MLMs - Pyramids of Hell?

PYRAMIDS OF HELL?

Ganga Prasad G. Rao
http://myprofile.cos.com/gangar

This won't be the first time that I am accused of exaggerating trends and conclusions. It's not that exaggeration comes naturally to me. It's more the motivation behind it. In a world that leans right at twice the angle of the Leaning Tower of Pisa, every issue, every manipulated rule risks destroying the future that our forefathers built for us with their sacrifice and with the dint of their morals and hard work. Besides, in a society that does not care for the left, complaints, suggestions and warnings are not heeded for months, sometimes years at a stretch. Also, many man-made rules, objects and structures – vehicles, buildings, policy promulgations last years, even decades once put in place. Is it not, I ask, prudent then, to anticipate ruinous designs of the right and make the public, policy makers and watchdogs aware of potential negative consequences ahead of the damage? After all, it will still take months and years for the matter to be resolved, if at all!

Today, my thoughts are focused on Multi-Level Marketing (MLM) companies. Typically, such companies operate through a pyramid of consumer-salesmen who both consume the MLM's product-line and build their own sub-pyramid of consumer-salesmen – the idea being that the pyramid grows larger as new members build their sub-pyramids, bringing profits to members in line with one's position in the grand pyramid. Nothing wrong with that per se. After all, many MLMs have survived and even flourished over the decades. Some MLM members are spectacularly successful and wealthy. So where is the catch?

Good question! Whether owned by its members as a co-operative or listed on the stock market, these consumer-(owner)-salesmen have an incentive to propagate their pyramid since their income increases with the size of the pyramid under them. The incentive to grow exponentially is not a problem in itself since the growth likely comes from displacing conventional market shopping. The problem comes about when an MLM produces an array of household goods and services that more or less make up the entire consumption basket of the average household. If these goods and services happen to be higher in quality than those available in the market (as needs to be for the MLMs to differentiate themselves and survive in the market), then, we have a situation in which exponentially greater amounts of higher quality products are produced to satisfy an ever-expanding pyramid. The problem is, these high quality products typically use more (higher quality) inputs and/or generate much higher environmental releases than normal products. As income increases, so does the quality of products consumed as consumers move to a higher lifestyle. That's even more emissions and waste. Now factor in population growth in the developing countries and what you have is environmental hell.

Now consider what happens when MLM shareholders scream for higher returns. Seeking to reduce costs, MLMs shift their manufacturing plants to developing countries with lower labor cost, lax environmental regulations (and even a decade-long tax holiday as the icing on the cake to ward off competing developing countries) Exaggerating I may be, but what does the trend portend for the future? More number of consumers consuming pyramids of higher quality goods and services to enlarge their income and satisfy the EPS growth required to obtain market returns from the MLM stocks? With larger volumes of higher quality products comes more environmental releases – to air, water and land. As the consumption pyramid grows so do pyramids and bubbles of environmental wastes. Don't get me wrong. I am not against MLMs. But someone's got to logically anticipate the outcomes given consumption patterns and incentives facing manufacturers and shareholders on one hand and the competition for foreign investment among developing countries on the other. With the developed world clamping down on CO2 emissions and the developing world holding out against any global warming controls, the 'leakage' of CO2 emissions will soon turn in to a krakatoan gas bubble as these firms shift to and ramp up production in developing countries.


Seems implausible? Here's your excuse. Chant together!
Exaggeration, thy name is Prasad Rao!