X-Message-Number: 3432
Date: Tue, 29 Nov 1994 21:27:46 -0600 (CST)
From: Steve Jackson <>
Subject: CRYONICS: Terra Libra

John de Rivaz quotes the Terra Libra FAQ as follows:
> Isn't Terra Libra just another multiple level marketing or "Ponzi" scheme?

The two things are quite different. A MLM is not a Ponzi scheme. To start
off a FAQ by confusing the two does not lend credibility to the FAQ!

> First, let me use the word 'system' in place of the word 'scheme.' Scheme is a

> perfectly good word but it does have some negative connotations. Second, let 
> suggest that you are asking the wrong question.

Or, at least, not a question which the FAQ is prepared to answer!

Multiple level marketing systems
> (MLMs) are inherent in the free market process. Take your local retailer for

> example. The local retail store is part of an MLM. The manufacturer markets to
> the distributor. The distributor markets to the wholesaler. The wholesaler

> markets to the retailer. The retailer markets to you, the customer. This is 
> way markets work.

This seems to be a deliberate attempt to confuse the issue. The essence of
a MLM system is that it is an alternative to the more traditional
producer/distributor/retailer/customer pattern! In order to say "The local
retail store is part of an MLM," you first have to change the definition
of MLM to include all free markets. This is NOT what people are talking
about when they ask whether Terra Libra is an MLM. This answer is too
carefully worded for me to think the writer is stupid. Therefore I conclude
he is seeking to obscure the issue. This does not prove that anything else
about Terra Libra is dishonest, but still, this one FAQ answer does a lot
to put me off the whole group! 

What most people are really asking when they ask if Terra
> Libra is 'just another MLM scheme' is, 'Isn't Terra Libra just another PONZI
> scheme?'

No, that is not necessarily what they are asking. They might mean just 
what they are saying. Many people do.

> Ponzi schemes use an MLM structure but there the similarity ends.

This is, in fact, not true. Ponzi schemes typically don't use a MLM 
structure at all. A Ponzi scheme is one that promises a high rate of 
return on an investment, but in fact survives by using the investments of 
later suckers to pay the promised returns to the first ones in. A Ponzi
scheme does not have the typical "MLM" pyramid structure.

A Ponzi scheme

> has no real products although they may sell a 'product' that tells you how you

> can get your money back by continuing the Ponzi scheme to lower levels. and go
> away.

No. That is not a Ponzi. That may be a dishonest MLM, or a non-MLM fraud, 
but it's not a Ponzi...

> The result is the people at the top of the

> pyramid (Ponzi schemes are sometimes known as pyramid schemes) who started the
> whole thing get rich while the people who joined late in the game end up with
> nothing to show for their 'membership'.

No. You are describing one type of pyramid scheme, like the "Airplane" game. 
That's not a Ponzi. A significant distinction is that the Ponzi scheme 
lies, even to the people it paid off in full, about where their money 
came from. When someone cashes out of the Airplane Game, they know 
exactly where the money came from; they helped lure it in.

> 'Now to answer the original question. Is Terra Libra a multiple level 
> 'system?' Short answer, yes.

Okay. This is probably what some people were asking. They may even have
WANTED a "yes." My parents were in Amway, the quintessential MLM, for a
while, and were not unhappy with it. I still use several Amway products,
finding them superior to anything I can buy at the store. Some MLMs are
honest and profitable, but they don't pretend to be anything but MLMs. And
they don't drag "We are not a Ponzi" red herrings around. 

> Is Terra Libra a Ponzi scheme? No.

This is probably true, based on what little I know about Terra Libra. 
Though of course you do not identify Ponzi schemes, or any other kind of 
fraud, by asking the proprietors "Err, is this a confidence game?"

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