Pyramid Power: Network Marketing Leaders' Accounts of Professional Development and Success Douglas Black A thesis submitted in conformity with the requirements for the degree of Doctor of Education Department of Adult Education, Community Development, and Counselling Psychology Ontario lnstitute for Studies in Education of the University of Toronto O Copyright by Douglas Black 1999 National Library Bibliothèque nationale du Canada Acquisitions and Acquisitions et Bibliographie Services services bibliographiques 395 WeHingIon Street 395, rue Wellington OtîawaON K1A ON4 OtiawaON K1A ON4 Canada Canada The author has granted a non- L'auteur a accordé une licence non exclusive licence dowïng the exclusive permettant a la National Library of Canada to Bibliothèque nationale du Canada de reproduce, loan, distribute or sel1 reproduire, prêter, distribuer ou copies of this thesis in microfonn, vendre des copies de cette thèse sous paper or electronic formats. la forme de microfiche/film, de reproduction sur papier ou sur format électronique. The author retains ownership of the L'auteur conserve la propriété du copyright in this thesis. Neither the droit d'auteur qui protège cette thèse. thesis nor substantial extracts fiom it Ni la thèse ni des extraits substantiels may be printed or otherwise de celle-ci ne doivent être imprimés reproduced without the author's ou autrement reproduits sans son permission. autorisation. Abstract Pyramid Power: Network Marketing Leaders' Accounts of Professional Development and Success Douglas Black Doctor of Education, 1999 Department of Adult Education, Community Development, and Counselling Psychology Ontario lnstitute for Studies in Education of the University of Toronto Millions of people from al1 walks of life in North America and in over 125 countries worldwide participate in a phenomenon called network marketing, or multi-level marketing. Yet very few researchers have examined the topic, perhaps because of the stigma attached to it. Media reports frequently feature "exposés" about people involved in network marketing, and often condemn the entire sector as a scam. But what are the differences between pyramid schemes and network marketing enterprises? How does the industry operate? What do people have to Say about their involvement in the industry? For this qualitative inquiry I explored the industry through both an extensive review of pnor research and published literature, and through the words and stories of network marketing leaders. Interviews with elite members of the field ii were conducted by and published in a leading trade magazine. I examined 33 of these interviews (with 40 individuals) to answer questions about how and why people become involved in this industry; the challenges they face in their work; how they overcome those challenges; and what they consider to be the keys to their success. A wide range of network marketing companies and personal backgrounds is represented in the inquiry. Critics denounce the industry on several grounds, including that it: is immoral or unethical; involves controlling recruits in a cult-like manner; encourages materialism and greed; is a pyramid scheme in disguise; does not provide an income for most members; is extremely difficult to succeed in; destroys friendships and other relationships; and that it commercializes friendships. In this thesis, I complicate these criticisms through an examination of both the views of industry proponents and the interviews with leading members of the field. lnterspersed with these discussions, I use vignettes featuring a fictitious character whose adventures in network marketing offer an alternative way of describing the experiences of elite participants in the industry. Thus, several layers of experiential understandings, information, and critique about the topic are intennroven throughout the thesis. Acknowledgments I wish to show my appreciation for the contributions of several people. Front and very central to the cornpletion of this thesis was Heather Allison. Without your love, support, and faith, I would not have finished. Many thanks! And although any errors in the thesis are my own responsibility, your many hours of editorial assistance (often while fighting off sleep after long days at the office) helped me to create a more polished report. You are the Grammar Queen! You sacrificed fun-tirne, and instead spent a lot of labour cleaning and cooking meals for me while I typed-al1 without making me feel guilty! I am deeply grateful for al1 you did. To my new neighbor and long-time friend, Catherine Phillips, I again Say "thanks!" My years at OlSElUT were survived only because of your friendship. I plotted a short time frame for completing this thesis, and you supported my work almost every single day. I also really appreciated those deliciously decadent hours spent eating chips on the beach!-l needed those getaways to remain grounded. Thanks also go out to family members, who, although on the other side of the country, offered encouraging words and cards that cheered my days. Evelyn and Earl phoned me frequently, and didn't suggest I quit, even when that was probably the smartest thing to do! Leslie sent cards that made me feel that I had iv sorneone thinking about me and sending positive energy my way. Ken's frank support and calm assurance that I would finish someday helped me when my thoughts were clouded. And several visits by Henri reminded me that others have taken this path before, and that support can corne from unexpected places. I also want to acknowledge the contributions of Larry Lonero and Kathryn Clinton, who sat down with flipcharîs and felt-pens to chart out possibilities for my project, and then offered encouraging words throughout. At OISEIUT, I want to thank J. Gary Knowles for your supervisory work, and for being willing to take on a rather unusual project with an unknown student. Thanks for going out on a limb, in an institution that discourages that, and thanks for answering my many phone calls with gentle compassion. Marilyn Laiken was also a great help, especially for your open and honest discussion of disagreements, and your quick response ta rny needs. Friends at OlSE also kept me sane and focused: thanks to Kerrie K. and Janice H.-l enjoyed our rather harried time together. Finally, I wish to acknowledge the importance of OlSE staff members who have made my institutional experience more pleasant: Amelia Nanni, for always having the answers with a smile; Bala N., for helping me feel safe in the building; Marian Press and Joanne Lynes for their friendly work in the library; Tony, Tom, and Avi in the computer labs; and the cafeteria workers who served me many hot and (presumably) nutritious meals. Table of Contents CHAPTER 1: INTRODUCTION .... ....... ........................œ......œ....................rnrn......1 W hat's Ahead? ............................................................................................ 2 Meet Julie: A Vignette ..................................................................................5 Why Explore Network Marketing? .................................................................8 How the lnquiry was Done .......................................................................... 14 . The Published Interviews ..................................................................... 16 An Ethical Consideration ....................................................................18 Some Constraints ................................................................................19 My Background in Network Marketing ..................................................20 CHAPTER 2: THE GREAT PYRAMIDS.......................................................... 26 Julie Gets Interested .................................................................................-26 Pyramid Schemes .....................................................................................-29 Identical Twins? ...................................................................................33 Variations on a Scheme .......................................................................37 Ponzi Schemes ...................................................................................-40 CHAPTER 3: WHO JOINS, AND WHY? ....................................................... 43 If Only I Had A ........................................................................................43 Needed More Money ............................................................................47 Bureaucracy Bites! ...............................................................................49 Free Time at Last! ................................................................................50 Loved Those Products .........................................................................52 Themes ............................................................................................... -54 Survey Says: .............................................................................................. 55 Ultimate List of Reasons Why People Join .................................................60 I Got a Gall From a Friend of a Friend ........................................................65 CHAPTER 4: CHALLENGES ........ .................~rn.m.......................................œ...68 Julie Joins ..................................................................................................68 A Look at One Company ............................................................................73