For those of us who know a friend or loved one who has been swindled into joining an MLM, we wonder how the person can get trapped in such an obvious scheme. If you’re someone who was once stuck in an MLM, you may be wondering how you didn’t see the signs earlier. Although many people point out the shady techniques of MLMs like LulaRoe, doTerra, and Arbonne, there’s a big piece of the puzzle that’s missing, and that’s the psychological aspect.
Something I spend many hours each a week studying are the various thinking flaws that all of us humans fall victim to. Many of these are cognitive biases that lead us to becoming the prey of different fallacies. Today, we’re going to talk about how MLMs exploit these cognitive flaws to keep people trapped, but more importantly, understanding these fallacies can help us make better decisions in all areas of our lives.
It’s also crucial to understand that there are external fallacies we fall for as well as internal ones. While MLMs are able to convince people that it’s their fault they aren’t making money, we’re also going to discuss an internal fallacy that simply magnifies the first one. When we’re able to first acknowledge what’s happening and then take a step back, we can make better, rational decisions. Not only will it help us better understand people who are victims of MLMs, but there are many other benefits.
Even if you’ve never been part of an MLM or know anyone who has been, being able to identify these psychological flaws can help you with your career, relationships, and your finances. Since learning about these flaws with my own cognition, I’ve been able to make better decisions, and it’s made my life run a little smoother, and I hope it can do the same for you.
The Just World Fallacy
For many of us in developed, capitalist nations, we’re driven by the idea of meritocracy and hard work. In one 2016 survey, roughly 64% of Americans say that they believe that determination and hard work are the most important success factors. From a young age, we’re all taught that if we work hard, we’re going to succeed, but unfortunately, MLMs take advantage of this.
MLMs start by advertising to people that this is going to be an easy way to make some extra money, and it’s one of the reasons they target stay-at-home moms. They discuss how beneficial the product is and how it basically sells itself. Not only will you be able to work from home while taking care of the kids, but you’ll be able to make thousands of dollars a month.
Within a few months, some alarms start going off in the new MLM recruit’s head. They’ve followed all of the strategies that the MLM taught them, but they aren’t making any sales. They’ve messaged all of their friends and family members on Facebook, but not only do they get no sales, but they ruin a few relationships along the way. They sit back and wonder, “If I signed up, why is it so hard to get others to sign up?”, and then they may start thinking they got suckered into a scam.
During the MLM team calls and seminars, some of these new recruits may bring up their concerns, but now the narrative changes. Although they were told that this was going to be simple, they’re now being told that they aren’t working hard enough. The money-makers in the MLMs tell people that they only get out what they put in, and if they work harder, they can become extremely successful.
The new recruit goes from being skeptical about their original decision to sign up to believing its their fault.
While some may call this a clear sign of gaslighting, there’s something less obvious at play, and it’s the just-world fallacy. The just-world fallacy is something many of us are affected by when we live in this meritocratic society. This fallacy is the misconception that people who are losing at the game of life must have done something to deserve it.
It’s easy to see how this plays out in MLMs. If you’re not selling enough essential oils, you’re not working hard enough. If you just messaged more people on your Facebook friends list or invested a little more into your business, you’d succeed. The problem with this is that it’s unfalsifiable. How could you ever run a proper experiment to see if this product or business model doesn’t work if the only answer you get is that you’re not working hard enough?
As someone who worked in sales in my early 20s, I can tell you that it’s not just MLMs who do this to people. Sales teams have some of the highest turnover rates because they’re all about making money, and if you’re not selling, it’s your fault. What’s worse is that we fall for this just world fallacy in other parts of our life and think it’s the reason we keep getting into toxic relationships or can’t pay our bills.
The reality is that the world is more complex than that, and there’s much more that goes into analyzing decisions we make and what’s going on in our lives.
Don’t Be a Victim of Sunk Costs
Lastly, there’s an internal fallacy that we fall for that’s more about us than it is about them. While MLMs may be able to exploit this fallacy, the members don’t even realize how often it happens. For those who are in MLMs, it’s easy to look at the investment you’ve made and use that as a justification to invest even more. When you put yourself into the shoes of the person who joined the MLM, you may relate to their experience with how they feel trapped
When someone joins the MLM, there’s an investment of both money as well as time. For most of these MLMs, you have to pay some money up front for the product, and then the person who recruited you makes more money by requiring you to have a monthly stock. You’ve also invested a lot of time into this thing where you’ve done their trainings and online seminars, and you’ve spent hours reaching out to people to try and get people into your own downline.
After you had your doubts and they told you that you’re just not working hard enough, you’re still thinking about giving it up. But then you remember something. You remember that you’ve already spent hundreds or even thousands on starting this business. Maybe you tapped into your savings or moved money around to make this happen. You may have even had arguments with your significant other about starting this venture, so you can’t give up now.
This is what’s known as the sunk cost fallacy, and it’s something that can happen to any of us. The sunk cost fallacy is when we chase after the something just because we’ve already invested in it. This is something that economics students and investors are taught, but this also plays a massive role in behavioral economics.
Think about that beater car you used to have, and you put a bunch of money into it. Right after a repair, something else broke, and you just had to fix it again because you already invested in it. Soon, you realize you’ve spent way more on the repairs than the car was actually worth, and it’s because of the sunk cost fallacy.
We also see this in relationships. Much like MLMs, people stay in abusive, toxic relationships way too long because of the time and effort they’ve put into them. If you’ve been with someone for months or years, you may not want to feel like those months or years were wasted, so you decide to stay in the relationship. Meanwhile, you’re wasting more time chasing the sunk costs.
So, what can we do to avoid these two cognitive flaws? Well, first, we need to realize that although karma is great in theory, it’s not always how things work out. Anyone with life experience can look to multiple events in their life where they did everything right but got a bad result. Sometimes, it’s not a just world. Sometimes, good people fail and bad people succeed. Other times, we can work until we’re blue in the face, but it doesn’t guarantee we’ll become millionaires.
When it comes to sunk costs, I’ve personally benefited from realizing when to pick my battles. Many times, what’s spent is spent, and I’m never getting it back. While we may be able to get a refund on some purchases, we can’t get a refund on time. So, to counteract that just world fallacy and sunk cost fallacy, sometimes, the best thing we can do is just take the loss and move on. If not, we just invest more time and money into something that isn’t paying off, the only thing we’re truly investing in is our own suffering.
If you need help with your mental health, I highly recommend the service I use, BetterHelp. They’re an affordable online therapy service, and by using this affiliate link, you help support The Rewired Soul.