In a down economy, there are no shortage of people and companies coming out of the woodwork to encourage us to create our own income-generating opportunities who then bill us for the encouragement.  Multi-level marketing (MLM) operations have field days when economic times are uncertain.  They play off peoples' doubts about their economic futures in order to suck in a lot of new enrollees, nearly all who are doomed to fail.   A British friend just called me two days ago to ask if I wanted to hear a talk about a golden wondrous MLM opportunity new to Thailand. 

Now here's the million-dollar or perhaps just $1.25 question:  do most MLM people fail because the MLM deck was stacked against them from the start or because they're just plain lazy?  In MLM Companies:  Where's All The Moolah?  I discussed the reasons I thought most MLMers fail in the MLM game.  I won't repeat what I've already written there.  Suffice it to say that a lot of people wind up dropping out of their MLMs companies with bitter memories and with lighter wallets and go out of their way to call the entire MLM model a scam.  Experiment M, discussed below, proposes to come up with a more exact answer why and how many people fail with the model rather than rely on failure statistics anti-MLMers pull out of their asses.

The other day I got e-mailed a letter from South Africa.  Three names were on the list.  I was instructed to transfer R50 (US$6) to each name, then add my name to the bottom of the list as I cycled the other names up.  I was to subsequently contact at least 200 people by e-mail and get them to do the same.  In a matter of weeks, I was told I'd see R3,200,000 (about $389,300) rolling in. 

Do I believe this will work?  Not at all.   That doesn't mean I think it's a scam.    If 35-40 people I contact follow the instructions and then get 35-40 people to follow the instructions who then get 35-40 people to follow the instructions, I would earn R3,200,000 or more . . . but that's a huge stack of ifs. 

This letter from South Africa was flawed for several reasons.   There were specific South African bank details for each name on the list.  No one but a South African or South African bankholder could easily transfer R50.  I also didn't really know the guy who sent it.  If he'd known me, he'd have realized I didn't live in South Africa and couldn't participate.  The sender had no credibility with me, a major reason not to act on it.

This got me thinking.  How many times have I received an e-mail urging me to pass it on in X number of days or I'll receive bad luck?  We've all gotten letters like these and until recently, I was passing them on.  Enough people forward these letters or we wouldn't keep getting them, and yet for what?  The promise that good luck will grace them if they forward them and bad luck befall them if they don't?  Can such a lame reward/punishment package be the reason this crap keeps flooding into our Inboxes?  In the last two years, I've gotten crap that Bill Gates and Microsoft  will be paying $200 for each e-mail you forward asking other people to do the same.  At least on this second scheme, there's some ludicrous promise of a payout, though none of the overly eager participants bothers to question why Microsoft would pay so much money for a task so easy, how Microsoft could track the number of e-mails you send, and where Microsoft is to send your "hard-earned" reimbursement when you never supply them with payment details or a physical address.   

The only reason any of these e-mails ever get read by me in the first place and sometimes, though rarely, forwarded is because someone I know sent them to me.  Had they been spammed into my Inbox, my spam filter would have junked them automatically or I would have junked them manually. 

Successful MLMers follow similar reasoning.  They recruit under them people they know.  Or at the very least, direct acquaintances of people they know.  This is because credibility exists at the very beginning of the contact.  People listen to proposals of people they know and possibly follow their lead if this person is someone they respect.

I decided to devise a simple experiment, called Experiment M, that would target and pay out like the MLM model, but unlike an MLM, not require any significant investment or time or risk that would scare away potential participants.  If the experiment winds up a success, with most people theoretically making more money than they invested and with their results being proportional to their measurable efforts, then I can conclude that it's just the particular MLM companies and the heavy buying demands they expect of their members that doom most MLMers to failure.  If the experiment turns out a failure, then the only explanation is people's lack of interest or laziness.  We can't blame the failure on complicated business models, high recruitment turnover, or any other reasons critics typically cite to justify the typical MLMers crash and burn rates. 

Experiment M is designed to be as simple as possible.   We take the same letter I received from South Africa, but instead of listing complicated bank account transfer details or requiring monetary notes be stuffed into envelopes at the post office, we make things as easy as can be by requiring that all money be transferred electronically via Paypal.  Paypal payments can be made across different currency zones and allow for the instantaneous transfer of money vs. reaching for a checkbook and having to send money through the postal services.  And since most of us buy stuff on eBay, we're all likely to have accounts.

Up front, we deal with people's fear of investing a lot of money in a scam by not asking for much to participate.   Total required: US$8.  Who among us can't afford to lose $8?  If you're among those who can't, you shouldn't be wasting your time at Doug's Republic reading about experiments.  You should be out there earning more money.  Since I, as the initiator of Experiment M, have no one to pay $8 to, for this to be completely equitable I will have to donate $13.60 of my own hard-earned dough to a local school, so that I'm as vested in this as any other participant.  Where did I arrive at $13.60?  $8 covers my initial inclusion at the #3 spot, just as it does for every other participant.  I also had to place two other people in the #2 and #1 spots.  These two don't get to profit through all three positions, so their cost to participate is less.  Spot #2 allows one to recoup $8 twice as fast as spot #3, and spot #1 five times as fast as spot #3.  Therefore, their cost to participate lessens in proportion to the quicker recoupment times, to $4 (= $8 ÷ 2) for spot #2 and to $1.60 ($8 ÷ 5) for spot #1.  $8 + $4 + $1.60 totals $13.60.

Let's make it even easier and less risky.  We have no control over Paypal's policies and believe they'd probably put a halt to our experiment as well as terminate various participants' Paypal accounts if they got wind of it.  We will dispense with Paypal altogether and treat this as a thought experiment.  Instead of really sending a Paypal payment to someone, you will send that person an e-mail with a subject title of "$X sent to you from A. B. Surname on date-month-year: Experiment M."  X would be equal to the amount you're sending, and you'll substitute your own initials, surname, and the date you send the payment.  If you agree to join us in Experiment M, your first step, before doing anything else, is to pretend-Paypal over the three paltry amounts to all three names listed at the end of this post.

Will pretend-Paypalling instead of real Paypalling skew the results?   People are more likely to act when they have a personal motive (= money).  By the same token, people are also more likely to act when they incur less risk.  Let's not get too academic about this.

Next, move the name and e-mail in the #3 spot to the #2 spot, and the name and e-mail in the #2 spot to the #1 spot.  The name currently in the #1 spot should be removed altogether.  Place your own name/business and your  e-mail address in the #3 spot.    The payable amounts listed on each line should remain unchanged.  The #3 spot always gets paid US$1, the #2 spot US$2, and the #1 spot US$5.

Do not spam anyone!   This is not an empty disclaimer meant to cover my own rear.  Spamming is a waste of time for this experiment.   It won't work.  Following the MLM recruitment procedure, you should only contact people you know on some level in order to have credibility established from the onset.   Your contacts should receive the e-mail and at least recognize your name or you can kiss off any chance of them participating.  If the person receiving your mail doesn't know you all that well, I'd suggest adding a short introduction at the very beginning of the post explaining how you know them.   Example:  "Dear Frank.   This is Peter McKinnick.   I contacted you about six months ago to see if you were interested in buying that prime ocean front real estate in Afghanistan.  Don't worry.  I'm not following up about that.  This correspondence deals with something else entirely I think you'll have fun with."  Then, copy the rest of this post along with your updated e-mail list of beneficiaries.   We have used the amended form of listing e-mail addresses, userID[A T]domain.com, to prevent spambots from picking up e-mail addresses from this site.  You would change the [A T] to a @. 

Ideally, each of the e-mails you send out should be mailed one at a time and personally addressed (i.e. "Dear Bob").  If any of your contacts sees himself cc'd with 99 other names in a group e-mail, your mail won't get read or acted upon.  Try to imagine the more respectful way you'd treat the e-mail if you received it addressed only to you or cc'd with half of greater New York.  The subject of the e-mail should, preferably, be something personalized like "Frank, check out this experiment . . . from Peter McKinnick."   If there are the two characters FW: before your subject title, meaning you're just forwarding on another e-mail, you've significantly lessened the chances of anyone looking at it, let alone acting on it.  Just think about all the junk e-mails you delete without opening them first.   You do so because the subjects are irrelevant and the sender has no relationship with you.

Groundrules. If real money were changing hands here, our first rule would be Do not try mailing out letters first in order to earn the $8 to then pay your way in.   In micro-economics, this is called the free rider problem, and if everyone thinking to participate refuses to put in $8 because they think no one else will, the experiment will fail before it's begun.   They'll be a lot of Experiment M e-mails floating around with no one actually getting paid.   Because the money in this experiment is only theoretical, no one has to think about losing a cent; but even if $8 were changing hands, come on, folks!  It's only US$8 we're talking about, less than a cocktail in a bar.  Another warning:  don't cheat your position on the list.  It might be tempting to try to sneak yourself into the #2 spot right away since the #2 spot gets paid double the initial #3 spot.  You'll actually wind up making less imaginary money.  The power to make money with Experiment M (or any MLM) comes from cycling fully through each of the levels.  You can do the math to prove this to yourself.  If you're mathematically incompetent, then just trust me on this point and enroll in a remedial math class.

You can only participate once.  A lot of us have the same names in our contact list as our friends do, so there's a chance you might be contacted to participate even though you're already on the list.  Delete any future e-mails you receive if you're already participating or have participated.

How much money could you make if this were real?   Logically, it should be a piece of cake for anyone to recoup their $8 investment and beyond.  All of us know 8 people who'd be willing to gift us a dollar, and I'm equally sure each of us knows 8 people we'd be willing to give one.   But realistically, I'm of the opinion most people will be too busy sitting on their chubby butts to make back even $1.  I'm already convinced my pretend $13.60 has faded forever into the sunset, but I'd love to be proven wrong.  I dearly want to be shown that MLM failure is due to the MLM companies themselves and not the people participating.  The payout works exponentially so that by the time you reach the #1 spot – that's if you reach it, mate – you'll be paid out $5 multiplied by everyone in your downline.  That's why manipulating your position on the list is a ticket to failure.  You'll just be shrinking the potential size of your downline.  As a reference, if everyone participating makes it a goal to quickly recoup their $8 investment by getting 8 of their personal contacts to send them $1 apiece, at the end of it all, you'd earn about $2,600.  It's mathematically possible to make a helluva lot more as well as a helluva lot less.  As I'm already forecasting most people are practiced ass sitters, a helluva lot less than $2,600 – for example, $0 -- is the more probable scenario.

Please make a note how many e-mails you send out and the date you sent them out.   We need this information to be able to effectively measure effort vs success.  Log your results, even if they wind up as nil, here so that the rest of us can be a witness to your success or failure.   My heart beats with anticipation.

Now for the real disclaimer.   This is neither a Ponzi scheme or an MLM operation.   This is a controlled experiment meant to test a particular business model in an entertaining way.  Every step of this experiment was designed to make it as effortless and as simple as possible for fear that participants would shun it if more than the slightest work was asked of them.    Consider any monies you improbably and imaginarily receive to be the result of your efforts in participating in this experiment.   All information gleaned from this experiment will be made publically available at Doug's Republic.  

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