No, It's Not a Pyramid Scheme

Every time I tell someone I joined a direct-selling company, there is a half-second pause before the question arrives. Sometimes it is just the eyebrow. Sometimes it is the eyeroll first, then the question. The question is almost always the same. "Is that a pyramid scheme?"

The honest answer is no. The interesting answer is that almost nobody asking the question knows what a pyramid scheme actually is, or why the direct-selling model became the slur it is today. The word "pyramid" is doing a lot of work in this country, and the work it is doing is costing people money. Real money. They are walking past legal, regulated businesses with their hands over their ears because a word in their head got more confident than the law it is supposed to describe.

I am a former professional ballet dancer, an autistic and genderfluid Brazilian-Canadian who works full-time as a Medical Equipment Technician for the Canadian Red Cross, runs multiple ventures on the side, and joined yet another one as a Canadian affiliate of MAKE Wellness. I wrote openly about it in The Quiet Logic of Buying From Yourself, and I wrote about the wider portfolio in Many Little Streams Make a River. This post is the long-form answer to one specific question that keeps showing up in DMs and across kitchen tables. So let me actually answer it.

Key Takeaways

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What People Mean by 'Pyramid Scheme'

A pyramid scheme is a specific, illegal structure. Money flows up from new recruits to the people who recruited them, on the strength of recruitment alone. Either there is no real product, or the product is a fig leaf draped over what is really a chain letter with branding. The math of it cannot work, because every level needs more recruits than the level above it. Eventually the population thins out at the base, the new money stops arriving, and the lower levels collapse with nothing in their hands.

Multi-level marketing is a different thing. The Federal Trade Commission drew the line in 1979, after a four-year investigation into Amway, and the resulting framework is what every legitimate direct-selling company in North America has operated under for the last forty-six years. The test is simple. Commissions must be paid on actual product sales to real customers, not on the act of bringing someone new into the business. There must be a real product that real people want at a real price. Distributors must be able to return inventory if they leave. There must be retail sales rules that prevent garage-stuffing.

That distinction is not folklore. It is the operating constraint of an industry that pays out commissions to more than seven million Americans and another one to two million Canadians, monitored by the FTC, the Direct Selling Self-Regulatory Council, the Competition Bureau, Health Canada, and the equivalent agencies in every country a serious direct-selling company operates in. When a company crosses the line, the system catches it. Amway itself paid out a one-hundred-and-fifty-five-million-dollar federal settlement in 2012 for exactly that kind of overreach. Other companies have been shut down. The category is one of the most surveilled retail spaces on Earth right now. That does not mean every actor is clean. It means the legal architecture is real, and "pyramid scheme" is not a synonym for "any business model I do not personally like."

The word travels for three reasons. The first is structural resemblance. MLM has levels, legs, and recruiting, and from a distance the silhouette looks like the thing it is not. The second is that some of the industry's worst actors have earned the suspicion fairly. High-pressure recruiting, inflated income claims, mandatory event attendance, cult-coded counsel rules. Those patterns are real, they belong to specific organizations, and the regulators are actively grinding them down. The third reason is the least flattering. The phrase "pyramid scheme" is satisfying to throw. Using it makes the speaker feel financially literate at no cost. It signals sophistication to anyone in earshot, regardless of whether the speaker knows what they are describing. Most people who use the phrase as a slur could not tell you the FTC's four-prong test for pyramid behaviour if you handed them the paperwork.

Dismissing a legal, regulated industry as a pyramid scheme is not skepticism. It is the financial equivalent of refusing to learn how a vaccine works and then having strong opinions about it.

Most People Fail at the Corporate Game Too

The next objection is usually some version of "yeah but most people don't make any money in those things." That is true. Most direct-selling affiliates do not build a serious income from it. The category is wide and the success curve is steep. The thing that bothers me is that the same sentence almost never gets applied to anything else.

Most people who go to work for a company do not become an executive. They never get past the middle tier of whatever ladder they joined. Most musicians never get a record deal. Most novelists never get an agent. Most startup founders fail; the standard venture-capital portfolio assumes most of the companies in it are going to fail and the survivors will carry the math. Around six in ten new restaurants close inside their first three years. Nobody who has ever opened a restaurant gets accused of running a scam.

So the failure rate is not the actual objection. The actual objection underneath is more like, "I tried it, or someone I know tried it, and it did not work, so the model must be the problem." That sentence is fine as a personal observation. It is not a thesis about an industry. The question worth asking is not "what is the failure rate" but "what does winning actually look like inside this game, and is that version of winning the one I am trying to play?"

Winning at the standard corporate game looks like a single career ladder, climbed for forty years, exchanging your hours for a paycheque that hits a hard ceiling because there are only so many hours in a week. The bargain at the end is supposed to be a retirement on some fraction of what you were already barely living on. You can hustle harder for a raise, but you cannot manufacture more hours, and the structural cap of the deal does not move regardless of how good you are. That is not a conspiracy. That is just the math of trading time for money on a single ladder.

The math of leveraged income is older than the internet and older than direct selling. J. Paul Getty, who knew a few things about being wealthy, said he would rather earn one percent of the work of a hundred people than one hundred percent of his own. Ray Kroc did not build his fortune flipping hamburgers. He built it franchising the system that flipped them. The point of leverage, in any model, is that your single effort gets multiplied by structures and people you did not personally have to be in the room for. Direct selling is one of the rare structures where that leverage is available without a quarter of a million dollars of startup capital. The trade is that you have to actually build, and you have to be patient about a two-to-five-year timeline, and most people will not do either. The fact that most people will not do the work does not make the model dishonest. It makes it honest in a way the corporate ladder rarely is, because the corporate ladder mostly lies about what is on the top step.

I have already written about this from a different angle in The Quiet Logic of Buying From Yourself, where I lay out the idea of buying products you were going to buy anyway from a company that pays you back, instead of from one that pays you nothing. The economic logic of MLM is just the version of that logic that includes a team. If you are willing to teach a small group of people to do what you are already doing for yourself, the math compounds. That is the whole thing. There is no magic. There is just the same time, money, leverage and patience that every other path to anything worth having requires.

The Original Influencers

The word "influencer" is treated as a recent invention, a job that did not exist before Instagram. The history is much longer than that. Avon was founded in 1886. The entire business model, for nearly a hundred and forty years, has been compensating women for recommending products to other women in their lives. Amway followed the same template in 1959 and gave it teams and structure. The modern Instagram influencer is the most visible version of a job that has been running quietly under the surface of consumer life since before electricity reached most homes. The only thing that really changed is the camera.

The everyday version of the work is older than the companies. We already recommend products to each other constantly. Somebody compliments your jacket and you tell them where you bought it. A friend is shopping for a fridge and you talk them into the one you have. A first date is coming up and you describe the dress that finally worked. Someone is researching collagen drinks after seeing a TikTok and you tell them which one tasted least chalky. None of that is a sales pitch. It is just how human beings exchange useful information. The strange part is that the entire consumer economy runs on this constant, unpaid recommendation work, and almost nobody who does it collects a cent from it.

A direct-selling affiliation is, at heart, a way to get paid for the recommendation you were already going to make. If a friend compliments your jacket and there is a referral code attached to it, you tell them the code. "Use Smith for ten dollars off, they come in five colours." The whole interaction takes forty-five seconds. The friend gets a discount. The brand gets a customer who already wanted the jacket. You get a small commission for a conversation you were going to have anyway. Nobody in that chain is being manipulated. The only thing that has changed from the unpaid version is that one of the most ordinary things humans do, namely telling each other about things we already like, now has a small financial reward attached to it.

The first benefit is even quieter than the commission. If you affiliate with a company whose products you already buy, you buy them at a discount from yourself. I wrote about that idea in The Quiet Logic of Buying From Yourself. The math is plain. If you spend forty dollars a month on a product and an affiliation puts twenty percent back in your pocket, that is roughly a hundred dollars a year that stays in your house. You do not have to sell anything to anyone. You do not have to build a team. You just stop paying retail on something you were going to buy anyway. That alone is a defensible reason to affiliate. Everything else is upside.

I learned this for myself with essential oils. I have always liked having the house smell good, and for years I bought oils and incense at Walmart without thinking much about it. Then I visited a friend whose home smelled extraordinary, and there was a beautiful diffuser running on her counter. I asked about it, left with a couple of bottles, and a few weeks later signed up under her with Young Living. I was not joining her team. I was not committing to a business. I just liked the products, I knew I would buy more of them, and the math of buying them from myself made obvious sense. The fact that she got a small commission for bringing me in did not bother me. She had done the actual promotional work that got me there. That is a fair trade. That is how every other industry on Earth pays people for bringing in customers, and the moment we stop pretending direct selling is the exception, the resentment dissolves.

A while later I signed up with doTerra too, the main competitor, for the same reason. Both companies make oils I like. Both have clearances and promotions that move in and out. I am not loyal to either of them, because loyalty in business is something you earn, not something you owe. I am loyal to my own house and my own friends. If a friend tells me they are shopping for a diffuser and Young Living has one half off this week, I tell them about it. If they say they do not like Young Living for some reason, I show them what doTerra has. Either way the friend goes home with something that suits them. Either way I have made a small commission for forty-five seconds of being useful. Neither company is the protagonist of the story. I am.

If I had a pet, I would already be set up the same way with a pet food brand. Pets eat the same food month after month for years on end, and anyone who has owned one knows how often the topic comes up between owners. Bringing a friend into a brand you already use, on a product they were going to spend money on every month for the next decade anyway, is one of the highest-leverage versions of a forty-five-second conversation that exists. The friend buys the food they were going to buy. You get a small ongoing share of a purchase that was happening either way.

This is the part that gets forgotten in arguments about the industry. The commissions are small. A bottle of oil generates a few dollars. A bag of pet food generates a few dollars. A subscription order generates a few dollars. The picture in most people's heads is somebody who hit a jackpot, which is not what happens. What actually happens is the same forty-five-second conversation, repeated honestly, in a thousand variants, over years. Anyone earning a serious living from a legitimate direct-selling company did not get lucky. They did the same small thing, in front of more people, for longer, than the rest of us. The structure available to them is the same structure available to every other affiliate in the same company. The only meaningful variable is how many of those small conversations they have had, and for how long.

That is also where the real skepticism belongs. If somebody claims they pulled a million dollars in a year of direct selling without years of compounding behind them, something is wrong with the picture. Either there is fraud in the back office, or the income claim is being stretched past what the company's disclosure actually says. Both happen. Both get caught. Both are different from the model underneath. The honest version of leverage is not glamorous. It is consistent, ordinary, slow at the start, and it compounds in a way that does not look interesting from outside until two or three years have already gone by.

The pace varies by person, and that is fine. Some people build fast. Some build slowly. The temptation to compare your own pace against the loudest result on Instagram is the same temptation that wrecks every other long-term project. The honest comparison is never "am I building as fast as them." It is "am I building at all, or am I still doing nothing while telling myself I am being clever by waiting." A slow build, done honestly, still lands you somewhere most people who never started will never see.

Why the Word Travels So Easily

There is one more reason "pyramid scheme" sticks to direct selling, and it is the reason that interests me most, because it has very little to do with economics. It has to do with what happens when somebody you know steps slightly outside the line, and what their stepping does to the people who stayed inside it.

There are roughly three kinds of people who throw the word around. The first are people who tried the model, did not put in the time, did not do the work, and walked away. Calling it a scam is much easier than admitting which parts they personally did not show up for. I have nothing harsh to say about this group. It is a very human move, and I have done my own version of it in other parts of life. But their grievance is with their own follow-through, not with the architecture of the industry.

The second group are people who have never tried it but have learned that "pyramid scheme" is the right reaction to have at parties. The phrase has become a marker of financial literacy in some circles, and once a phrase like that gets adopted as an identity signal, dropping it would mean admitting the previous use was wrong. Most people will not do that, even quietly. So the word travels intact, unexamined, from one mouth to the next, picking up confidence as it goes.

The third group is the one I care about. It is the largest. These are the people who cannot stand the idea of someone they know stepping out of the agreed-upon pattern. There is an unspoken contract in most adult social circles, which goes something like this: I will not embarrass you by trying to live a life that is too different from yours, and you will not embarrass me by trying to live one that is too different from mine. The contract is invisible until somebody breaks it. When somebody does — by starting a business, by going freelance, by joining a direct-selling company, by quitting a job, by leaving a career, by writing in public, by building anything visible — the contract gets violated, and the room gets uncomfortable. The most common response to that discomfort is not curiosity. It is to find a small, fast, available word to defuse the discomfort, and then aim that word at the person who caused it. "Pyramid scheme" is one of those words. "Get-rich-quick" is another. "Annoying" is the catch-all.

When somebody calls a friend trying to build a small direct-selling business "annoying," they are very rarely complaining about the friend's actual behaviour. They are complaining about being made to look at their own choices in a mirror they did not ask for. It is much easier to label the person holding up the mirror than to look. I have lived on both sides of this. I have been the friend climbing out, and I have been the one in the room watching somebody climb out of a pattern I was still inside of. I know what the second posture feels like, and I know how easy it is to reach for a slur instead of a question.

The people you spend time with set the ceiling of what you believe is possible. Spend enough time inside a group that laughs at every different path, and you will start laughing at them too. Spend enough time around people who are quietly building something, and the laughing stops being interesting. That is not a sales pitch. It is just an honest description of how human beings calibrate. If you have ever wondered why the most casual sentence you say about a side project gets met with the same eye-rolling caution every time, the answer is usually less about the project and more about the room.

A different path is not a wrong path. A direct-selling business is not for everybody, and neither is a corporate job, and neither is freelancing, and neither is a restaurant, and neither is a startup, and neither is an unfinished novel in a drawer. Pick the path that gets you to your actual version of winning, the one that is yours and not the one your aunt at Christmas dinner thinks should be yours. Treat the work like work. Be patient on the timeline. And let other people walk their roads without forcing them back into your bucket because their walking makes you uncomfortable.

The word "pyramid" is doing a lot of work in this country. It has earned some of its reputation, but most of what it carries now is not skepticism. It is misinformation that costs the people repeating it more than they realize.

Frequently Asked Questions

Are pyramid schemes still common?

No. Pyramid schemes are illegal in the United States and Canada, and they get prosecuted when they appear. The Federal Trade Commission, the Competition Bureau, and the Direct Selling Self-Regulatory Council are all actively monitoring the direct-selling industry. The few that surface are usually shut down inside a few years. The model is mostly historical, even though the phrase has stayed in cultural circulation.

How can I tell a real direct-selling company from an illegal pyramid scheme?

Look for a real product that real customers buy at a real price. Look for commissions paid on actual product sales, not on the act of recruiting new people. Look for the absence of a required purchase to join. Look for an inventory buyback policy. Look for a published earnings disclosure and a regulator who is paying attention. If the company you are looking at has all of those, it is operating inside the legal framework. If it does not, you have your answer.

Why do so many direct-selling companies feel pushy or culty?

Because some of them are, and that is a fair criticism of those specific companies. High-pressure event attendance, "do not criticize your upline" rules, framing leaving as failure, treating skeptical family members as enemies of your dream. Those patterns are real, and they belong to particular organizations and training cultures. They are not the model itself. The newer wave of direct-selling companies, sometimes called the Modern Affiliate model, has stripped most of those patterns out: free enrollment, no minimum orders, no inventory, no required events, no recruiting-only commissions. The category is moving, even when the cultural memory of the category is not.

If most people fail at this, isn't it dishonest to recruit anyone?

Most people fail at most ambitious things. Honest recruitment frames the timeline as two to five years of consistent work, frames the realistic outcome for most people as a small additional income stream rather than a replacement income, and frames the time investment accurately. That is a real business proposition. Dishonest recruitment claims overnight wealth, posts staged luxury photos, and tells everyone they can quit their job by Christmas. The first conversation is fine. The second one is what the regulators take down. It is also what most people are actually mad about when they say "MLM" with a sneer, and they are mostly right to be mad about that specific version.

Is it true the people at the top make all the money?

In every meritocratic structure, including corporate ladders, the top earns disproportionately. Calling that a unique problem of direct selling is misinformation. The honest version is that the structure rewards consistent long-term builders, and that the very top of any sales organization is a small group of unusually driven people. Most people who say they want to be a corporate VP also never become one, for the same reason. The shape of the curve is not a scandal. It is just the shape of any real performance-based system.

Why are you defending direct selling publicly?

I am not defending an industry. I am one stream-holder in one company, working a model I think is sound, alongside four other ventures I have written about. What I am doing is pushing back on a piece of misinformation that I think costs people more than they realize. Real options get walked past because of a word in someone's head. That is worth one honest post, especially when the person writing it has nothing to lose by being plain about it.

Related Reading

• Many Little Streams Make a River The broader picture of how I think about diversification and the four ventures the direct-selling stream sits next to.
• The Quiet Logic of Buying From Yourself The personal version of why I joined MAKE Wellness as an affiliate, and the Pride in Ownership idea I borrowed from a much older industry.
• How I Built an AI Editorial Team for ThinkEV.ca A different kind of venture, also built without outside funding, also misunderstood at first. The pattern keeps repeating.