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People in Glass Houses

I came across an interesting blog post today by industry critic Robert FitzPatrick. On his blog he recounts the story of Lasdwun N. Luzes – a fanciful economist who is described as, among other things, “a lobbyist for the Direct Selling Association, a fierce critic of consumer protection and a fervent anti-regulation spokesman.” The fact that no such person is a lobbyist for DSA is only the first indication that the entire scenario is a carefully-crafted farce. It turns out this sham character dates back to a 2000 April Fool’s hoax Mr. FitzPatrick engaged in for a publication related to the printing industry. What I find most telling about this particular literary expedition by Mr. FitzPatrick is what it reveals about his position on ethics. In short, if you don’t have facts to support your theories – make them up! Oh, and don’t forget to present the fictitious ramblings without noting that they are satire – that way you’ll fool a lot of people into believing what you have said is true, but if anyone ever calls you on it, you can claim it was all a joke. Nice.

Ironically, it is exactly this kind of deceptive behavior Mr. FitzPatrick accuses direct sellers of engaging in.

Anyway, in the interest of setting the record straight, I’d like to propose a more realistic alternative – one that’s actually true. Meet Bjorn Boss. Bjorn works for a small consulting firm in Anytown, USA. Bjorn is also an independent seller for a direct selling company. He works about 10 hours per week on his direct selling business and makes about $200 per month. It’s not a lot, but it helps pay the bills each month. He joined the company about two years ago because he wanted to buy products he was already using at a discount. After awhile, others found out he was selling the products and wanted to buy them too – thus his business began to grow. Maybe someday he’ll build the business into a full-time endeavor, but for now, he’s enjoying the extra income and the flexibility to decide when, where and how he runs his direct selling business.

The defining difference between Lasdwun and Bjorn Boss is that Bjorn actually exists – in the form of millions of Americans who are direct sellers. Some get involved for supplemental income, some build a business, and some sign up as a seller because they want to buy products they already use at a discount. There’s no cookie cutter description for all the Bjorns out there. That’s one of the greatest attributes of direct selling – it’s completely customizable to each person’s unique goals.

Critics like Mr. FitzPatrick will try to lump all direct sellers into one big pot and suggest that no one succeeds because only a small percentage make a full-time income. Not only does that completely misrepresent the reality of direct selling, but it disrespects to the millions of people who rely on their modest direct selling income to pay the bills each month. I’d like to see Mr. FitzPatrick look those people in the eye and tell them they aren’t successful. It might give him a whole new perspective on what “success” means – and for most, that’s not a 6-figure income.

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7 Responses to “People in Glass Houses”

  1. Len Clements Says:

    Hello Amy,

    Great blog. And yes, Robert FitzPatrick and his sidekick Jon Taylor have been distorting and “making up” facts for years. In fact, Lasdwun N. Luzes appears to be a composite of several actual people, including myself (who first referred to him and Taylor as “anti-MLM zealots” – see link below), and others who’ve never existed at all.

    Here is a comprehensive exposé of several anti-MLM zealots, including FitzPatrick:

    http://www.marketwaveinc.com/articles.asp

    Keep up the great work.

    Len Clements
    Founder & CEO
    MarketWave, Inc.

  2. quixtarisacult Says:

    Amy,

    Obviously you and Robert are on opposite ends of the spectrum. I notice that you don’t make any exorbitant income claims like many of the individual recruiters are known do (against DSA policy) to make their business more inviting. I suppose that if a person is very careful to not get intimately involved in MLM ‘systems’ they ‘might’ be able to make a few dollars but there will be expenses involved in selling.

    By your scenario, a person works 10 hours a week which ends up being about 40 hours a month to squeak out a $200 profit. This works out to exactly $5 per hour. Would this (supposed) profit include any of the expenses involved in producing this profit? Just an estimate, a person would have to sell around $1,000 of product (give or take) to produce the $200 and after any related expenses are deducted, most people would consider their time more valuable than that. Of course yours is fuzzy math and therefore mine must be just as fuzzy.

    The problem I have with many of the MLMs (as you know Amy) is the emphasis placed on recruitment of a never ending number of new ‘distributors’ who are encouraged to be a consumer of their own wares. To the MLM companies, these distributor are viewed more as ‘customers’ rather than ‘distributors’ (a deceptive term when most of the distribution they do is to themselves).

    So, these folk get a discount on the products or services. I’ve noticed that many times the wholesale MLM price for items ends up being more like the retail price. Most of the time common items of similar quality can be had at a local brick and mortar retailer at a significant savings.

    Mr. Fitzpatrick’s blog post may be farcical in nature, but so is yours (of course you intended it to be). To believe you, the vast amount of people involved in MLM businesses are actually making money, when most probably are not. Consuming your own goods and looking at a relatively small commission check as profit is to invert reality and pull a con job on oneself. Note, that any commission check serves to merely offset the cost of the products, and then the IRS views the commission check as taxable income.

    Anyone considering involvement in a MLM or direct selling business should take significant time to investigate all the pros and cons like any real business man or woman considering a regular business offer. Folks many times only consider the information provided by the recruiter, which is only half of the story. Listening to what ex-distributors say may give one a more balanced view of the offer.

  3. Len Clements Says:

    quixtarisacult –

    First, the vast majority of MLM companies and leaders within those companies offer their tools and training at, below, or often times at no cost (and that’s among the minority of companies that even allow their leaders to produce their own tools). Making any significant income from the “tapes & tools” business is an aberration virtually exclusive to Amway.

    Furthermore, the math is only fuzzy on your end. You asked: “Would this (supposed) profit include any of the expenses involved in producing this profit?” Well, if it didn’t, then it wouldn’t be a “profit” (this term usually represents gross income less expenses).

    You further state: “…a person would have to sell around $1,000 of product (give or take) to produce the $200…”. It’s amusing how you, like FitzPatrick, attempt to debunk the multilevel marketing concept by only considering retail profits, and omitting entirely from consideration the ability to earn multilevel overrides. Couldn’t some, most or even all of this $200 profit come from sales commissions?

    You go on to say: “This works out to exactly $5 per hour… most people would consider their time more valuable than that.” What you have failed to factor into the equation is that, unlike conventional businesses, the expenses to produce the $200 profit in Amy’s example are not required to maintain it (other than perhaps her personal qualifying purchases, which are likely for her and her family’s personal use). A better example here might be a recent wrongful termination case where I testified as an expert witness. In this case the distributor was earning $4,000 per month gross, but also had about $4,000 in expenses. But besides a $100 monthly product order for her and her customers, the other $3,900 was being spent in an effort to build her organization larger, not to maintain the one she already had. That is, the $3,900 in monthly expenses could cease, and the $4,000 income would continue (which the jury apparently got – the distributor, with a monthly net profit of essentially ZERO, was awarded $650,000).

    It is extremely unlikely that the 40 hours being spent each month by the person in Amy’s example is doing this to only maintain her $200 profit, and far more likely that it is being applied to increasing profits – and this $200 profit could very well still be earned even if she were to take the entire month off.

    Len Clements

  4. ibofightback Says:

    Great comments Len, and your anti-mlm zealots articles are a classic expose I link to often (p.s. some links between pages on your new site would be helpful!)

    However, both on your site and here you’ve tended to repeat the myth that profit from training is an endemic issue within Amway. While some groups and some individuals associated with Amway have had serious issues in this area, it is by no means as widespread as many believe. Indeed virtually every lawsuit and every internet “horror story” on this topic can be sourced to just one organisation and it’s off-shoots. While a large and successful group, contrary to many reports this organisation has never been a majority of the Amway business, nor close to it – they’ve just seemed that way as a result of the “press” they’ve received over they years.

    /ibofb

  5. Amy Robinson Says:

    While I think the discussion of income and its sources is an important one, let’s try to keep the comments non-company specific. I don’t want to cut the discussion off by not being able to approve posts.

  6. Trey Campbell Says:

    Just an observation: much critic focus is on the side of profits.

    Consider the intangibles for a moment of someone running their own business via the direct selling business model. Many participate as a social endeavor – to get to know more people in their community, to have an excuse to get out of the house, to travel, to have a sense of control in their lives they may not find in a “9 to 5 job…”. These types of outlets and opportunities are relished by the people who participate in direct selling for those intangible reasons. Bonus – they get a product they use at wholesale and make money from the sales to others who use the products.

    Selling has other intangible dimensions to it that are usually not thought about out loud enough. Realize that sales skills are translatable to any career in any given industry. It’s also something that will survive rough economies. Sales is a part of everyday business transactions – direct, retail, or other.

    You also have the skill set you can come away with by surrounding oneself with positive people who believe in you and are encouraging. Skills such as independence, attitude, goal-setting, self-motivation, schedule and communication are very desirable traits in our society and something this business model promotes.

    While the concept may be wasted on the critics who seek out attention of audiences who, like them have a lack of understanding for what may be the most basic of business principles, it is not wasted on the millions of Americans who see the “big picture” and get into direct sales for reasons in addition to that of money.

    Yeah, there’s lots of broken glass from all the flinging rocks, but at the heart of the matter – direct selling is an individual choice (and, yes, I agree research should be done on the front end and all pros and cons weighed to make an educated decision if it is right for the individual). Just like other business ventures, you get out of it what you put into it and you take a calculated risk. For some people that works for them, for others it may not. But isn’t that part of the American dream? Many Americans desire the additional income in order to build their “glass house” to fulfill their own dream.

  7. Party Plan Pat Says:

    I loved this post. I felt like I was in a heated game of mad gab, trying to figure out the meaning of that which is already on the tip of my tongue.

    Yes there is a general misconception about the direct selling industry, both on the part of the opponents and proponents.

    But hey my money is with Jim Cramer, you the the loud Mad Money guy, direct sales biz opps are here to stay and more importantly 15 million people cannot be so totally wrong.

    BTW, incidentally the richest man in the world, Warren Buffet owns 3 Direct Selling Companies and is quoted as saying that it was the best decision he ever made so…

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