An Economist's Story

Great job on your page!! I was perusing the comments section and someone who addressed you as "Clueless" advised you to "ask any economist" whether MLM (oh, sorry, that's "networking") is the "business of the future". Well, here you have a real, live economist--I have a BA and an MS in economics and do various types of statistical analysis and forecasting in my J.O.B. First my story, then my real-live-economist opinon about "networking"... My wife and I were involved in the Amway business (Britt system) during the first half of 1996. I was affected by the government furlough (I'm a contractor--no pay for them, no pay for us) so I was certainly "looking". I "happened to run into" a guy at the local mall (read: I was "contacted" but didn't know it at the time). This amiable fellow "owned his own business consulting firm". I told him I had a background in economics and was looking seriously for a new opportunity and he took my number. To make a long story short, we saw "the Plan" at a local hotel, scrutinized it pretty intensely, went back for a second look, even did some library research...and WE GOT IN!!! Boy was I excited. Here we were getting in early, saving ourselves from a lifetime of making money for the government and the corporate meanies and getting nowhere. I mean, look...I wasn't getting a paycheck, my wife worked in HR for a local bank that was a prime target to be bought out...these people were right...we NEEDED THE AMWAY BUSINESS!! So I had upline call some of our friends--we are one of the most "successful" couples in our circle of friends (if you believe money defines success, which I don't), so we figured everyone would "get in" if we did. And I kept clipping articles about downsizing and rightsizing and furloughs, and interest rates, and how inflation erodes financial investments, and I bought all of John Sestina's tapes because he's a financial planner and he's a DIAMOND (oooohhh....ahhhhhh) and...and...nobody got in. Huh? Why not? Well, according to upline--"oh, the timing isn't right with him...you're planting seeds; you'll reap a harvest later...they don't see it now, but when they see your success, they'll get in..." Sound familar to anyone? I was just finding my way around the Web at the time and I came across Sidney's page. And I said all the standard knee-jerk, brainwashed stuff that I'm sure your mailbox is full of: "He's just trying to blame others for his failures by stealing people's dreams...he has nothing better to do than sit in front of a computer...if he spent as much time on the system as he does on that page of lies, he'd be a diamond by now..." But even though I stuck to the party line, something deep down knew there was a lot of truth on that page. And as we bought 6 and 7 tapes a week (for the HUGE downline we would soon have because I had over 300 NAMES on my list!!), and reached 1000 PV each of our first 2 months WITHOUT SPONSORING ANYONE (we sold a lot of products to family, bought a ton for ourselves and got double-PV on two water treatment systems)--things began to feel even worse. And worse. I kept reading Sidney's page and seeing more truth. I saw it at our weekly opens and nite owls. I saw it at Britt Spring Leadership--our first and last function. And I watched our savings account dwindle to nothing and our credit card balances balloon...and I saw our behavior reinforced by upline: "...'look at how successful they are', they told other distributors...'they made 1000 PV their first 2 months JUST ON SALES!!'" I knew that this could not last. Unfortunately, my wife was more committed than I was and she did not at first want to see the "negative stuff" I had seen on the Internet. Without going into painful detail, I became clinically depressed and we finally quit. (Interesting aside--my therapist is also a pastor and he had a VERY, VERY low opinion of Amway and the false doctrine of 'prosperity theology' that is so prevalent in the systems.) Unfortunately, our upline was not as nice as yours and I had to ship all our products back to the corporation for refunds. I did eventually receive a check for what I had returned. But for the 150 or so tapes--zilch. We hadn't been in for 6 months, which I thought was the time frame of the Britt system buy-back agreement, but my upline Ruby gleefully informed me that only UNWRAPPED tapes are covered by the buy-back rule. My sponsor had once told me verbatim as I questioned him about tool profits "if you quit, I'll buy all your tapes". He lied. He bought 6 tapes for 4 bucks apiece. Thanks. Boy this business is sure full of integrity, isn't it?! Fortunately, this story has a happy ending. The further away we got from this stupid and amazingly deceitful business, the better our lives became. We reconnected with friends we had effectively "flushed" after they wouldn't get in. We began to study our religion more intently, realizing the many lies taught by [censored]'s organization. My wife's bank was in fact bought out--OH NO, the corporate meanies!! What horrible things happened? Well, the new bank offered her a job, which she bravely turned down because it wasn't in line with her career goals. So she went out and found a great job for a well-respected international company (no, it's not Amway, I said 'well-respected') at a substantial pay increase. As for me, I am now with another government contractor and I'M FREE!! That's right, all of the glassy-eyed rhetoric about negative co-workers, corporate prisons, "freedom trains", and how AMWAY is the ticket out...SAVE IT! I found a much better solution--it's called telecommuting! And I wasn't really even looking for a job at the time, but the Lord works in mysterious ways and I am truly thankful for His blessings. But I did not put a picture of this opportunity on the refrigerator, nor did I "speak it into existence". So here I am, enjoying what I do, working for a visionary, intelligent and courteous boss. My and my wife's needs are met, and it's largely because we had the courage to QUIT AMWAY before it devoured us. Certainly, I will continue to tell everyone who inquires that they should run very quickly in the opposite direction if they are approached by someone looking for a "sharp individual...". Now, back to the original intent of my letter--the "ask any economist" thing about MLM. The reason I was initially excited about this business is because the time-compounding mechanism as it was presented made a great deal of sense to me as a vehicle for generating wealth, and it compared favorably with the "hours for dollars" trade-off as presented. This belief was heavily reinforced. Unfortunately, the hype caused me NOT to look at the other side of the argument. Sure, time-compounding works WHEN PEOPLE ARE WORKING but how can you ensure this? The old maxim, "find a need and fill it" applies here. The systems sprung up in Amway distributor groups (Britt and Yager were the first and largest) because there was a NEED for a mechanism to mitigate the drop-out rate. In order for anyone on top to make any money, there had to be a way to KEEP downlines in the business. By feeding them hype and demonizing the sin of QUITTING (and profiting from it, too--WOW--that's quite entrepreneurial!) more people stay in, making the inflow from products (and tools) more consistent. Hearing John Sestina throw out numbers and figures and analysis and listening to Steve Ridley talk about all of his accomplishments and how Amway was the best thing he'd ever seen sure got me going. Add Paul Zane Pilzer to the list as well--he's a professor at the Wharton School (U Penn) and is the economist people point to as a major source of MLM endorsement..."see, he's a famous economist, and HE says..." However, what really made me see the light, and the idea that MLMers (especially YOUR UPLINES!!) would much rather you NOT consider is THIS--does the exception prove the rule? For example, John Sestina is a financial planner and a diamond and he likes Amway; so does this prove that Amway is a financially sound move for everyone? No--to even scratch the surface of this question, you would need to know how many financial planners think Amway is a horrendous idea. Of course your sponsor won't tell you of any. Neither will Bill Britt. And since they tell you not to listen to "outside negative people", IF you're a "good, little distributor", you'll NEVER get the other side of the story. I have met several people in the financial planning and investment industry who believe that Amway is nothing more than a "legal-by-a-loophole" pyramid scheme, and that the little factoid shared in the Plan that "98 percent of the people who get into the stock market end up losing money" is a bald-faced lie. Same deal with P.Z. Pilzer. Because ONE economist says MLM is great and is the wave of the future, does that make it so? Hardly. I'd venture to say I could find ONE person in any occupation to endorse just about any idea. But that ONE person does not represent consensus. Not even close. MLM is based on "keeping people in". The Washington Post just ran a front-page story the other day about home-based businesses that said of MLM: "the real money is not is sales, but in finding others to do the same thing you do." (It was not written with a negative tone either). So, to evaluate MLM as an industry, you need to carefully examine what the "successful" MLMs do to keep people in. Amway is far-and-away the biggest and they are now in servitude to the Britt and Yager systems. Yes, the corporation is a separate entity and many of the problems arise from the systems of "independent" distributors. But if you cut those two huge systems out, there wouldn't be much left of Amway in the U.S.A.--simple as that. Other "successful" MLMs include: Excel, Equinox, and NuSkin...it's not hard to find people who have had even worse experiences with these than with Amway. The Bill Gouldd guy who founded Equinox sounds like a true whacko. True, there are some small, well-managed companies with which people can be quite successful--the Pampered Chef comes to mind from the article in the Post. And Avon and Tupperware continue to be household names--though, how many people do you know who sell either, and of those people, how many have become "financially independent" and generated "unlimited residual income"? In my real-live-economist opinion, the bottom line is this--MLM has generated small side incomes for many people for a long time and will continue to do so. Recently, people like Kevin Trudeau, Bill Gouldd, Bill Britt, Paul Miller, and the rest of the Amway diamonds have discovered effective ways to "keep people in" and as a result have become lavishly wealthy. Their "success" (and I use that term very loosely) has helped give rise to the the theory that MLM is approaching the "3rd Wave" and that it will take over as a distribution industry standard, causing supermarkets, Wal-Marts, and other superstores to go out of business because they can't compete with the efficiency MLM offers. At least one notable financial planner (Sestina) and at least one notable economist (Pilzer) subscribe wholeheartedly to the this theory. But the mechanism that "keeps people in" is the foundation of the Wave 3 theory--"residual income" is only residual if a lot people below you are still buying a lot of stuff. And from my experience and research, the incomes of a company's "heavy-hitters" are inversely proportional to the ethics they use to keep their downline "in". In other words, the most deceitful and cultish leaders are the best at motivating their downline into a consistent buying frenzy and thus make the most money. The Internet is a dreadful threat to these people. In the past, Sidney Schwartz would just be a number; if he quit, so what, replace him with someone who will follow the system. "It's a numbers game", the uplines teach (Yes, they really do say that about PEOPLE! And the corporations are bad?!) Now, you and Sidney--and all of the folks who have done such a great job setting up pages--can get your messages out to millions of people worldwide, thereby greatly lessing the efficacy of the "heavy-hitters" distributor-retention systems. The easy availability of information counter to the systems' teachings is a HUGE threat, make no mistake about it. One of the things that makes cult techniques effective is isolation, either physical, intellectual, or both (look at the folks in San Diego...) "Listening to negative influences" is really cultspeak for "looking at all the facts to make an informed decision". For these reasons, I do not think that MLM as it is practiced by the large Amway systems has a very bright future at all. And MLM as it is practiced by the more reputable companies simply will not generate the momentum on a grand scale to reshape the entire economy. We have our problems, sure, but America is pretty darn competitive right now; Japan and Europe are struggling mightily. Tough though it's been, the corporate consolidation trend has made for some extremely effective companies that do not now nor will they in the future have anyhing to do with MLM. So keep up the good work, and don't sell your Wal-Mart stock just yet...