The Crack Binness vs. The Amway Bizness & The Delusion of Free Enterprise

So… As I was sharing….continuing from my last post
The final meeting was short and not sweet.
Heather’s mentor (I’ll call her Griselda) wanted to know what I thought of it all. I said quite frankly that I did not see a business plan in their “bizness” plan…. Apparently, I was wrong. Of course it was a solid plan; I just had to see the overall vision of the Big Bizness! Griselda knew many people who had retired by 35 as millionaires; this was for a greater good too, to help other young women progress too. She was a charismatic young woman, warm and gentle…not pushy. She sounded sincere, even believed what she was selling. As she spoke, she mentioned often that it was not her job to convince me, the bizness was very simple. There was no need to complicate it with statistics, research or numbers. I simply had to consume $300/m; sell $150/m. I’d earn 35% in savings off personal use and 35% gross margins off sales. I just had to be open to it; see how I might fit in the ultimate goals.

I just do not see how you can call something a business plan without any numbers…

So, I asked for numbers; what would my overhead be?
$49.95/m – Premier membership to get discounts to books, tax info, website access, training, calendar
$5.58/m – Amway fees (paid annually as a lump sum)
$36.95/m – Communicate fees (Communicate is the mandatory Amway audio journal to share your deepest darkest secrets with all the Amway crew)
$25/m – Digital delivery and unlimited DVDs (because anyone still plays DVDs in the year 2015???)
$397.50/m – Inventory costs (with the intention of consuming $300/m; this estimated monthly consumption increases up to $600/ month by the end of the first year for no apparent reason, seems Amway just decided you would need to consume two times more of their “awesome” products per month within the year)

Undisclosed by Griselda but gathered from a friend who was actually suckered into this mess.
~$300 – Upfront sign up fees
$30/m – Book purchases (part of the bizness contract is that you must always have an Amway recommended book on the go – I wish I had that deal to write books with a guaranteed 8 mill in sales it appears that privilege is only for Diamond bizness owners or those higher at the top of the pyramid)
$25/m – Conference  costs (paid as a one time expense ~ $300/ annum initially; this cost significantly increases as you rise up the Pyramid).
??? Unknown costs to purchase recruitment kits
??? Unknown costs Travel, gas & mileage for various meetings
??? Unknown costs for shipping, damages, refunds


Estimated monthly financial cost: $594.98
Projected monthly sales (without any proper market analysis/ p&l disclosure): $150
Performance monthly Bonus (based on $150/m sales): $13.50
Projected monthly Net Margin (per my calculations from their brochure):-$431.48


 

Yes. A monthly loss of -$431.48 (even when I accounted for my current monthly expenses I’d lose – $248.28/m)… And no Break even analysis anywhere in all the DVDs, bizness books, and brochures, just a faithful dream to multiply your efforts at an exponential rate by the base of 18. I deduced a formula from statements and the beautifully illustrated chart bellow, by the second year: Recruits = 18+182; by the third year: 18+182+(182+183); by the fourth year: Recruits equal about 15% of the number of people living in Edmonton and by the seventh year, the plan, by my calculations, involves the potential to have recruited more people than there are living on the planet > 7 billion people….. hmmm

There might be a little flaw in the “plan”.

20150515_193654

Business Fundamentals Which I think Are Fairly Obvious … When One is Not Delusional

1. Big savings sale is really an oxymoron…

If you are consuming your purchase; you are not saving. The two things are mutually exclusive. Yes. All those TV commercials that claim you can save more by buying more lied to you. You save more when you do not buy more. Get it? When you buy what you need at the cheapest price you are being smart and spending less, but you are spending nonetheless. You are not making a profit by buying at a discount. Seems like stating the obvious right?

It is the best plotted racket I have ever seen! These people actually convinced over 3.3 million “independent” bizness owners in 100 countries (or up to 8 million distributors depending on which source you read) to “earn” a living by buying consumer goods for consumption. I think a word should be created:

Amway
verb
To determinedly con people in the most spectacular multi level fashion imaginable.

  • as in: Griselda amwayed Heather till the poor girl literally had thousands in noncash purchase savings and hundreds of thousands in consumed products.
  • or as my Naija people will say: Ma Guy! That Griselda amwayed that Heather maga die!

2. 99% DISCOUNT off of $1000 is still more expensive than 0% DISCOUNT off of $1

Amway products are seriously expensive. According to their brochures, you could spend anywhere between $200/m to $329/m on just facial products. Mint tells me that I spend only $8/ month on my face (cleanser, toner, night cream and lotion purchased in bulk every 3 – 6 months).

20150515_193953

 

3. You never get high on your own supply!

It is not a sustainable or profitable situation when you have to consume your inventory. This seems very obvious; even crack dealers know this. Yet…

In this bizness model, you are not only expected to consume $300/m initially, within 12 months you are also expected to increase to a monthly personal consumption of $600. I currently spend $183/m on consumables…

Griselda informed me that all business owners need to support their own business by buying more from themselves; you “earn” 35% in savings and help everyone in your network…Sigh. 3.3 million people bought this line? Really? Imagine if each Starbucks owner drank 7 out of every 10 coffees sold to support their business as well as everyone in their corporate office.

4. Time is money

8 – 15 hours/ week recruiting people
5 hours/ 2 weeks meeting with new recruits and the team
30 mins/ d listening to Communicate and leaving audio journals about your personal life for “mentors”
2 hours/d reading lots of feel good bizness propaganda >>
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some of these powerful books even had highly edjumacated PhD Level graphs like               this one (real picture, from real book) >>

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 Working 32 hours per week only to lose -$431.48 per month in the  quest to gain freedom from your oppressive time  consuming job is probably not the most PhD-  like decision one can make.

 

5. In order to have a market, one must have buyers who make purchases from sellers … for that to happen, one needs market share

…You know that feeling that there is a Starbucks everywhere? Well, we have 72 in Edmonton, 65 Shoppers Drug Mart locations, 5 Walmart locations …. 4,000 Amway distributors in Edmonton. Imagine 4000 Walmart locations in Edmonton or 4000 Shoppers Drug Mart locations or 50 times more Starbucks locations. Who is buying if almost everyone is selling???

6. The *Oga at the Top makes the most money; so it makes sense to choose the path of least resistance to the top …

To illustrate this point I thought I’d compare the structure of a Crack Dealing Organization (Numbers obtained from Freakonomics) with a typical Corporate retail structure (Salaries obtained from prospectuses and shareholder meeting minutes) with the Amway-not-sure-why-this-is-a-legal-thing-Pyramid (salaries gleaned from the fine print of the Amway Bizness Plan Brochure). The irony is that Griselda, Heather and Bill truly believe they’ve escaped corporate structure for freedom & financial independence to earn those dolla dolla bills y’all…

Crack Binness
Crack Binness

 

Amway Bizness
pyramid

The odds of getting to the top of this structure (or climbing 6 levels) — 0.00000067 if you do not die or get incarcerated (hopefully someone finally wins a court case against this bunch, because it is crazy that this is legal); where you will proceed to make <0.36% of the organization’s income.

Deduced from the fine print of the brochures:  5 in 1000 distributors make $55,000 a year; 1 in 10000 make $111,000 a year; 6 in 100000 make up to $2,657,000 a year….Not exactly a sure bet!

So, if one was lucky enough not to get shot or incarcerated, one has a significantly (>30000 times) better chance at financial freedom dealing crack than by joining Amway.

DISCLAIMER: I do not in anyway endorse or support dealing crack! Just pointing out how ludicrously bad an idea this Amway madness is.

Corporate Business
Corporate Business

I met with the Amway bizness women … later than initially planned, because at some point before hand, I decided to launch a store for my crafts (Side note: Please visit the Crafters Store at 4805 50 Ave, Leduc for some beautiful things from me!)… an actual business! Needless to say, to the obvious frustration of Heather, I did not buy into this bizness. She made sure I was aware of how risky my current career choices were, and how I was not actively mentoring young women or leading a big network as I might want. Griselda made sure I was aware that not everyone was rich enough to invest and the Amway way was a tried and true model to escape quickly into financial freedom.

Well I was definitely not rich enough to invest…in fact if anyone had odds stacked against them it was me: 15 year old, traveler – now immigrant, living completely independent of family by 19, with that beautiful accent (perceived as a language barrier by most), ignorant of politics, biases, stereotypes & systems, without savings, unable to work off campus & denied access to loans (as an international student), required to pay more on down payments (on work permit status)… and more obstacles than I care to think of. If I could save enough to invest and figure out the system without manipulating poor people into a massively exploitative bizness, then in my opinion Griselda, Heather and Bill could to…It has absolutely nothing to do with having a large enough amount of money to start off.

“Nothing in all the world is more dangerous than sincere ignorance and conscientious stupidity.” Martin Luther King Junior.

 

*Oga – A Yoruba word for Boss.

My Amway Story

My Induction … Almost

A few months ago I was recruited…almost into Amway or World Wide Dream builders or an Independent Business or some odd amalgamation of the three. See, it is never really clear to you what you are getting in until you are full on in it with this bunch. They are not very upfront, in fact they are vague on purpose and in a way that feels insincere and deceptive. I had never heard of them or their business model before hand. You can never quite put a finger on what is wrong with it all and who “they” are, and this is why I was intrigued by it all.

 I met Heather (I’ll call her that for the purposes of this post) at another friend’s place; she seemed genuinely interested in my career as an Associate; I love making new connections, so we exchanged numbers and made plans to meet up for coffee some time. She had a mentoring business for women. Curiosity piqued, I eagerly met with her to learn about how she mentored young women in business. The first meeting was all about me, my career, my achievements, current struggles … we just talked and laughed and never got to talk about her mentorship. So of course, we had to meet again. The next meeting 20 days later when my busy schedule allowed, she talked about how excited she was about getting to listen to John Maxwell for a few dollars, a luxury that would have cost thousands of dollars if not for her women mentoring female leaders business. All she shared was how she had learned about her opportunity from another young lady who was financially independent and did not have to work for anyone anymore; how Heather had gone through a qualification process with this incredibly smart young lady.

She completely refused to talk about specifics about her business, but she gave me a book. I love reading, and I generally never turn down a book. So, still intrigued by this mysterious business she was in, I read the book: Robert Kiyosaki’s “Business of the 21st Century”.

The book, random fragments of our conversations…mulled over… I thought… Aha – I figured it out! – It must be a network of mentors charging and mentoring people in some odd pyramid structure! I’d busted Heather; figured it out! I thought.

So, 40 days after our first meeting after a false sense of friendship or intimacy had set in from truly sharing my thoughts, and she sharing vaguely about her business, we met again. I thought the Kiyosaki book was very biased, very heavy on sensationalizing entrepreneurship and very light on actual business knowledge, especially for a book that claimed to be a business book. I found relevant, the quadrant described in the book. I thought the whole book should have just been a blog post/ essay about the quadrant.

rich-dad-cashflow-quadrant2

 

I definitely did not want anything to do with something that smelt like network marketing; I do not need to sell my friends products to survive. I already pester them enough to support my crazy charitable ideas. I had heard all sorts of horror stories of people deceiving unknowing people into these network schemes at significant expense to desperately poor people who end up forming the bottom rung of these schemes. I told Heather that.

She nodded. “mm hmmm”, she said. Agreed with me, mentioned my desire for passive income which I had mentioned earlier on, found common ground to continue her spiel on financial and time freedom. Wait a minute! I recognized what she was doing! In counselling my tobacco patients for behavioral change, I do this: Empathetic listening, providing affirmations, reflective listening, rolling with resistance, developing discrepancy … this woman was motivational interviewing me! (I thought to myself) I really had to know what this big business was now. She proceeded to draw charts of her phenomenal growth from $2000 per year to $75,000 in three years, waffled on about having a distribution centre shipping products directly to her, cutting out “the middle man” thus saving a tonne of money on all these items she usually consumes anyway.

Eureka! I had figured it out – It was a bulk buying group in which you got discounts for purchases on all items from Apple to Michael Kors (who were apparently partners) and got marketing rebates when you got your friends interested in purchasing in bulk with you with a minimum purchase of $2000 per year!

I could live with that.

I agreed to another meeting about 2 months from our first meeting. This was going to be with her team of women building women leaders. We carpooled with another lady who she had met at a local cafe.  My first thought upon arrival was, It was not a women’s leadership meeting, by any stretch of the imagination as there were several men there. My next was, there was no food and it was bloody cold. I did get some “perfect” water. Who invites someone out at 7 pm without feeding them in civilized society? I was hungry and tired, after having pulled a 12 hour shift.

It cost me 5 hours to get into the details of their “business” plan which was more of a weird marketing plan. They had no actual business plan – No mention of initial investment, no mention of feasibility, no exit plan, no SWOT analysis, no porter five forces analysis… It was exhausting mind numbing ramblings from some guy (I’ll call him Bill) who was well off in this business now and who started out with $75,000 consumer debt & school loans, but was now apparently balling out of control in wealth. He started off by letting us newbies know, he absolutely did not need us, because new recruits tend to come in skeptical about them, and he wanted us to know he was in fact more skeptical of us. We were the ones with a hidden agenda apparently, and for all he cared we could just walk out of the room right away, because a lot of recruits did not have what it took to make it in this business …It was some odd form of reverse psychology with the intention of earning implicit trust from some insecure person/ someone who for whatever reason might have something to prove… Bill could never retire in his early 30s just doing his job; why? his parents couldn’t retire at 65 and still owed money on their mortgage; he knew several people in this situation too, despite making a tonne of money at the oil rig where he had worked as a new grad a few years ago. In the conventional employee situation, he spent money as fast as he made it, so did all the others who had picked up the oil rig job decades ago as a temporary solution to get out of debt. Bill was doing so well now at 36, he’d soon quit his day job which he hated so much. His job was horrid; slavery in fact. The conventional ways of making money were just totally broken, and he just got in more debt regardless of how much he worked. Bill had to get permission as a grown ass man to take a vacation – that was cruel. (I just thought how ridiculously entitled he was… as I considered all my intelligent international graduate friends who were currently being denied any chance of jobs).

At the end of the night, I finally figured it out: I learned that you had to buy $300 a month in products from Amway you already consume (even the “brokest” students apparently consume $400/ month in consumer products according to Bill), through the IBM & Microsoft partnership developed website, sell at least $150 per month to friends and recruit about 18 people in the first year to get to $55,000 at the end of the first year; attend a whole bunch of “Leadership meetings” supported by World Wide Dream Builders (which as Bill emphatically pointed out were the only way to learn how to get financially free; it was crazy to prioritize anything above learning from these geniuses how to gain your financial freedom, they were only after helping you grow) own your business (this was very important to Bill, it was clearly your independent business not an Amway business!), buy from your own business (it would be crazy not to; every business owner supports their own business) — and from there on the sky is the limit! 

Oh, and if you really want to make it, you should not read the blogs, ignore all warnings from family, Bill had done that and now he was thankful he did.

Because I’m a sucker for punishment, and I really can not help myself when I get curious, I did in fact analyze this “Bizness”, and decided that I had a better stab at financial freedom by dealing crack or buying stock in Alticor/ Amway/ World Wide Dream Builders than joining. I really wish they were publicly traded. I hope they’d appreciate my humor and charts comparing their corporate structure to that of a Crack Franchise. 🙂  I have another meeting with Heather and her mentor this week, I intend to share my business analysis with them and on this blog later this week.

 

Meanwhile, have you had an Amway- Word wide Dream builders – Independent Business Owner experience?

Please share!