The difference in MLM business models and ordinary business models

Let's clear up some misconceptions, eh?

I write books and magazine articles. I have had a book published. Here's how the chain of money goes:

The publisher prints the book. They resell to jobbers at about 30% of the cover price (about a 10-15% profit.) The jobbers sell to distributors at about 50% of the cover price (10-15% profit for them.) Distributors sell to stores at about 60% of the cover price (10-15% profit) and book stores sell at 100% the cover price (about 20% profit when it all works out)

Now... here's how that works under MLM:
Publisher prints the book. They resell to "top line"
"top line" sells a few books but then sells the "opportunity" to second tier.
"second tier" sells a few books and sells opportunity to third teir.
"third tier" sells a few books and sells opportunity to fourth teir.
"fourth tier" sells a few books and sells opportunity to "fifth tier"
"fifth tier" sells a few books and sells opportunity to "sixth tier"
... and so on in an endless chain. And every book that sells (that 80% profit, remember) gives a kickback of 5-10% to the upline. All the way up.

There comes a point when that profit getting to the top is just about zero, so the MLM starts "restructuring" the payment plan. Notice that nobody's getting the 20% that the original model provides to the resellers. Notice that the original model says that "if you earn it, you can keep it."

There comes a time when you pay out so much in compenstation to a huge downline that NOBODY gets any mone. You can't pay a downline of 10 people 20% of a product's cost. That's about twice the cost of the original product and you're losing money fast (which is why a lot of MLMs collapse quickly.)

If everyone gets 20% of the previous person's sales, then there comes a point when tht 20% equals a few pennies.

And remember there's no limit to MLM downlines. If you can get a downline of 50 people, you can do that.