Every year at about this time of year, Binion's Horseshoe Casino in Las Vegas organizes the "World Series of Poker". Thousands of people fly to Las Vegas, pony up $10,000 and play in the main event. Most people expect to lose their money but they think of it as an experience. Some people hope to win, but ultimately, there can be only one champion. There will be a small group of people who actually take home more than their $10,000 entry fee, but the vast majority will lose money. Most people are aware of the tremendous odds against them winning at the final table, but they press on anyway.
The Amway opportunity, as promoted by the Amway Motivational Organizations (AMOs), operate in a similar manner. The main difference is that most prospective IBOs go into the venture expecting to win, and there is no assurance of there being a champion (new diamond). In the Amway opportunity, there is the real possibility of all the IBOs losing money. Sadly, as I said earlier, most participants go in expecting to win. Most participants do not realize the tremendous and overwhelming odds against them making a net profit, let alone achieving the legendary "diamond" status.
In both scenarios, the vast majority of participants lose money in order for a few to win. The difference is that poker players generally understand that they are likely to lose, whereas Amway participants are often mislead into thinking they are likely to succeed. Most Amway participants figure this out and quit. The difference here is that poker players generally do not quit playing poker. Most Amway participants want nothing to do with Amway or its products when they quit.
This can be confirmed by the fact that former IBOs generally do not continue to purchase Amway goods once they are out of the business. If they did, then Amway sales would continually increase even if their IBO force were to shrink. But that isn't the case. I recently read some Amway supporters bragging about an increase in IBO retention, but even if true, it doesn't appear to be translating into better sales or an increase in the number of new diamonds emerging from the systems.
If I'm not mistaken, I believe there were far more World Series of Poker Champions in the last ten years than new diamonds and emeralds in North America. (The World Series also has smaller events, thus there are many many more champions than new diamonds and emeralds)
Yes, Joe -- you've hit on a major point about Amway. Poker players who lose don't necessarily quit poker, since they enjoy the game for its own sake. But when an Amway IBO quits, he stops buying Amway products altogether. This is why Amway's sales in North America are in a steady decline.
ReplyDeleteA good police detective would see immediately what this suggests. The persons who buy Amway products (mostly IBOs and their families) ARE NOT BUYING THE PRODUCTS FOR THEIR INTRINSIC QUALITY. They are buying them only to develop PV, to please their up-line, and to deceive themselves that they are involved in a real business operation.
This is the rock-solid proof that Amway is a disguised pyramid scheme. Standard pyramid schemes are solely about recruitment, and involve no product-purchase at all. But a disguised pyramid scheme like Amway uses its products as a kind of camouflage or fig leaf. They are of no real importance, except as a way to cover up the fact that Amway profits primarily from constant recruitment, and from the tool-and-function racket.
This has been admitted (foolishly!) by several Amway defenders who show up here and at other anti-Amway blogs to defend their company. They yell "I don't have to sell anything!" or "I just offer a business opportunity!" or "Sales aren't important in Amway!"
Well, that's a very damaging admission, even though these guys are probably too stupid to realize it. They are admitting that Amway products are nothing but a cover for recruitment, and the bleeding of IBOs of their cash.
With the perpetual turnover in IBOs over the decades, you'd expect that at least some of them would continue to use a few favorite Amway products even after they had quit the business. But they don't. Amway sales are stagnant or in a downward spiral.
I believe that Amway is a product based pyramid scheme. The problem is that Amway was very clever is setting up policy to safeguard (in writing only) against pyramiding. In real life, I believe Amway IBOs primarily buy products to participate in the pay plan.
DeleteIt will be interesting to see how the FTC rules against Herbalife.
This is an interesting post because I love comparisons. One of the things that triggers in my brain when I'm gambling versus being duped is the detriment to my pride. I feel like far less of a person if I lose $200.00 to a scam vs. losing $200.00 gambling. I believe the reason for this is two fold. First, I'm going into gambling as a form of entertainment, and if I lose (it's already incorporated into my mindset) I'm not upset because I understand the risks (you basically covered that in your article). Second, when I lose in gambling, I don't feel like it was an insult to my intelligence, and I don't feel like I was being taken advantage of. With Amway, even if the products are good, and I was getting something significant from their products that I couldn't get elsewhere, I still wouldn't purchase their stuff after reeling me into the scam. I wouldn't purchase their products, because of spite, and the fact that I wouldn't respect myself if I gave even one more cent to a company that could've bankrupted me.
ReplyDeleteI guess in not so many words...the big difference is causality for the money loss. The people in the casino aren't smiling at me because they are my buddies who want to help me succeed, and they make that apparent. The people in the casino don't use deception to lure you in, but rather give you all of the facts ahead of time to make an informed decision. Most importantly, the casino doesn't care how much you spend, when you spend it, or if you ever come back, giving the customer the opportunity to truly choose for themselves.
Ben, one other point is that generally, poker is a zero sum game. So while people may lose, some are assured of winning as well. In Amway, it's possible for everyone in a group to lose money because of the expenses in the tool system.
DeleteAmway would be like a poker game where the house takes a portion of every hand played. The longer you play, the more money the house takes and then there's a real possibility of all players losing money. That is called a negative sum game.