The passive income influencers

Pour it out for Katie Zachariah, you guys. President Trump's latest press secretary lasted a record breaking five days on the job. Along the way, we found out that she said she was an attorney, even though she never passed the bar. But don't sleep on Zachariah's actual career as a multi-level marketer. According to reporting in Wired, Katie was an affiliate marketer for a fitness MLM called Beachbody, a company which she herself described to Wired as sort of a pyramid scheme. Beachbody has been the subject of a class action lawsuit, saying it's scammed its coaches, it's been accused of charging customer credit cards without consent, and it has settled a $3.6 million consumer protection lawsuit in California. But Beachbody is not the subject of today's explain from Fox, Norris Katie Zachariah. We're gonna talk about how people, like her, with big followings on social media, compel others to try and build up a side hustle, and how those people who get convinced often end up feeling scammed. We're gonna hear from one in a moment. (upbeat music) - I'm Anna Garten, and each week on Happy Hour, I invite new and old friends for a drink and a fun conversation at my kitchen table in New York City. On this week's episode, I'm joined by Julia Louis Dreyfus. We talk all about attending a fashion show in Paris together, throwing dinner parties, and making her Broadway debut in other desert cities. New episodes of Happy Hour are available every Wednesday. You can watch on YouTube or listen wherever you get your podcasts. Cheers. (upbeat music) - Support for today's explain comes from Ring, whatever shows up around your home this holiday season with Ring, you're protected. Ring makes it easy to keep an eye on your place inside and out. Battery, doorbell, 2K plus delivers written all 2K clarity with up to six times in a hand zoom. So you can get a closer look without losing detail. Inside the compact indoor cam plugs in almost anywhere making it easy to check on your home and pets while you're away and outdoor cam plus helps you keep watch over your yard and other outdoor spaces from wherever you are. With Ring, you're protected for the holidays, shop cameras, doorbells, and more at ring.com. (upbeat music) - With eight streams of income, here's four side oscillations. You should definitely check out especially if you're lazy. Number one is today explained. - 'Cause it's passive income. (upbeat music) - I'm Vivian Vivian Ho, freelance journalist, based out of London. Basically, I returned the freelancing full time, maybe at the end of last year, just about. And around that time, I just started getting inundated with all these weird reels from people be like, oh, you know, like-- - I just made $1,500 in my bed. This is how you're gonna make money while laying in your bed. - If you want a passive income stream that'll literally make you money while you're sleeping, keep watching. - So, it would usually be a woman. That's typically always a woman doing really ordinary things, like, you know, putting on her makeup, drinking coffee, you know, working at a laptop, cleaning a little bit. And, you know, then there'll be like some big, like, you know, text that comes across the screen saying like, oh, hey, like, I must stay at home, mom, and I'm making $20,000 a month plus working from home. Side hustle without ever posting to social media, growing up, following, or selling friends and family. And I do it all without ever leaving my house. So, side hustle any beginner or stay home, mom can do. - And then, you know, later on, they'll start saying like, here's how you can do it, too. Some of them are, you know, pretty typical side hustle is that you would see, you know, if you were looking to make a little extra cash, like, you know, transcription services, or putting captions on videos, that sort of things, or customer reviews. But then there are other ones that were like, digital templates, you know? And so they would tell you to download Canva, it was just a graphic design platform. And they would say, just go on there, make a bunch of weird invitation templates, and put them in an Etsy store, and that's literally passive income is what they'd say. - I started selling Canva templates on Etsy last year, and my shop has been brought in over $80,000. - If I can help on your specific Etsy journey, let me know how in the comments, because I genuinely want to help. You'd make it once, and then just kind of sit back and rake in the cash as it comes in. And so that was the first one I tried. And that was when I learned I am not a graphic designer. I legitimately did not make any money. I made three sales, and they were of the digital templates, so each one I would have been making a dollar 25 each. But then on top of that, you know, I had to start paying for Canva Premium. I also have to pay for something called E-Rank, which is how you look at like, you know, what's popular, what's trending on Etsy. I want people looking for. And so in total, I spent more than $200 out of my own money to get going with this. And in total, like if you're just looking from those sales, I made $3.75. (upbeat music) - So on top of the digital templates, I tried affiliate marketing, which is essentially sales, you know, just at a core. Once again, if somebody had come to me and said, "Have you considered sales?" I'd be like, no, I don't want to do sales. But they're saying, you know, this is, you're already online. Might as well make money doing it. And affiliate marketing essentially works. It's like, you know, you get a specific link for a product. And anytime somebody purchases that product through your link, you get a commission from it. Who are y'all? Affiliate marketing. I swear to god, there are brands begging for creators to become affiliates for them right now. - This is how you're gonna make five to 10 gay a month as a complete beginner. - Like I said, this is kind of where the scan became clear to me. All these women kept telling me, I didn't have to be an influencer. I didn't have to go online. I faced on the internet or anything like that. But with affiliate marketing, why would you buy something from somebody that you didn't know? You know, like, why would you, why would you click that link and choose to buy that instead of going too directly to the source? And so that's why I kind of realized, I'm like, okay, this kind of makes sense. That like, you kind of need to have a brand. You kind of have to be the influencer to do that. On top of that too, you couldn't get affiliate marketing deals without being kind of a brand in the end of the self. The one way they told me to do it was through something called to just store 24, which is essentially all the spam things you get in your spam email. Like, so like love pills is what they said. You know, like, less is on how to be a better lover. A lot of vitamins that really, really sketchy vitamins, that kind of thing. And so, you know, I felt kind of grows trying to sell any of that. But so I chose one product that I was like, I'm familiar with this. I might as well try that, which was a light therapy mask. I'll try that. But during this time too, I mean, I was trying a bunch of other hustles to like one of them with the transcription services that we talked about. I tried to sign up for that through the, the one that was recommended by all the other influencers. And they're like, no, we don't, we can't take anymore. Like, there are so many people out there who have signed up for this. So you're, I was waitlisted for that. I was waitlisted for video captioning. And then I tried customer reviews. And once again, it was like, you know, it was like all the good products that were being reviewed were like, I couldn't do that. Or like, you know, I didn't qualify for a lot of it. And so that was, this is kind of what I realized. Like, you're telling these influencers are telling people that they can make money this way. But they're kind of not taking into consideration the basic, you know, the basis of economics. When the demand is that high, like, the demand doesn't mean in supply. There's calling you, anybody can make digital templates. But the fact is if everybody is making digital template, why will they buy yours? - Okay, so you try to become a graphic designer. You try to become a marketer. You try to become a transcriber. None of it works out. And you end up feeling like you're the one who kind of got scammed. But you also write about examples of people for whom this worked out. So what's the difference between like you and one of them who actually did end up making say six figures in passive income a year? - So the thing is, you're always gonna have success stories and people are gonna be able to find success in these fields. You can do this. The thing is, and the issue with all of this is that it's not easy money as the way they're tying you is essentially a career switch. Basically, these influencers are tying you that for a few hours a day, you can essentially have a career in these fields. One of the experts I spoke to you had a really good saying, which was like, you know, it's some pluck, lock, and the algorithm when it comes to social media and success with that. You used a four-letter word at one point, and I wanna ask-- - He's a lot of those. (laughing) - I don't wanna ask a little bit more about it because I think it's what we're gonna talk a little bit about next on the show. You called these side hustle reels and the whole idea that you can get rich off of them a scam. - Oh. - And that makes me wonder like if you ended up feeling like the side hustle industrial complex is a little bit like the pyramid scheme, multi-level marketing complex of your. - The one thing that really freaked me out is going into this whole side hustle thing was that, you know, like as most people who grew up in an American suburb, you know, I grew up surrounded by MLMs, surrounded by, you know, the multi-level marketing things. And, you know, we've seen enough of them that we know what they are. We know that it's essentially a pyramid scheme. There's a big boss at the top who's making the money and like you essentially make more money from recruiting. I was really freaked out because a lot of these influencers use the same language. They use the same tactics. And that if you failed, it was your fault. You didn't work hard enough. Even though it's supposed to be no work at all, you know, well, you know, you got to put the work in. And so it's deceptively deceptive as what it felt like essentially. And that's what I kind of realized that this is kind of the new MLM. They're not recruiting me to sell for them. They're recruiting me to follow them. And to increase their social media engagement, to watch the reel all the way through, to comment on their posts. And then some of them are even selling like kind of sketchy products, like tutorials. That was kind of, that was the whole thing for me when I realized like this is kind of the new MLM. Instead of recruiting people to sell for you, you're recruiting people to follow you, to increase their social media engagement. And they're trying to do it without realizing that you are not going to have to test if you think you're going to have. The influencer peddled side hustle as the modern date pyramid scheme when we're back on today's split. Sport for Jakesplain comes from Shopify as the holiday's approach on one hand, it might seem like a strange time to jump into an intense new process like starting a business. But on the other hand, Black Friday's approaching, so there will be lots of online traffic. To take advantage of, Shopify can help you make it all happen. It's a platform to use her record breaking, reliable holiday selling season and it works for businesses at every stage. Shopify's pre-built website themes and AI site builder make it easy to launch a professional looking website. They also have a mobile app that lets you bring your store from anywhere and their AI ecommerce expert sidekick can help you manage almost any business tasks with a single prompt including holiday discounts. With Shopify, you can easily sell everywhere people shop, online in person across social media and even in AI chats. If you're ready to launch your business before Black Friday go to Shopify.com/explain to start your free trial at Shopify.com/explain go to Shopify.com/explain today to hear your first. Are you tired of hearing about business, tech and finance from the bros? We are the Tiger Sisters, a top business podcast with the Vox Media Podcast Network. Tiger Sisters releases every Monday and we decode money, power and love. And who doesn't love all those things? We are the internet's Wall Street and Silicon Valley big sisters. Tune in every Monday for late night sister talk meets boardroom strategy. Check out Tiger Sisters on YouTube, Spotify or wherever you get your podcasts. Welcome to the Tiger fam. Supported takes when comes from Ring. It's that time of year when packages start piling up at the door and between holiday shopping travel and so much more on your schedule. You can't always be there when they arrive but with Ring you can still check in on what's happening right from your phone. 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All right, let me explain again. Okay, we wanted to hear more about the side hustle of this pyramid scheme so I reached out to Bridget Reed, features writer at New York Magazine who wrote the book on multi-level marketing. The industry that you might think of as door-to-door selling, it has existed in the United States since basically after the Civil War. Once the country opened up with railroads, with commerce, there were tons of door-to-door salesmen and this is the canonical American salesman that you might think of in Arthur Miller's play, Death of a Salesman, if you've ever heard of the Fuller Brush Man or the Avon lady as she used to be. Don't you wish you were this happy resource for woman and look at her dual pin, a reward for success. She's in the beauty business representing Avon, the world's largest cosmetic company. These are people that buy products from a company like Fuller Brush at a discount and sell them at a markup door-to-door and they keep the profit. That is the, it is a very simple business. That persisted over the turn of the century and then through the early part of the 20th century. Now in the 40s, what was invented by these two guys named Mittendr and Castleberry who were some hustlers in Southern California was something they called the plan. It looked like door-to-door selling like they had a product which was Vitamins, which at the time was this very exciting new product and it looked like you were buying the Vitamins and selling the door-to-door. But what they figured out was if they told you you could recruit other salesman and then based on how good you were at telling those guys to buy Vitamins, you could get paid on that. So the real thing they invented was instead of getting paid on how much product you were selling like the Fuller Brush Man, they paid you on how much you got other people to buy and how much you were buying. So before you sold a single vitamin to a real customer, you were rewarded for recruiting. This is how we define a pyramid scheme today. This type of business model exploded over the next 30 years, especially in the 60s and 70s as the American economy took again another downturn with stagflation. They were rampant across the country as these same guys that learned the plan with that first product just copied and created new companies all over the country and it was an enormous scandal such that Walter Mondale actually introduced in 1972 a Pyramid Sales Act on the floor of Congress, which never became legislation, but it was a scandal, a national scandal. By this point, many of these companies, and specifically AMY, they became incredibly politically influential in the right wing. So over the course of the 70s, the right wing is coming to power. AMY basically achieves a regulatory victory after the FTC tries to shut down the company as a pyramid scheme. Basically, they get what you might think of as a gray area or a loophole where the FTC finds that AMY is operating in a fraudulent way, but doesn't go so far as to say you can't do this business model called Multilver Marketing. They create some rules and that's it. And that is basically the regulatory sort of status quo where you get our current Multilver Marketing industry. These companies don't operate in any different way than AMY, than any other company that was actually shut down by the FTC in the 70s. And yet, they are deemed legal. They are allowed to operate. How often do you end up on the short end of an MLM if you sign up? I mean, what's the ratio of winners to losers here? There are some experts who say that 99% of people, maybe even more than 99% of people lose in a Multilver Marketing scheme. And the data that we actually have from companies themselves when they are required to tell you how often people make money in their companies, this happens when they've been sanctioned by the FTC or in other countries where they're required to do that sort of thing. A fraction of a percent make what we could think of as a living wage, like a job that you would take to earn an income. And even barely larger fraction make maybe poverty wages. So we lost 188,350 dollars. I am more convinced than ever that get rich quick schemes and business in a box. And it's so easy. These are promises that are predatory. Most people are losing because to join these companies you have to pay. Even if you're just paying the $40 sign up fee and maybe spend a few hundred dollars, if you have that. thousands, and then across the industry, millions of people paying that every year. And then it turns over and you get a new crop of maybe college freshmen or new college graduates or nurses or teachers who think, "I'll make a side hustle," that's a lot of money. I mean, we just spoke to a woman who recently, as a freelancer, decided to like give in and try and do all the like side hustling things on the internet that her social media kept telling her to try, including becoming a graphic designer on Canva, trying to become essentially a marketing rep for a bunch of products, and even like transcription services. And then we started talking about whether these things are like MLMs, I'm guessing you have an opinion. Yeah. So this is like a tricky thing because multi-level marketing is a very specific form of quote, again, income generation. But because the sort of biggest problem with it is that it relies heavily on promotion, it relies heavily on cost upfront, and it's very, very difficult to actually make money from it. So all of those characteristics you can also find in a lot of today's side hustles from those things you're talking about, but also like what about Uber, Instacart, these gig work jobs that for some people for whatever reason you might actually make a real living from it. But tons of people also try it and don't. So the general undertone of scaminess that gig work has really does come from MLM, but it might not necessarily operate exactly as multiple marketing, which I argue in my book and which I believe is a pyramid scheme has has very little to no difference in operation from the type of scam or financial crime we call a pyramid scheme. So then help us connect it to what we see on social media in terms of let's say what Vivian got roped into these side hustle schemes that will help you generate passive income. But where do you see like the connection? Multi-level marketing in the United States, even since the 80s and 90s has been almost like a sort of margin operating type of work. It eats away at the gaps in our labor market where people are desperate. In the United States already, multiple marketing has just been a kind of a sort of subsist underneath. All other, a lot of other types of work that are also, they share the DNA of the MLM pitch, which is like, oh, you don't have a college degree, you don't have time, you're a mom, you need work that you can do in the gaps of your life with childcare. And we can help you not just, you know, make your credit card payment, whatever, but you can actually get rich doing this. You can actually start to do this full time. That pitch MLM did first. MLMs, the same industry that created MLM also helped literally create the independent contractor as a sort of tax status as a type of work that's exempt from all the protections of full-time work in the 30s and the New Deal. So we could not have MLM if we didn't have independent contractors because you need to have a workforce that basically exists outside of federal oversight. Then on the multiple marketing side, we get straight up fraught. Like they have been those companies basically lie about how they work. That's what was just found in the FTC's case against Amway. Amway and two affiliated training groups have agreed to pay $225 million to settle allegations that they used misleading earnings claims and pressured recruits to buy products they were unlikely to sell. This is a warning sign to all MLM companies saying, hey, we see you, we see what you're doing, knock it off because this is what can happen to you. And then in the middle is maybe the affiliate marketing where they make it seem so easy. All of that, if it's easy for this one person maybe because of XYZ fluke reasons. And then for you, it's not easy. That's also fraudulent in some way, but it might not be straight up fraught because maybe they didn't lie to you. They just made you think it would be easy. And for whatever reason, no one's buying your crap. Because there's a lot of crap, right? But you've paid that person to get the right to try to sell the crap. And that's the game. That's the game. If I can get you in and you're paying me to learn how to do whatever the side hustle is, like it doesn't matter if you survive because I've already been paid. And that's MLM. And if it's not ruining your life very quickly or irreversibly, then maybe it's not something that's going to get the same kind of attention as, say, Amway has in the past. Does the long history that you've given us from the Civil War on? Does it just like continue? I mean, do you do you forecast on this kind of thing? I don't know. Is there something human nature here that we're always just looking for a way to get rich quick? And so, we're always going to find options. I wouldn't say it's human nature. I would say it might be American, American nature. It's capitalist nature, but we've exported a lot of it too. I mean, it really is that manifest destiny that, like, if you can find virgin territory and stake your claim and get there first, and then everyone that comes after you is in your downline. I mean, that's kind of America's thing, right? That is our capitalist society. That's an ownership society. That's a property owning society. And MLM comes from a very insidious project to pretend to democratize that. Like the guys who invented it were very serious that they were trying to kind of create an army of salesmen who really believed that they were going to get the same opportunity as the Rockefellers, as the Carnegie's, as those guys that were early to the American project and the American industrial project who really got to stake ownership claims that today, their ancestors profit from? That is what MLM tells you is it really tugs at the deepest parts of what we are taught as Americans we should be able to do here in this country, but it also exposes sort of fractured that is how very few people really live out that dream. In that respect, yes, it's going to keep going, but I think the more that people talk about those experiences and sort of destigmatize the ways that it doesn't work, that's the only way you can really get out. MLM really traffics in that sort of individual, very libertarian idea that you should be the one to blame for your failures. Rather than what's really true about MLM, it's actually literally rigged to fail. And it happens every day that people leave MLM. So maybe with these other scams, people talking about how they don't work, that can only help. Bridget Reed's book on multi-level marketing is called Little Busses Everywhere, How the Pyramid Skings shaped America, it drops in paper back today, think how much money you can save if you buy 20 and bring in 20 friends and serve some pigs in a blanket and punch. And Ariana Spur produced the show tonight, I'm an outsider, edited, Bridget Dundee, David Tattish, or Mixed in Gabriel, Dunnetop saw through the scams of Bridget Reed's book, Little Busses Everywhere is not one such scam. I'm Sean Roberts from This Is Today Explained.