Amway/WWDB: Part 4: Economics

This is Part 4 of the Dealbreaker for our relationship. You can read Part 1, Part 2, Part 3.

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How is the Amway dream misleading? Why is it not a certainty that someone will become Diamond? Why are IBOs not actually creating societal value; for example, “building families”?

Please see below for four reasons why I feel Amway is an investment with low societal and economic return:

1. Destruction of the free market:

This is a long-term vision. If the world relied on MLMs rather than supermarkets for their products, the economy would be a mess. The only way MLM products can be sold are through their networks, They would never survive in the free market. The IBO price of a product is even higher than the retail price of a similar (or more high quality) product at a supermarket, not to mention the mega-inflated Amway retail price. MLMs can charge that much because they are shielded from the free market. They don’t face competition from supermarket products because Amway IBOs can only buy Amway products. 

Economic competition is a wonderful thing. It develops price efficiency (i.e. lower prices when supermarkets compete with each other), innovation for better products, product diversity (i.e. a large selection of products. I’m very picky about my products, and nothing in the Amway catalogue appealed to me. For example, I don’t use products containing parabens as it is a hormone disruptor that is actually banned in the UK. However, most Amway products including toothpaste, shampoo, and lotion contain parabens. Yes, I read the ingredients of many of the products when I was evaluating this business opportunity.). I can’t believe uplines use the argument “buying from your own store cuts out the middleman” . If you’re truly buying at manufacturing price, why would it be even higher than the retail price at supermarkets? Another example of trying to mislead IBOs.


2. Misdirection of incentives.

I think mentorship is great. I like the focus on personal development and leadership. What doesn’t make economic sense to me is the indirect payment scheme- why does the mentorship have to be intertwined with an MLM? Once the Amway payment scheme is brought into the picture, the motivations of the mentors are no longer pure. They are not directly rewarded for their mentorship, rather they are rewarded by how much product their downlines are pushing. There is a conflict of interest built into the system itself.

The real winner here is not the mentors, it’s Amway. Amway gets a large profit, since they are charging high prices for poor quality products, and they give IBOs a small cut of that profit. The mentors are paid on how much value they are giving to Amway, not on value to the mentees. Of course, some mentors are “pure”, but that doesn’t change how the system is set up for misdirected incentives, especially with the common human vice of greed. And Amway/WWDB capitalizes on that. They disguise greed as “dreaming”. They create a thirst for money- “Think of what you would do with all your time and financial freedom!” which further discolors the motivations of the IBOs.


3. Oppression of the downlines:

How many people in an IBO’s network are needed to reach platinum (7500PV)? Looking back at my notes, your upline mentioned 50 people. This would be around 10-15 partnerships. Let’s assume 10 partnerships. So each one of the IBO’s downline would need 10 more partnerships in order for themselves to be platinum. In 6 cycles, that would be a network of one million people! That’s pretty much our entire city! And guess how many people would be on the bottom of the chain of downlines? Almost 900,000. They would each need 10 partnerships, so 9 million new people are needed. That’s simply not possible. What will an IBO do? Lie to them and keep telling them that it’s possible to reach Diamond? Or tell them the truth that they will have to keep buying overpriced products but won’t get a return on their investment? Those on the bottom will most likely quit, and the chain will collapse from the bottom as the uplines lose their PV and along with that, their residual income, which may make the uplines quit.

I know there are still a lot of people in our city. However, if this business is really as great as the uplines portray it to be, eventually it’ll reach the stage where it runs out of people because it is built on geometric expansion. People may say “People are always quitting so market saturation will never be reached”. If the system was actually solid, like how Mr. Diamond says*, market saturation will be inevitable!

* the regional Diamond had said that his mentoring is so effective that everyone will enjoy the wealth that he has

”Building families” is a lie. Sure, families at the top reap the rewards, but by the 6th cycle, there will be no more people left in our city to prospect, and the 900,000 people on the bottom won’t have anything. Money is made from the losses of the families at the bottom. To me, that is low societal value. Essentially, IBOs have to lie to their downlines or have them quit the business, both of which are undesirable options.


4. Limited growth:

The income IBOs make is paid by Amway; as a result, how much an IBO makes is determined by how much value the IBO provides for Amway. (Aside: I’m sorry, I know everyone defines entrepreneur differently, but I don’t see IBOs as entrepreneurs. I see them as glorified salespeople for Amway.) The maximum income would be in turn determined by how much value Amway is providing for society.

I don’t see much value in low quality products at high prices. I don’t see much value in mentorship with conflict of interest. The value that Amway provides is the hope of achieving a false dream, and this value is only for addicted IBOs. As such, Amway revenues are limited, which limits IBO incomes. They aren’t providing true value for society.

It’s like the book The Go Giver*. How much you make is how much value you provide for society. For example, Apple makes A LOT of money. They provide a lot of value to people through their products, which enhance the quality of life of many many people in the world. People directly pay Apple to use their products, and the potential for growth there is unlimited as opposed to the indirect payment scheme of Amway.

* For my readers: This is one of the book that is given to the prospects to read during the "vetting process"

In addition, with companies like Apple, money is made from customers who pay for the product or service and leave satisfied. With Amway/WWDB, money made from losses of families on the bottom, who were misled to believe they are “investing”. Even if there is income growth, it would come at the expense of others, which I feel has low societal value.

IBOs believe it’s all about how hard they work, but it’s not about how hard someone works if the model itself is flawed. Time, energy, and money are precious resources. Everyone wants to put those resources to where they can deliver the highest value. For how I value things, I really don’t see this as a high-value investment.

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Thanks for reading! For Part 5, please stay tuned for next week's post :)