This article appears in the June 2025 issue of The American Prospect magazine. Subscribe here.
Little Bosses Everywhere: How the Pyramid Scheme Shaped America
By Bridget Read
Crown
According to classical Marxism, capitalism is destined to collapse on itself because of its supposed inherent contradictions. As it develops, eventually almost the whole population will end up in the working class, leading to an epic conflict between capitalists and socialist revolutionaries, with the proletariat victorious. Needless to say, this does not seem at all likely.
But there is something that actually is devouring American capitalism from the inside. It’s a sort of mutant simulacrum of business, drenched in hyper-capitalist ideology, but which produces nothing and sells to no one. It’s called the pyramid scheme.
That’s the story told in Little Bosses Everywhere: How the Pyramid Scheme Shaped America, a superb new book by journalist Bridget Read. She argues persuasively that multilevel marketing companies (MLMs) like Amway, Mary Kay, Herbalife, or Nu Skin operate in a predatory fashion for the benefit of a precious few. She also shows how MLMs were central to the rise of the conservative movement and its anti-regulatory, anti-government ideology.
Now America has a president in Donald Trump who not only perfectly embodies the fake-business essence of the MLM, but also was literally involved in MLMs himself. He is ripping up the constitutional framework and regulatory state that underpins American business, and his lunatic tariff policy looks likely to cause a severe recession. The MLM virus threatens to destroy its economic host.
A TRADITIONAL PYRAMID SCHEME is a straightforward fraud in which people are recruited into an organization, requiring a payment to join. That payment is split between whoever recruited them, and whoever recruited their recruiter, and so on up the chain. This unfolds along exponential growth lines until such schemes run out of potential recruits and collapse very quickly. The people at the top get rich, and everyone else loses money.
The MLM was developed in the early 20th century by a bunch of losers. “What brought the architects of the MLM plan together was their collective failure. They were middle-aged nobodies,” Read writes. Carl Rehnborg was a repeat failed entrepreneur—one scheme involved attempting to sell dairy products in China, not realizing that most Chinese people are lactose intolerant—who set up a vitamin supplement business called Nutrilite in 1934. This business was not working either until two more struggling men, Lee Mytinger and William Casselberry, hit on the idea of introducing pyramid scheme dynamics to the business.
MLMs were central to the rise of the conservative movement and its anti-regulatory, anti-government ideology.
Instead of selling directly, which is grueling and risky, they would sell Nutrilite as a business opportunity to others. As a distributor, you could become a “sponsor” of other distributors, who would buy their products from you, and sponsor other distributors in turn, creating a “downline.” Higher order volume meant bulk discounts; buy at least $15,000 and you became a “key agent” and got a check for one-quarter of whatever your downline was buying. If someone in your downline reached key agent status, you got 2 percent of what they got.
Critically, unlike traditional direct-selling companies, Nutrilite distributors would not be required to sell anything—only to buy it. “Mytinger & Casselberry had solved the problem Rehnborg had been struggling with for years regarding Nutrilite, which is that no one wanted to buy it or sell it,” Read observes. “The incentive in their new system was to sell to other distributors; the customer, and any actual demand for vitamins, was an afterthought.”
That basic system persists to this day. MLMs claim “sales” figures in the $40 billion range, but that number is solely based on products bought by their distributors; nobody, including the companies themselves, has any idea how many products are actually sold.
Nutrilite lives on as well. It was eventually folded into Amway, the most successful MLM in American history and an exemplar of the deep intertwining between these marketing schemes and right-wing Republican politics. The two families who built Amway from a peddler of soap and home-care products into a global sensation, the Van Andels and the DeVoses, have been major funders of the GOP and conservative institutions like the Heritage Foundation, the producers of Project 2025. Betsy DeVos, who would eventually become secretary of education during Trump’s first term, wrote in a 1997 op-ed that her family “is the largest single contributor of soft money to the national Republican Party … I have decided … to stop taking offense at the suggestion we are buying influence … They are right. We do expect some things in return.”
Throughout the book, Read shows American regulators constantly struggling to arrest the cancer-like growth of MLMs, and the industry fighting back with heavy lobbying. During the New Deal era from the 1930s to the ’70s, when the power and legitimacy of the administrative state was at its height, the Federal Trade Commission put up a serious fight. Shipments of bunk products were confiscated, and the most openly scammy MLMs were shut down or sued out of business.
But in the late 1970s, the agency lost a critical legal battle. It sued Amway in these years for allegedly running a pyramid scheme. At the same time, it was attempting to crack down on deceptive advertising to children, particularly of sugary cereal. Reactionaries, supported by MLMs and other industries that had run afoul of the FTC, like car dealers and real estate agents, spied an opportunity. They attacked the “KidVid” proposal as nanny-state overreach, and put the FTC on the back foot.
In 1978, administrative law Judge James P. Timony agreed with the FTC that Amway had engaged in price-fixing and restraint of trade, but not that it was a pyramid scheme. He accepted the company’s claims, which became a set of rules to avoid violating the law: Distributors must sell to at least ten people, they must resell at least 70 percent of their inventory each month, and the MLM would buy back any unused and unexpired products.
Amway is the biggest multilevel marketing company and a global sensation.
The following year, an open ally of MLMs won the presidency. Ronald Reagan gave the keynote address at the 1980 Amway convention, right after Jay Van Andel took over as chairman of the U.S. Chamber of Commerce. For the next 12 years, the FTC did not bring a single case against an MLM. “The money siphoned from the millions of Americans churning in and out of Amway had helped fund the New Right political revolution that successfully made big government bad and greed good,” Read writes.
The 1978 Timony ruling was buttressed by the fact that Amway persisted over time. A normal pyramid scheme should collapse within weeks or months, so surely it didn’t qualify.
Yet sophisticated analyses of pyramid schemes show that they can last indefinitely so long as they don’t grow too fast—and modern MLMs have tremendous churn, with up to 75 percent turnover per year. So long as the scheme sheds enough people who are replaced with constant supply of fresh victims, a pyramid can persist. And without regulatory enforcement getting in the way, that growth is unencumbered by legal risk.
As Read notes, what studies have been done on MLMs show a near-total lack of legitimate business activity. MLMs, including Amway itself, have been caught repeatedly violating the Amway guidelines, only to face minor fines. Wisconsin sued the company in 1982, and found that while Amway promised an annual income of $12,000 ($25,000 today), the actual average was a loss of $918. Internal data from Mary Kay in Canada, which is required to be disclosed by Canadian law, shows that 85 percent of distributors make nothing whatsoever in sales, and a further 13 percent made an average of $208 per year, not counting expenses. Another outside study of Nu Skin found that 99 percent of distributors lost money.
Most people have probably heard of at least one MLM, given their focus on recruitment. But as Read points out, it is telling that you almost certainly haven’t heard of their products—like her, I’d heard of Amway, but not its toothpaste Glister, or its energy drink XS, or its water purifier eSpring. Very few people are actually using this stuff.
Read illustrates the MLM dynamic with a story told in short segments throughout the book about Monique, an Air Force veteran who got sucked into Mary Kay back in 2013. The vignettes show why so many people—overwhelmingly women these days—find MLMs appealing: The typical recruit is struggling economically, and drawn to the flashy promises that you can get rich and “be your own boss.” In a grim irony, recessions are often great for MLMs, as they increase the population of economically desperate people. Only capitalist business hustle can get you out of a crisis caused by capitalism.
Monique’s story also shows why people can stick with an MLM. Mary Kay has stiff incentives that relentlessly pressure members to buy more product and, especially, recruit more members into their downlines, packaged with constant propaganda asserting that anyone can make it if they try hard enough. Buy enough and you make it to higher ranks, and are celebrated with special jackets at lavish ceremonies. The social pressure to stay and keep grinding is very strong.
Inevitably, Monique ended up buying most of the products with her own money, telling herself she’d sell them later. Eight years later, having spent more than $75,000 on Mary Kay junk, Monique ended up deeply in debt with a house full of makeup that she can’t even use, as it gives her a rash. All available evidence suggests that is roughly the average MLM experience.
A CENTRAL LESSON OF ECONOMIC HISTORY is that capitalism cannot work without regulations. Indeed, without property law and corporate law, plus police and courts to enforce those laws, it couldn’t even get off the ground. But more protections are necessary to preserve the integrity of the market and protect the public. Without strong government oversight, any market will eventually be overrun by lies and fraud, and implode in financial panic, as seen in 1857, 1873, 1893, 1907, 1929, 1987, and 2008.
In all the legal disputes mentioned above, a central question was lost: What is the point of allowing MLMs to exist? The industry is plainly abusive and deceptive, and it’s not as though Americans are lacking for retail shopping opportunities. But as the neoliberal consensus that regulations are bad until proven otherwise took hold, such questions were ruled out of consideration.
Under the Biden administration, things seemed to be turning around. The FTC got its most aggressive leader in decades, Lina Khan, who set in motion and strengthened several new regulations aimed at MLMs. These were in progress until the last days of the Biden administration. Alas, the book was finished before the presidential election, so the note of tentative hope on which Read ends is a sour one.
A central lesson of economic history is that capitalism cannot work without regulations.
If an MLM could somehow be distilled into a single human being, it would be Donald Trump. This is a man who, despite inheriting hundreds of millions of dollars almost tax-free, failed at every legitimate business he ever tried. His real estate empire collapsed. He couldn’t even turn a profit with a casino.
His one true talent, which made him billions, was selling the illusion of business acumen, through the press in the 1980s and ’90s and on The Apprentice. That allowed him to license his name and likeness to all kinds of products made by others, to create a scam university, and—of course—to end up in a partnership with ACN, an MLM “selling” telecom services.
Without the national celebrity and reputation created by reality television, buttressed by a national culture of business worship fueled to a great degree by MLM propaganda and lobbying, Trump would never have become president.
And now we are seeing an MLM president in action. Trump is ramping down the agencies designed to protect the American public and the market. He fired Alvaro Bedoya and Rebecca Kelly Slaughter, the other Democratic commissioners at the FTC, after Khan stepped down. The Consumer Financial Protection Bureau is being torn to shreds, and even the Consumer Product Safety Commission is under threat.
Trump’s FTC actually did recently file a lawsuit in Nevada against one particularly egregious MLM called IYOVIA, which markets investment training services and allegedly ripped off customers for $1.2 billion. But one-off lawsuits against the worst of the worst—literally 21 international agencies had warned populations about IYOVIA, according to the complaint—pale in comparison to stronger rules that could take down the entire industry, as Khan’s FTC was doing. (The lawsuit also makes clear the investigative work was done when Khan ran the agency.)
Every day, more and more of the national income produced by legitimate work and businesses disappears into the maw of innumerable scams and grifts, from phishing emails to scam texts and calls to phone hacks to crypto rug pulls to MLMs. Trump, naturally, has his own meme coin, and publicly advertises that the largest bribes will get you access to the White House. Now he has inflicted perhaps the most crack-brained economic policy in world history on the American public.
One would think that actual capitalists running real businesses would realize the importance of regulation to the functioning of the market, and turn against Trump. But if Read’s book is any guide, they will not. Someone else will have to wage the scorched-earth campaign against dishonest dealing necessary to preserve the American economy.
