Sunken Cost Fallacy?

 One thing that many Amway IBOs likely suffer from is having invested too much into the business to quit. They may have spent months or even years working the system hard and they start to realize that the system isn't working out or that the business is just not producing the results that were advertised. You see obvious problems in the business, but you reach a very tough fork in the road.

To quit would mean failure, as presented by many uplines. To quit is to be broke for life. To give up hope. Quitters are failures and are labeled as losers by the Amway IBOs. What hopes do you have of retirement and walking the beaches once you quit? Are your dreams of success shattered? This is a very difficult decision that must be dealt with by Amway IBOs, or maybe even those considering the business. Often the "sunken cost fallacy" plays a role, where you feel that you've invested too much to just walk away. although in many cases, making a business decision to stop is the only way to stop the financial losses.

I encourage IBOs and/or prospects to completely take the emotion out of this decision. Do not think about dreams, walking the beaches and early retirement. Do not think about what you upline may or may not have promised you. Stop and think only about your Amway business and the results that it has produced or not produced. Has your business been increasing towards your goal of financial independence or are you seeing losses month after month? Do the math. Are you on target to reach your financial goals or are you headed towards bankruptcy? Don't think only about what happens if you quit. Think about what happens if you continue. Are there prospects of making a profit or is that next major function around the corner and likely to put you deeper in the hole?

This post is not about encouraging people to quit or to walk from the business. But certainly, business owners should think like business owners and they should make an honest and realistic assessment about their continued participation, especially if their bottom line is red ink. If you are not making a profit now, what will change next month to make things better? If you repeat what your upline advised. your results are not going to magically get better. Use facts to make an informed decision.

The Warning?

 Having been involved in many Amway discussions for some time now, I recognize the many warning signs of a bad upline or a bad LOS. While not all uplines are the same, I do not believe that any LOS (Line of Sponsorship such as WWDB or BWW) is free of bad teaching, regardless of what you hear. Some of these points are simply clues that you could be in a bad LOS, you still need to think as an independent business owner and watch out for your own best interest because these folks will say they have your best interest at heart, but they really have their own best interest at heart.

When you were prospected or recruited, was your sponsor upfront about the Amway opportunity or were you told about some new e-commerce opportunity or the like? Were you told that selling products was important or were you told that buying from yourself is the way to succeed? Did you know that some uplines make most of their income from selling business support materials and not from Amway? Were you told that functions and other tools were vital to your success? Were you told that the system was "optional, but so is success"?

Were you told that a college education was not important to your success in Amway? Were you told that buying from yourself can result in a profit? Did someone say that the Amway opportunity helps save marriages or makes you a better person? Was the Amway opportunity used to preach religion or politics to you? Did anyone tell you to ignore facts if you have a dream? Were you told to submit to upline? Or were you told to check your ego at the door? Did you get the impression that your upline was a divine being? Did you give the speaker a standing ovation when they entered a meeting or function? Did you ever wonder why?

Were you told that you save money on Amway products only to realize that they are not generally cheaper than other retailers? Were you told that you have joined the best or the fastest growing LOS? Were you shown fancy cars or other luxuries and told that you can also achieve these lifestyles if you follow the system? Did your upline or sponsor tell you and verify how they are performing in the Amway opportunity or were you simply shown a photocopy of some check from an upline? Did you hear that you should always avoid "negative", or that people who are not in Amway are broke or losers?

These are some warning signs that you could be in a questionable LOS. In many cases, an LOS's priority is simply to sell you tools. Tools that are supposed to help you succeed in Amway, but more often than not, they help the person selling the tools to profit, regardless of whether you make a cent in Amway or not. It is important to look at facts, to track your progress and to keep track of expenses. If you are not progressing as the plan was shown, you may want to take a look and make sure that you are not overspending on tools that aren't helping you. Or if you are unable to sponsor downline, you may have to ask if this business is for you.

The business has warning signs. It is up to you to see them or to ignore them.

The Financial Freedom Myth?

 When I was an Amway IBO, I often saw my upline diamond driving around town dressed in a business suit. I used to think why does he keep working if he can walk away and collect residual income? My sponsor told me that the diamond only works because he loves and cares about his downline and wants to help them. So, there are two possible scenarios, the diamond is working to help his downline out of a genuine concern, or possibly he is working because he has to! The only difference now is that the diamond works the night and/or graveyard shift, because many IBOs are building the business after they complete their day jobs. **We should also note that my former upline diamond dropped down to the emerald level around 2005 and has since re-established his diamond level. He also moved from Hawaii (he said he loved the ocean) to Washington State and lives in a middle-class neighborhood.

Now Amway has stated that the average (non Q12) diamond earns about $150k a year. That is a decent income, but after taxes and paying for basic expenses such as medical and dental insurance, the average diamond probably lives a very middle-class lifestyle. Keep in mind that a large portion of a diamond's income comes in the form of an annual bonus, thus a diamond's monthly income may be quite small. Yes, diamonds may have other sources of income such as speaking engagements and income from standing orders and functions. But this income depends on the diamond's continued appearances and efforts. Stop "working" and the income stops also.

So is it likely that a diamond is "free"? I would have to conclude that a diamond is not free and may actually have to spend more time maintaining his group than if the diamond simply had a 9-5 job. For one thing, a diamond needs to maintain a personal group to keep qualifying for bonuses. With a poor retention rate in Amway, I am fairly sure that a diamond spends much time recruiting personally sponsored IBOs to maintain this group. Additionally, a diamond must help his six or more groups of downline platinums to maintain their businesses or face the possibility of falling out of qualification. My former diamond dropped down to the emerald level but has since re-qualified at diamond. A diamond must also dedicate time to reward up and coming movers and shakers, to keep them motivated. I got to spend time with my upline diamond when I was considered a promising up and coming pin.

In order to continue to receive tools income, a diamond must also travel to numerous functions and speaking engagements. Although the tools income allegedly doubles a diamond's income, it also adds a lot of expenses, especially if the diamond and his family travel first class to show off the diamond lifestyle.

After breaking down projected income and considering projected expenses, I can only conclude that a diamond probably lives a middle-class lifestyle and probably works as much as a man with a 9-5 job, except that a diamond works nights and weekends. A good portrait of this is shown in Ruth Carter's book (Amway Motivational Organizations: Behind the Smoke and Mirrors). In the book, the diamond had a net income of over $300,000, but lived in debt, could barely pay his mortgage, and was always on the run from one function to the next. Is that financial freedom?

I believe that diamonds may actually be busier at the diamond level than an average Joe who has a 9-5 J-O-B. The difference is that the diamond works the night shift. Is this the freedom you are seeking?

Diamond Retirees?

 One of the things many Amway IBOs hope for is the dream of receiving residual income from having built a big Amway business, and then "walking away" from the business and retiring young while enjoying a life of luxury. To "prove" that this is possible, some diamonds may show off pictures of cars, mansions, and other luxuries, all allegedly attained by having built a big Amway business. And sadly, many young people get trapped into believing that they can all achieve this a with 2+5 years of work. It's basically a myth and a get rich quick scheme.  Last time I checked, a picture of a sports car or mansion isn't concrete evidence of success.  Don't believe me?  Try using pictures of a house as collateral to get a bank loan. 

But where are these mysterious people who built sizable Amway businesses and simply "walked away" while the money kept rolling in? There are several issues to think about for people who believe that people "walked away" from an Amway business and continue to collect a significant income.  Amway certainly doesn't mention this as a benefit of their opportunity.

First of all, if someone truly could walk away and live in luxury, why are there countless stories of diamonds, double diamonds and some higher, who quit or resigned from Amway? Why did they not exercise the option of walking away? For certain Amway bonuses, there is a "side volume" requirement. How do "retired" IBOs continue to meet this requirement? None of their downline ever quits despite the fact that an overwhelming number of IBOs quit each year? Who helps these downline while their upline is walking the beaches of the world and how can anyone maintain a certain volume after walking away? Most IBOs find their business fall apart immediately after they stop adding downline. Also, how do you meet the minimum sales/customer PV if you are sitting on the beaches drinking Mai Tais?

I believe the answer is simple. There aren't people walking the beaches of the world while Amway cash rolls in by the truckload. Sure, some people might still be earning some income by having repeat customers or having some downline who remain active when you leave the business, but I seriously doubt that there are people jet setting and traveling to the beaches of the world with no financial worries simply by working 2-5 years as often suggested in recruitment or open meetings. If these people exist, why can't anyone name even a single one of them? Why do crown ambassadors keep working busy schedules? Why are diamonds always scrambling from function to function if they could truly walk away and enjoy life with income pouring in from Amway? Why are there stories of diamonds having homes foreclosed and a prominent triple diamond involved in bankruptcy proceedings a number of years back?

I think the answer is quite obvious. It's because someone walking away from an Amway business while income pours in is like chasing the end of a rainbow. You can see it but you can never grab it. If not, where are all of these mysterious retired Amway people?

Residual Income?

 One of the things that got me interested in the Amway business was the talk about lifelong or even generational residual income. Residual income is something that keeps coming in even if you don't do anything. For example, if you put $100 in the bank, you would earn interest every month. The problem is that $100 would only get you a few cents each month and it would not be enough for you to retire and enjoy the trappings of wealth. But what is a reality is that you will not achieve this in an Amway business, unless you are one of a tiny fraction of 1% who can overcome incredible odds.

The IBO retention rate of Amway IBO is about 50%. Many IBOs last less than a year and only about 5% of IBOs last more than a few years. Thus, any hopes of "residual income" is unlikely. You cannot get repeat customers and downline when they are quitting faster than you can recruit them. And certainly, you can conclude that you cannot receive residual income when you cannot retain IBOs. In fact, I don't know of any IBOs who have ever "walked away" from their Amway business to enjoy residual income. Have you even wondered why diamonds and crown ambassadors are still working and none of them have quietly retired? I would guess that they don't retire because they cannot. Once you stop, more than likely your income stops. A diamond lifestyle would take a lot of income to maintain. Thus, how can someone walk away and expect to sustain their lifestyle? The answer is obvious to me. You can't walk away and retire. It is probably why even crowns, and all the diamonds continue to work busy schedules. I highly doubt they are working because they "love" their downline.

It's no secret that diamonds earn income from the sale of standing orders, voicemail and functions. But once you stop appearing at functions, I do not believe you would continue to share in tool profits. Also, Amway has a requirement of "side volume" in order for an IBO to receive certain bonuses. How can you maintain a level of side volume without being active and recruiting IBOs? My upline said your downline will do what you do. If you "walk away", so will your downline. The only way for your Amway business to survive is to keep working. Sometimes I wonder if the diamonds even have a plan and enough savings and investments to actually retire someday.

Breaking down a diamond's income is basic math. Even a $250,000 annual income isn't that much when you break down all of the expenses associated with a diamond lifestyle. The diamond lifestyle is an illusion of wealth. One that looks flashy, but I am not convinced that these diamonds are living large behind the scenes. Many professional athletes end up broke within years after their playing careers are over. These athletes earn much more than Amway diamonds. The difference is that diamonds can keep working while pro athletes cannot. But the common denominator in my opinion is living a lifestyle that your income cannot sustain. I hope you see the similarities. To me it is crystal clear.

Is Amway Like Gambling?

 Let me make a disclaimer right off the top so Amway defenders don't try to discredit the post without reading it. The Amway opportunity is not a game of chance, but ironically, the results can be compared to gambling, except I believe that gamblers generally have a greater rate of success.  But I will go on to explain how and why the opportunity can be compared to gambling and why the diamonds can be seen as a casino or the "house".

In the Amway opportunity, the odds against someone going diamond are astronomical. Literally tens of millions of people or more have attempted to build an Amway business in North America over the years and diamond club for North American diamonds some years back had 160 diamond-ships represented. Certainly, some north American diamonds may have turned down a free trip to Hawaii but I'm guessing that's not a big number.  Diamond club was held at a hotel on Maui and I contacted the hotel to ask how many guests attended.   160 diamond-ships doesn't sound like a whole lot does it?

The odds are also stacked in favor of the diamonds. Casinos are not built by winners, but by the hordes of losers. Just as a diamond business is not built by having a foundation of winners, but layers and layers of IBOs who are moving volume but losing money overall. The Amway opportunity is simply set up that way. Look at your common 6-4-2 plan or whatever version your group uses. The newest or biggest layer of IBOs make very little and when you factor in expenses such as functions or standing orders, the losses can be staggering.

A diamond, like a casino will attract many young dreamers who think they can conquer the world and will get rich. They use bright lights and profile former winners just as Diamonds show off fancy cars and testimonies to lure in recruits. The newness of the opportunity gets you excited, just as someone walking into a casino might feel the excitement with the sounds of the casino. All you need is some effort and little luck, right? Sadly, that excitement is all too often replaced with the harsh reality that most must lose in order for there to be a few winners, both in casinos and the Amway business.

Like casinos and diamond uplines, there is much caring for active IBOs and for players who are spending their money in casinos. But once you walk out of the casino, there is no special treatment, just as an Amway IBO who stops building a business or stops being core quickly becomes forgotten and shunned. In Amway, people who said they were lifelong friends were never heard from again once an IBO missed a few meetings. If you re-emerge, you will find the love again, just as you will get free drinks when you start gambling in a casino again.

And yes, there are some exceptional people who can scratch out a nice living by gambling, but they are few and far between, just as there are diamonds, but diamonds also have thousands of people who wanted diamond but could not achieve it. Those who can finally make it usually have an exceptional blend of skill and a bit of luck. Some even cheat/lie in order to gain a bigger edge, both in gambling and in Amway.

Like a gambling "system", the Amway opportunity has "systems". In either opportunity, the system doesn't work for the masses. There are an exceptional few who can make it work. Except in gambling, most people understand that the odds are stacked against them. In Amway, many new IBOs are told that anyone and everyone can succeed when it simply is not true.

Can you fulfill your dreams by gambling or with the Amway opportunity? The answer is yes, but the reality is that few will ever do so. Like casinos and Amway diamond-ships, both are built on the backs of those who lose, not on those who win.

Food Stamps?

 I decided to post this article regarding the new US policy on Food Stamps or SNAP benefits.  Now I'm not advocating for or against the policy but I kind of bugs me when smug politicians go on TV and blatantly lie.  I'm somewhat appalled that so many lies are swirling about and to cause even more panic, the news seemingly plays right along and helps to spread fear amongst the public.  

So, I looked at the upcoming changes regarding SNAP policies and the misinformation being spread is that senior citizens will starve, along with families with children because their food stamps or SNAP will be cut off or eliminated.  That is not true, and I don't know why it's being presented that way, other than partisan politics.  

The primary targets of the food stamps policy going forward as I understand it, is to eliminate illegal (undocumented) migrants from receiving assistance, and to require some work (or other allowable activities) for Able Bodied Adults Without Dependents, or (ABAWDS).  These ABAWDS would be referred to (I assume) a State run agency that would assist, monitor and enforce the policy.  In Hawaii where I live, the program used to be called "Employment and Training".  The work requirement is 20 hours per week or employment, work search, or perhaps volunteer work.  I will emphasize that the target group for these activities is Able Bodied Adults Without Dependents.  

I've seen some Tik Tok videos of what seemed like 20 something year olds whining that they are unable to work, or they refuse.  Now if you are unable to work because of a disability, then more than likely, you are not a part of this target group.  However, if you're simply unwilling to do anything because you enjoy your X-Box or Nintendo Switch too much, then that's a whole different issue.  Of course, the entire idea is to gain employment so as not to need SNAP benefits.  

That's pretty much it.  This new law is not going to result in Grandma or Grandpa to starve, nor will young children be deprived of these important benefits.  The target group are again, able bodied adults without dependents.  It doesn't seem unfair or unreasonable.  I've heard that this is a republican witch hunt, to which I will point out that it was under the Clinton Administration's welfare reform that brought the 5 year limit on cash assistance to families with dependents.  Again, I'm not advocating for or against it, but trying to see the issue through a neutral lens.