Tuesday, February 22, 2011

But it's not a pyramid scheme! You can make more than your upline!

Ah, that clever retort.  If you've been approached by an Amway "IBO", or as I will affectionately refer to them "Ambots", you've doubtless been wary when you found out you'd be in the business of prospecting recruits for your income.  You'd probably encountered this sort of thing before, and probably in a negative light.  Certainly, in that moment, you asked this common-sensical question--"but isn't this a pyramid scheme?"  And certainly, your question was answered immediately by one of two boilerplate answers spoon-fed to him by his glib upline.  The first I'll address today, which is "Oh gosh no!  Why, you can make more money than your upline, so it can't be a pyramid scheme!"  The implication here is that in any true pyramid scheme it is impossible to make more money than the person who solicited you.  Like most claims Ambots make, this one is an outright lie.

While it is true that in any pyramid scheme, those at the top stand to profit more, it is not a foregone conclusion that a sponsor makes more than his sponsee.  In fact, as long as you sponsor more people than your sponsor, it is possible for you to earn more than he does in a pyramid scheme.  To show that this is true, let's consider the oldest pyramid scheme, the classic chain letter.  In this scheme, an individual will send out a list to 5 people.  The list will have 5 names on it (his own name and 4 aliases).  The instructions will inform the recipient to send 5 dollars to each of the 5 names on the list, add his name to the bottom of the list, and scratch the top name from the list.  He is then to send the new list to 5 people and ask them to do the same.  This is what such a pyramid will look like after 2 generations of sponsorship:


So at the first generation, there would be 5 "recruits", and at the second, 25 "recruits".  If this were propogated for 5 generations, there would be 3125 at the last generation.   At that point, the initial sponsor would have his name drop off the list and have no further payments sent to him for further generations.  For each of the 5 members who enrolls at the 1st generation or later, the maximum he can make is $19500 dollars (-$25 + 5x$5 + 25x$5 + 125x$5 + 625x$5 + 3125x$5).  However, suppose some "lazy" member at the first generation decides to sponsor only 1 person, as in the diagram below.  Here, his one second generation recruit is shown sponsoring a full 5 recruits in the third generation:



So, now for the left-most "lazy" member of the 1st generation, the maximum he can profit is $3880 (-$25 + 1x$5 + 5x$5 + 25x$5 + 125x$5 + 625x$5).  However, his ambitious recruit can earn the full $19500 given that he sponsors 5 subsequent generations.  So, we see, just as in Amway, breadth is more important than depth.  More importantly, we see that this claim, like so many by Amway zealots is just plain false.  In just about any commonly encountered pyramid scheme, it is possible for a recruit to make more than his upline, so long as he sponsors more recruits.  This simple chain-letter example just proves the Ambot claim false. 






20 comments:

  1. Great job! I look forward to reading your blog and your viewpoints!

    ReplyDelete
  2. That was one of the stupidest posts I've ever seen...no wonder jc likes it! LOL

    ReplyDelete
  3. Thanks for your patronage, Joe and Tex!

    ReplyDelete
  4. jc is a whore mongerer: http://texsquixtarblog.blogspot.com/2009/02/things-you-didnt-know-about-joecool18.html

    ReplyDelete
  5. Tex is a racist. Links available upon request.

    ReplyDelete
  6. I thought we were all on the same team, guys, i.e. trying to educate readers about Amway. Tex, I've gathered that you think we're wasting time talking about anything but "the tools", but understand Joe and I probably agree that the tools are the biggest scam associated with Amway. If there are to be legislative changes, that's probably where they'll start, just as they did in the UK. However, there's more wrong with Amway than the tools; e.g. deceitful recruiting practices, near 100% failure rate, overpriced products, cult-like motivational organizations (tool sales aside).

    My motive with this blog is to arm friends, family, and would-be recruits with defenses against the fallacious reasoning of rabid IBO's. Having never been in Amway myself, that is what I can best offer. Joe's experience is different, and his blog is different. You're currently embroiled in a lawsuit over the tools scam, as I understand, and that is what you're passionate about. Different strokes. All valid. That's why there are different blogs.

    Peace.

    ReplyDelete
  7. John, Tex has been banned on my blog and just about every other Amway related blog or forum. He's been banned because he wants blog owners to steer the discussion to his interests. tex also continues to post his made up stories about who he thinks I am and other defamatory posts about me. I find it odd when Tex's real identity is well known AKA Scott E. Johnson from Plano Texas.

    ReplyDelete
  8. John,

    Here's an analogy: You are a doctor, and a patient comes in with a compound fracture in his arm, i.e., the bone is sticking out of the skin. Then, you notice he also has a hang nail on one of his fingernails. What do you do?

    The UK did NOT use legislative changes, they didn't use the legislature at all, they used the executive and judicial branches. I don't think we need legislative changes in the U.S., we already have RICO fraud laws on the books here.

    ALL of the other problems you listed (deceitful recruiting practices, near 100% failure rate, overpriced products, cult-like motivational organizations) have their roots in the Amway Tool Scam. ALL of these issues will virtually disappear when the Amway Tool Scam is put out of its misery.

    I am in a lawsuit over my First Amendment rights. Amway is claiming it is over a couple of cuss words in emails, I say it because I am educating IBOs about the Amway Tool Scam.

    jc knows why I made those comments to individuals, and it has NOTHING to do with being racist, because there isn't a racist bone in my body.

    If you want to discuss ANYTHING related to these issues, propose a day/time to call this conference call number: 760-569-6000, access code 975016#. I live in the central time zone, so either use that time reference or indicate which time zone you will be calling from.

    There will be no peace until the Amway Tool Scam is shut down.

    ReplyDelete
  9. Tex,
    Funny, I actually am a doctor, but regardless, I get your analogy. Understand, though, my mission here is to educate and debunk moronic claims. I care little about 'fixing' Amway so that it works correctly. I'm not sure it can work correctly. The FTC had it right when they said MLM's present an "intolerable potential to deceive". Amway is just too easily corruptible. See, once a population is saturated, it takes deception to stay even with attrition rates. As long as Amway is preaching personal consumption, it cannot be profitable venture for the overwhelming majority of distributors, and the only way to keep them in is to portray unrealistic success at the higher pin levels. Whether that is genuine wealth from tool sales or phony wealth from renting planes, yachts to shoot staged lifestyle videos, it has to be done to keep the carrot dangling.

    BTW, I also live less than 50 miles from you ;)

    ReplyDelete
  10. John,

    jc is a proven liar, because he originally denied being the jc on the World Sex Guide site, then had to admit it was him when it was pointed out the same email was used for at least 2 sites he posts on. If you want to verify this, go to ibofb's site and register, I think you can see the details of jc lying there....if you want. LOL

    My analogy was meant to educate and debunk moronic claims, and that is my mission as well.

    Amway works correctly in other countries, there is no reason why it can't here. The FTC was right, but they are not doing their job.

    Amway without the tool scam is far from being saturated. Any business, including Amway, is easily corruptible, and Amway is also easily fixed. Amway no longer preaches personal consumption (but many of the upline still do), and Amway has put a great deal of effort into emphasizing retailing. Unfortunately, the tool scam sweeps in and takes all of the retail volume, and then some, making the increased retailing effort a step BACKWARDS. The Amway business has never been profitable for the overwhelming majority of distributors, even before the Amway Tool Scam. I doubt any MLM is, either. But that isn't the question, because the question is the unethical, immoral, and illegal Amway Tool Scam. There are other successful MLMs that do just fine without the extraordinary wealth or a tool scam. Even Amway does well in other countries without these factors. If you want to visit some time instead of talking on the phone, I'm okay with that as well.

    ReplyDelete
  11. Truce guys? You're both welcome here, regardless of your ideologies or proclivities. Try to keep comments to the actual subject of the posts.

    ReplyDelete
  12. I agree not to fire unless fired upon.

    Regarding your post, just as it's true the ability to make more than your upline doesn't prove Amway isn't an illegal pyramid, it's also true the ability to make more than your upline doesn't prove Amway IS an illegal pyramid scheme, either.

    There is little difference with a person sponsoring more people and being directly and indirectly responsible for more Amway volume and making more money (i.e., working harder) and a person in virtually any other profession working harder and having more responsibility and making more money. With Amway, you build the organization below you, with most companies, you rise up through the organization towards the top. A very similar outcome.

    The FACT is the FTC ruled the Amway business is a legitimate business model - BUT THEY DIDN'T LOOK AT THE AMWAY TOOL SCAM!!!

    ReplyDelete
  13. "it's also true the ability to make more than your upline doesn't prove Amway IS an illegal pyramid scheme, either."

    That's a very obvious statement. The point of my post was that the Ambot defense is a weak one.

    As for the tool scam, yes, it is an illegal pyramid scheme. As for Amway, the FTC only ruled Amway was legitimate given certain parameters, namely retail sales, which Amway has failed to meet for 30 years.

    ReplyDelete
  14. John,

    You ignored my previous middle paragraph.

    I don't consider the ATS so much an illegal pyramid as it is fraud, and RICO fraud at that. The fraud is that most prospects and IBOs are not aware most of their uplines' lifestyle comes from the ATS, not from Amway profit. Not telling your self described downline "teammates" and "business partners" about this massive material business model aspect is unethical, immoral, and illegal. Increasing retail sales without getting rid of the ATS will only permit the upline LCKs increased access to available cash. This is why I stated only increasing retailing without getting rid of the ATS would be a major step backwards, above.

    ReplyDelete
  15. tex's first post in this thread makes him a liar. He always claims that he only defends himself and doesn't fire the first shot.

    ReplyDelete
  16. While not determinative, not being able to make more than your upline is an indication of an illegal pyramid, just like being able to make more than your upline is an indication (and again, not determinative) the situation is not an illegal pyramid. However, not making more than the "top guy IS an almost universal condition in most legitimate companies, where the CEO makes more than anyone else.

    In other words, you're using this issue for your own twisted purposes just as much as the IBOs are for theirs.

    ReplyDelete
  17. Anon,

    I said the post was stupid. That's an accurate comment on the post, not the person. However, calling me a liar when I've just proven you wrong is firing the first shot, you IDIOT!!! LOL

    ReplyDelete
  18. Oops! I should have closed the parentheses on "top guy" above.

    ReplyDelete