Is there a direct relationship between network marketing and pyramid schemes? How can one differentiate the two?
Just to clarify, I'm all for "networking" in the sense of meeting new people outside one's usual social circles and looking for ways of working together for mutual benefit. But I am not involved in "network marketing", and having known a few people who were, I don't recommend it.
The short answer to your first question is that the "networking marketing" is legal, while the "pyramid schemes" are illegal. But that doesn't really answer your second question. I am not a lawyer, but my understanding of the difference is that a legal networking marketing business has a real product or service for affiliates to sell (eg Avon sells cosmetics, Tuppaware sells plastic kitchenware), whereas the only thing an illegal pyramid scheme sells is franchise rights to sell other people franchise rights, and so on.
In practice, both forms are among the more exploitative forms of capitalism. Even in legal network marketing businesses, the people who make the most money are those who have recruited the most sellers to work beneath them, while those who actually pound the pavements selling the products seldom even making a living out of it. In many ways, this business model of clipping the ticket on other people's entrepreneurial labour is very similar among the newer digital platform monopolies like AirBnB, Uber, and particulary Amazon's Mechanical Turk.