Before Investing in an MLM

By Rabbi Eli Teitelbaum

While there are some MLM’s that are an outright pyramid scheme and illegal, there are many others like Amway that have been ruled legal by US courts yet that does not mean that they are a good business to go into. One of the big problems with many of these MLM’s is that they easily mislead people into believing that they are an easy way to riches. Before going into Amway or any other MLM, I would very strongly suggest that one read two very important books that will open your eyes on this subject. One is entitled “Behind the Smoke and Mirrors” by Ruth Carter who had made it to the very top of Amway before she realized her mistake and the other is “False Profits” by Robert L. FitzPatrick. Ruth Carter reveals the multi-level deception, delusion and guile she found in the Amway distributor business. According to the SA4400 (a document which Amway distributors are required by the FTC to give to prospective recruits) the average monthly gross income for active distributors was $88 in January of 1998. This was of course before expenses.

I still remember when Amway started in 1959 and many of my friends joined in hope that they’d soon make it rich and retire. It didn’t take them long to realize that there was no pot of gold at the end of the rainbow and they all soon dropped out for one reason or another. Before one goes into any business, one must do careful research to find out the pros and cons. This is something that should be discussed with a good accountant and lawyer. The last person to ask is of course the person trying to get you into the business since he may very well have a personal interest in the matter.

The thing we must learn from the terrible Enron fiasco is that it’s very easy to make all kind of claims about a company’s great success and earnings yet it may all turn out to be a big balloon filled with lots of hot air. Since Quixtar is a “sister” business to Amway it certainly would be proper to learn a little about Amway before going into Quixtar.