I think the incentive of referring a friend is that they would vote you for sure.
The power of a referral program is that it incentivize people to refer as many people as possible, not just their friends. For example a youtuber with 1 000 000 sub could post his link and he would reap massive rewards from all his followers posting on steemit.
If you want virality a referral system is key.
I also don't like the idea that my friends would have rewards cut because they would register by me.
Your friend would have the opportunity to earn back by referring new users.
If you don't referring anyone, you don't have the full rewards. Still it sounds me like some MLM shit.
Many users don't click ref links because no one want potential loss even when there is no fee built-in. They're right. All the others would have 'f* it moment'.
MLM is based on selling products to people, it requires people to buy stuff in order for other to take a percentage. Steem doesn't require anyone to invest or buy something so I don't see a referral program controversial at all in this instance.
I'm not talking about the product part of MLM, but the system where the last one sucks. That's why I've written that
Also, I'm not saying that referral systems are evil, but it must be well thought or Steem will be another item in the ad/spam filters with a lot of "get rich quick" ads.
I like the idea @good-karma has written about, some kind of mentoring seems nice. However, users want money without active work. I know about some sites that mentor their acquired users because of life time interests. Rare, but they exist.
Back to the referral system and MLM 'confusion': yes, referred users wouldn't buy anything, still they lose money on long term when they sign up trough an affiliate vs normal accounts. It could only work if making a new account would be unavailable by the normal, non-referred way, so there would be a referrer in any case.
If there would be referred and normal accounts, I'd say "please, don't be stupid, never ever use Steem affiliate links, use the original registration form (make a new account if necessary)."
I think, you are confusing referrals with MLM...referrals doesn't cost anything from user and only person who joins through referrals would share very small percentage of future earnings, which they don't even have to see. Also people who referred them have incentive to support them by voting, because it will, not only gives them pleasure to do so (because they are friends, family) but they also receive small extra reward. Just like curation, you like the content you vote and you also get small reward.