Anti-MLM Zealots – Part II

False Profits – Robert FitzPatrick

       Another prominent MLM opponent, Robert FitzPatrick, has gone so far as to co-author two books on the subject. His primary work is a 216 pager called False Profits, and subtitled “Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and Pyramid Scheme.” I think Mr. FitzPatrick mistitled his book. It should have been called “An Expose’ of the Airplane Game.” Indeed the first half of the book is nothing more than an elegant rant about the classic pyramid scheme of the 70’s and 80’s. Even when MLM is discussed it is usually within the context of our alleged “capitalization on New Age, Mysticism and Transcendentalism.” Dr. FitzPatrick often blurs the lines between present day network marketing and the New Age influence of 80’s style pyramid schemes, which in my over 14 years of full time study and participation, I have never seen practiced by anyone (although New Age philosophy did permeate a small number of legal MLM organizations in the 70’s and 80’s). FitzPatrick, himself an avid student of “New Thought philosophy” and a graduate of several personal development and enlightenment courses, focuses heavily on “New Age philosophy” in False Profits, which he claims plays a “central and defining roll” in enrolling and inspiring distributors. He claims that all MLMs rely on the “core beliefs” of the New Age community. That being, “wealth comes not from frugality, hard work or ingenuity, but from being in the right place at the right time. And faith will take you to this mystic and magical place.” So, what if we (like I, and so many of my peers) apply frugality, hard work and ingenuity to their MLM business? If FitzPatrick was only denouncing the way many of us promote and conduct our MLM business I’d have to agree with him, to an extent. I don’t like the way some people pitch and practice MLM either. But why throw away the present just because you didn’t like the wrapping paper?
       FitzPatrick accuses MLM of wrecking the American Dream of millions of would be entrepreneurs. “It (MLM) leaves in it’s wake a trail of cynicism and disempowerment, no small wonder as recruits observe billions of dollars landing in the laps of tiny elite groups at the top.” Where, I wonder, does FitzPatrick get this stuff? Most MLM recruits are in and out of the business so fast that their experience could have little impact on their psyche, and the majority of those I’ve known who’ve spent some time working their MLM business, gave it their all, and failed, simply moved on to other entrepreneurial ventures. And what about all those thousands of people like me who are making only supplemental or good living incomes and fall somewhere in the middle of their company’s hierarchy? Throughout virtually all of FitzPatrick’s work it’s as if this substantially larger demographic didn’t even exist.
       It’s interesting to note that only a page later in his book, FitzPatrick states “… no one makes a substantial income in the MLM system.” So now, not only do all those like me not exist, but neither do those elite few at the top. I’m really not trying to exploit poor semantics here. “No one” means NO one, doesn’t it? So which is it?
       FitzPatrick, an obviously scholarly and intelligent man, demonstrates his ignorance of MLM with statements such as; There are 5-10 million distributors in the U.S. selling $10-$20 billion in goods, “mostly to each other.” It seems odd that such an “expert” could not narrow down such basic data to within at least a 25% margin of error. In a later section of his book FitzPatrick does acknowledge that his numbers work out to an average $2,000 per year in sales per distributor, but then notes that this would leave a “profit” of only about $50 per month, then curiously drops the point as if to imply that would be the total income. However, FitzPatrick completely fails to consider that most compensation plans pay about 8% of downline volume to each distributor in commission. How does one write a book about multilevel marketing and when challenging its income potential ignore multilevel overrides?
       And are we selling all this product “to each other?” No, we sure aren’t. Virtually all contemporary MLM companies today have no requirement or system in place where higher ranking reps supply those below them with product. That’s how many old-school MLM companies used to do it before affordable and practical computers. No MLM company still does that. Not one. Even in 1997 when FitzPatrick wrote his book, his comment would have been obsolete by a couple of decades. Curiously, FitzPatrick makes several references to distributors warehousing and passing on products to other distributors, yet later acknowledges that “most MLM companies distribute via computer thus freeing distributors from having to personally stock and deliver inventory.” In seems as if FitzPatrick occasionally forgets his own earlier arguments only to contradict them later.
       In the same paragraph he goes on to say “The larger of these operations have already reached their saturation points in the United States… who has not been solicited? Who has not tried it?” Earlier, FitzPatrick asserts that his analysis of MLM will be based on, among other things, “logic.” Let’s do the same. If everyone has been solicited, or even tried MLM already, then how did so many companies that have launched in the last few years, such as Freelife, Usana, New Vision, Tahitian Noni, Xango, Isagenix and so many others, acquire tens of thousands of new reps? Is FitzPatrick suggesting these are all ex-distributors from other companies?
       FitzPatrick goes on to say that MLM “catapulted into economic expansion in the late 1980’s” due to the New Age movement. In fact, MLM exploded in the very early 80’s primarily due to a very favorable court ruling in the FTC vs. Amway case in 1979 (which essentially validated the legality of MLM) and economic conditions very favorable to MLM – such as the highest unemployment rate since the Great Depression.
       His lack of knowledge of the subject matter is never more evident than when he states “One of America’s fastest growing MLMs, Nutrition For Life, which was founded by marketer Kevin Trudeau sells the inspirational cassette tapes of the largest publisher of New Age catechism materials, Nightingale-Conant, as one of its core products.” First, NFLI was not founded by Trudeau (NFLI launched under the name Consumer Express in 1984 and Trudeau was hired as a marketing director in 1987). Second, the majority of the Nightingale-Conant catalog could hardly be considered “New Age catechism material,” and thirdly, the Nightingale-Conant material was only a fringe part of the more than 300 consumable products offered by NFLI and for only about two of their 19 years of business. What’s more, this “fastest growing MLM” filed bankruptcy and went out of business six years after False Profits was first published.
       Or, how about this statement: “…what ever the (MLM) product happens to be, it is presented as largely incidental.” I wonder how distributors for such companies as 4Life, Matol, Cell Tech, Tahitian Noni, Legacy, or Xango would feel about that assertion considering their entire companies are based on one primary product. There are numerous MLM companies today whose distributors are fanatical about their products (in many cases to a fault) and who recognize that income is based on a percentage of sales volume. It’s common knowledge today (not to mention common sense) that massive product sales volume is the key factor in generating significant income.
       Exaggeration, hyperbole and semantic manipulation are all signs of a weak argument, and FitzPatrick resorts to such tactics on a number of occasions. For example, he sites that there are “countless” examples of MLM creeping into “the most sacred of places” – religion. Then he accounts for only three. One was a blatant pyramid scheme (not an MLM operation) back in 1988 called Corporate Ladder, and another was Pat Robertson’s short lived KaloVita company and his “prosperity theology.” FitzPatrick is so desperate to come up with a third example that he throws in Robert Schuller only because his Positive Thinking tape set was once sold as part of an MLM company’s product line.
       Another example can be found in his discussion of Richard Poe’s book Wave 3 where Poe offers many examples of MLMers making one-half million dollar per year incomes. First he notes that Poe does concede that “only the rarest few in the industry achieve this level of success,” then refers to this as an “admission of often paltry financial returns from MLM.” How does acknowledging that very few make half-a-million per year get twisted into “often paltry returns?” What about all those incomes (and thousands who earn them) that fall between half-a-million and paltry? Oh, I keep forgetting. We don’t exist.
       In his effort to portray pyramid schemes and MLM as “Kissing Cousins,” FitzPatrick comments: “Periodically, appearing under new names then running their brief and inevitable course, these schemes now emerge bearing the more respectable, legal veneer of multilevel marketing while leading ever increasing numbers of people down the same dead end.” But there are dozens of MLM companies over ten years old. Herbalife is 23 years old.  Mary Kay Cosmetics is 41. Amway is 46. Shaklee will celebrate its fiftieth anniversary in 2006. Brief and inevitable dead end? Really?
       In total, only eight MLM companies are even mentioned by name in False Profits and only four are discussed in any detail. Even then we only hear anecdotal evidence based on the experiences of a handful of failed distributors (once again, there are currently over 2,000 MLM companies in operation in the U.S., and over 10 million distributorships). FitzPatrick acknowledges that the Airplane Game is the “center piece” of his book and devotes a substantial portion of it to a detailed personal journal of his experience with it. Of those MLM companies mentioned, the vast majority of his attention is on Amway. He is highly critical, and relates numerous examples, of tactics that were virtually exclusive to Amway (aka Quixtar, aka Alticor), then couches his comments in language that suggests such tactics are universally practiced throughout the entire MLM industry. What attention is devoted to other MLMs is mostly made up of a rehashing of Nu Skin’s troubles back in 1991 and ‘92 with little mention of the extensive and model reforms they have made since then.
       But then, this is a common foible in every Anti-MLM Zealot’s argument. That being, the actions of a few high profile regulatory or media targets is indicative of how the other 99% of MLM companies operate.
It’s not.
       Robert FitzPatrick’s writings provide so much fodder for this series that I can’t cover it all in one issue. His essay titled “The 10 Big Lies of Multi-Level Marketing” and newest booklet “Pyramid Nation” reveals far more and better examples of Dr. FitzPatrick’s utter lack of understanding as to the true nature of network marketing today.
       And if you’re wondering about such issues as “inevitable saturation” or “99% of all MLM participants fail” or any of the other tired, almost cliché’ Anti-MLM Zealot mantras – oh, we’re getting to them.
       The renovations begin later. This is just house cleaning.