Business Ventures and Dreams
published: Fri, 20-Feb-2004 | updated: Thu, 27-Oct-2005
Sometimes, I'm a dork.
Seriously. Every now and again, I surprise myself with my own naïveté.
So, last month I sold my other car. My next door neighbor congratulated me on even trying ("we always take ours to the dealer and they buy it; at a discount, sure, but it avoids the hassle"), and then recounted the story of the last time her husband had tried to sell a car privately. He had one phone call, and the caller wanted to come out and see the car. They get in the car for a test-drive and within five minutes the guy reveals that he's not really interested in the car at all but in recruiting my neighbor into Amway. Apparently, this is one way this guy recruited his downline, by responding to people's car ads but in reality wanting to make the Amway pitch. Once he received a negative response, he informed my neighbor that he had several other cars to 'see' that day and cut the test-drive short. Ha, ha, I laughed.
Anyway, last week, I fell into talking to this guy at the Y, let's call him Martin. He commented on my jacket that had the old Casino Data Systems logo on it. I explained that CDS were no more, but that I used to work for the company that bought them (or merged with them, or whatever). Turned out that Martin was a software developer as well, used to work for MCI in town, but now owned his own independent business that dealt in "Private Franchising." We exchanged cards and I thought no more of it.
He phoned me a couple of days ago, and said that he might have some business for me. Since I'd been pitching the "I'm now contracting" line, I assumed that he might have some kind of contract or consulting opportunity. We arranged to meet at the Starbucks near where I live. I arrived early and got myself a hot Venti Passion tea and read AvantGo on my Clié until he arrived. The snow swirled outside.
Well, as soon as Martin pulled out the nice multicolored printed four- page form from his briefcase, I knew something was up. He put a red pen down by the form. On the front page was some drivel about removing retail middlemen in the chain from manufacturer to consumer. Bells started ringing ever so faintly in my mind. He was spouting about IBM, about e-commerce, about how the retail businesses make profit, yadda, yadda, yadda. He then said that he was affiliated with a new kind of e-commerce company, and asked me to write it down on the form. Those damn bells were now deafening. I picked up the red pen and wrote down what he spelt: Q-U-I-X-T-A-R.
Bugger it. I'd been had. Quixtar is Amway in web-friendly clothes. I said no way am I interested in any multi-level marketing (MLM) scheme. He was insistent, I was adamant. Of course, it had been a long while since I'd looked up what Amway (sorry Quixtar) was all about, just that they operated on the legal side of a very fine line from a pyramid or Ponzi scheme.
Anyway, he finally understood that I wasn't budging from by viewpoint and so we parted. He took his form away with him, together with his red pen: we'd never got beyond page 1. I took my half-full Starbucks cup home and sat down at my laptop on the Internet, determined to rediscover what I'd previously learnt about MLMs and Amway/Quixtar (AmQuix) in particular.
And my friends, in my opinion it's as awful as I vaguely remembered in Starbucks. Take a look at the Skeptics Dictionary for a start. A little more digging brought up this guy's brush with Amway. And then I found this site that performed a complete business analysis to show that being on the low rungs of AnQuix affiliation is a loss-making proposition for the vast majority of IBOs (Independent Business Owners). (For example, from Quixtar's own reports we can work out that IBOs make on average about $115 per month, before expenses.) This site also had a page on Amway/Quixtar business myths.
(Quick note: IBOs are the people who try and sell you stuff. Since AnQuix doesn't want to employ them, instead they form their own little independent businesses, working in theory from 8 to 12 hours a week. Of course, the way they make money is to (1) recruit other people under them to form their own IBOs since they then get a cut of their action, and (2) to sell these new recruits motivational tapes and materials on why AnQuix is going to make them rich, and how to run their own businesses. Oh, and, of course, (2) is entirely optional, but it has been shown that the only way to make money in AnQuix is through operating this "tools business" as it's called. Selling stuff like detergents and cleaners doesn't make you anything really.)
Another great site was this one: Amway/Alticor/Quixtar Sucks!.
I then went to Quixtar's site and did some comparison shopping. They had a no-name desktop system on sale for $1299. I was able to get a cheaper equivalent system from Dell, but one that also included a larger hard drive, a separate DVD drive (the Quixtar one didn't mention anything about DVD) and Microsoft Office Basic Edition instead of Open Office. I didn't try any more comparison shopping, it was pointless: why bother with a no-name, when I could get a better-appointed Dell for the same price?
In summary, what did I relearn? For me, the basic business model is broken. You only achieve riches if you have a very large downline (that is, you have recruited a number of other people into the Amway dream, who have also recruited a similar number each, and so on. The more stuff that flows through you to your downline the more you make (and of course the more your upline makes as well). Unfortunately, like any pyramid, this is self-defeating since there's just not enough new recruits to go round. If you're high up on the pyramid, then groovy, you can just sit back and relax if you want. If you're low on the pyramid, then your life becomes just a daily grind of trying to persuade people that this scheme works, that they should persuade their relatives and friends to buy stuff from them, and maybe join so that they too can try and persuade their relatives and friends to do likewise. In essence, you view everyone you meet as prospects. For if you don't, you lose.
And, in truth, the way the people high up in the pyramid make their money (apart from the upflow of commissions on commissions) is by marketing and selling motivational tapes and materials and seminars to their downline. Not to the general public, mind, but to the people they've recruited and to the people they've recruited and so on. The pyramid feeds on itself.
For me, this research just re-emphasized how ugly the entire scheme appears to me. I feel sorry for Martin, having failed with me, he has to keep on trying to recruit, to get enough people to move himself up the pyramid, being pressured to do so by his upline, having to rack up the 'invisible' expenses (like the mileage on his car to go to hopeless recruiting meetings like mine). Brrr. Not for me. In fact, I had this peculiar 'unclean' feeling the rest of the evening.