a way to tell the world about the dangerous of MLMs. And I think I might know the perfect distribution network. And that is why tonight we are starting our own pyramid scheme, #thisisapyramidscheme. Because if someone you know is thinking about joining an MLM this is a hugh opportunity and let me show you how it works.

I wanna tell you about a fantastic product for you to share with friends and families. This product is this entire video about why MLMs are fucking awful. Let me break it down for you. By sharing this you can be an independent distributor for a leading web video about the dangerous of MLMs. You could do this full-time or part-time and give your family the lifestyle that deserve, which is frankly not getting caught up in this bullshit. You need scientific proof that it works? We told a dog we’re going to produce this video and look, the dog is walking now. Was it able to walk before? Sorry, we don’t keep those records. Here is how it works. Simply watch this video and then forward it to five people and then instruct them to send it to another five people, and so on, and so on, and so on. Within 14 cycles every single person on earth will have seen this. To the point that we will need to start fucking to create more people to watch it. Also, if every single person on earth is watching this video. Hello, Beyoncé. I’m…I’m a really big fan. And like MLMs, we will like to direct a message to Latinos in particular, so we will be uploading two versions of this segment to YouTube, with one in Spanish. But because I don’t speak Spanish, it will be subtitled and this portion will be performed by Jaime Camil from Jane the Virgin.

Hola. Hola, Jaime.
Hola, John.
Hola.
Como estas.
Um, you are clearly a more attractive version of me in every way, aren’t you, Jaime?
Yes.
Yes.
Yes, I am.
So, please share this video to stop people getting involved with this scheme, because MLMs are hurting people. And we need to spread the world about their dangerous. Send this to 20 people.
30 people, 100 people.
What are you waiting for? This system won’t work and it is not a dimaryp. It’s an anti-dimaryp. This is a pyramid, right?
Right. This is a pyramid.
We are in a pyramid.
That’s our show. Share this video. We’ll see you next week, good night.


You may want to check out Jaime Camil version of last part of the show.
It’s hilarious, totally worth it.

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