Tag Archives: myths

Debunking the critics. Claim: the one who does the work receives the smallest compensation

In recent weeks I’ve done a couple of posts where I’ve highlighted some of Amway’s online critics and their hypocrisy and sometimes downright fraudulent behaviour. But what about the claims they make about Amway? Do they make legitimate points? Occasionally they do. But not often. Here’s a recent example:

Over the weekend Joecool aka Steve Nakamura did a blog post that claimed –

One of the issues I have with the Amway plan is that the newest IBO, possibly the one who does the most “Work”, receives the smallest compensation. Amway pays about 32% of their income back in the form of bonuses. An IBO who does 100 PV receives a 3% bonus and somewhere, uplines and sponsors receive the rest.

Later he says –

Here’s a challenge for IBOs and/or prospects who are being recruited into the Amway business. 100 PV will cost around $300 a month and dedication to the tools system will cost you around $200 a month on average. Would you not be better off simply writing a check to your upline for $100 and not even joining?

Let’s examine these two claims. Joecool points out that Amway pays back around 32% of their income, and the IBO doing 100PV (points volume) will receive 3% volume rebate, or a little less than 10% of this. It sounds like the “upline” makes more, right?

No.

There are several ways to generate income in the Amway business. Joecool dishonestly only includes one of them, the volume rebate. The first income source for IBOs is retail margin, which on Amway products ranges from 20 to 30%.

Let’s take an example. Say an IBO sells 2 x Perfect Packs and a 1 x Farmers Market Vibrant Health Combo and 1 x Kid’s Chewable Multivitamin. IBO cost is $244.19.

Product PV BV Profit
Perfect Pack 41.95PV 121.66 52.73
Perfect Pack 41.95PV 121.66 52.73
Health Combo 15.75PV 45.67 19.78
Kids Chewable 4.97PV 14.40 6.22
Total 104.62 303.39 131.46

First of all you’ll note that the IBO cost for *more* than 100PV is only $244.19. Joecool, who was an IBO for less than a year in the mid 1990’s,  claims 100PV will cost the IBO $300. He is still stuck in the mid 1990’s and completely ignores the fact that Amway increased the PV/BV ratios for their major brands several years ago.

So, the IBO profits $131.46 in retail margin, then gets a 3% volume rebate (on 303.39 BV) which is an additional $9.10.

Total gross profit for the IBO “doing the work”= $140.56

What does the upline get? In the US the volume rebate scale goes up to 25%, then there’s an additional 4% leadership bonus, plus various other Emerald, Diamond, Depth etc etc bonuses. I believe it averages roughly 32%, so less the 3% given to the original IBO, that’s 29% of the BV (business volume) or $87.98.

  • The new IBO doing the work gets $140.56
  • The upline IBOs who helped share in $87.98.

So for the total profit available, the IBO gets 61.5% and the upline share in 38.5%.

Joecool’s claim is false.

Joecool gets to this point because he completely ignores retail profit and is most likely assuming an IBO is only “buying for themselves”. Of course, if that’s all they do, then they’re not even operating a business and they have done no work. They’ve merely shopped! If they bought the above for their family (say 2 adults, a teenager, and a younger child), then they’ve saved $131.46 by shopping at the wholesale price and got an additional $9.10 discount.

Not bad.

But Joecool isn’t talking about a shopper, because in the next statement I cite from him he says this person is spending $200/mth on “tools” . If they’re building then they’re trying to recruit customers for the products, and other IBOs to market them. As such that IBO must have at least 50PV in customer sales in order to receive a bonus on downline sales. Where does he account for that? He doesn’t. What about increased volume from their work recruiting others? He ignores that too. As he does an increased bonus thanks to that extra volume.

Even more ridiculous, he seems to think that the money spent to obtain 100PV is 1) a business expense and 2) you receive nothing in exchange for the money!

Both are absurd. Firstly of course, you receive products in return. Products that are some of the best in their categories and have won awards around the world.

As for it being a business expense, have you run that past the IRS, Joecool? Can a business owner who withdraws stock for personal use, or accounts for it as a sale to themselves, claim that as a business expense?

It’s absurd, and sadly Joecool isn’t the only MLM critic who asserts this.

If anything, a $300 product purchase for personal use is an income for their Amway business, from a sale to a customer (themselves). There’s no profit since it matches the $300 expense for the IBOs business to purchase the stock from Amway.

Was this how Joecool ran his Amway business? Spending money not for products he wanted and thought were good value, but merely to try and qualify for a bonus? That’s not only stupid, it’s also potentially defrauding his upline of commissions they should have received.

Unfortunately, we already know Joecool has no problem committing fraud.

Amway/Quixtar Myths, Psycho-facts and the Internet Echo Chamber

The Internet is unprecedented in it’s ability to provide access to massive amounts of information to anyone who wants it. However, as a true “medium of the people” there is no editorial oversight. There is nobody fact-checking statements and claims. Anybody can write pretty much anything they want. In theory of course, if one person puts up a website making one claim, then someone disputing it can put up another website, and an independent observer can make their own judgements.

In reality though, few of us are truly independent observers. We each have our own background, our own experiences, our own biases through which we filter everything we encounter. One effect of this is what psychologists call confirmation bias – we tend to actively seek out and give more weight to evidence which supports the beliefs we already have, and we give less weight to evidence which contradicts our beliefs. For example, someone who already believes that UFOs are alien visitors is far more likely to accept a report of a UFO sighting than someone who does not hold this belief. A “believer” would tend to accept the report at face value – a skeptic would look for other explanations.

Another phenomenon of belief is the Echo Chamber effect. Like minded people tend to congregate in similiar places, and share similar ideas. Simply by virtue of the fact we each have limited hours in the day, this also means we inherently limit our exposure to other ideas. We talk to people who agree with us, they talk to us, we all tell each other we are right, and our beliefs are reinforced and strengthened. It has been said that if something is repeated often enough, most people will believe it, no matter whether it is true or not. Robert Samuelson, writing in Newsweek, called these beliefs Psycho-facts. In the world of logic, it’s a logical fallacy known as argumentum ad numerum – if it’s repeated often enough, it must be true!

The Internet provides an almost perfect arena for these phenomena to act in concert. Individuals can log on to Google and search for a subject they are interested in. Confirmation bias plays it’s role, and the individual will be more likely to read and believe articles that support their existing tendencies. Then forums, newsgroups, chatrooms, and sites like MySpace allow these like-minded people to congregate in virtual communities, reinforcing their beliefs in the Internet Echo Chamber. Using blogs and other web technologies, these beliefs can then be published in a variety of forms, with little or no editorial oversight or fact checking. As these sites and posts accumulate, “psycho-facts” are reinforced via argumentum ad numerum – it’s all over the internet – it must be true!

I encounter this phenomonen again and again amongst internet-based critics of Amway and Quixtar. A meme is somehow spawned, and then the critics repeat it amongst themselves and elsewhere. The meme is spread through forums and blog comments so that it appears ubiquitous. And of course, this very ubiquity reinforces the belief there is a factual basis in the meme – when often there is not.

One example is the myth that there has been no growth in IBOs in 30 years. This particular meme began with a post on September 1 2004 by Amway/Quixtar critic “lawdawg” on his website, LawBlawg. The post Zero Population Growth (site now defunct), seemed logical and reasonable and claimed that the numbers of Amway and later Quixtar IBOs had not increased substantially in 30 years. This is in fact false, something I address elsewhere on The Truth About Amway and Quixtar. The falsity of the claim did not, however, prevent it being spread throughout the internet.

Barely one week after lawdawg’s post, a comment by user “Doug_G” repeats the claim on Quixtar Blog. The following month, in October 2004, a poster by the name of “Roger” repeats the falsehood on the What About Quixtar forum as does jason on Sinking in Quixsand. Lawdawg himself repeats the claim often on QuixtarBlog (november 2004, June 2005, July 2005) as well as on his own site (now defunct). “Rocket” repeats it in October 2004. In December 2004 and May, June, and July 2005 “Imran” repeats the claim in posts on the Random Observations site, run by a Quixtar critic. In May and August 2005 it’s repeated by poster “dmm” on QuixtarBlog. In July 2005 it’s also repeated on the WorldWideDreamStealers site. In August, November and December 2005 it’s stated as fact by JoeCool18 on QuixtarBlog and other sites critical of Quixtar. Joecool18 repeats the claim again in February 2006 on the QuixtarBlog forums. WildHalcyon states it as fact on QuixtarBlog forums in October 2005. Ty Tribble continues the myth in April 2006 and in July of 2006 JoeCool18 is still repeating it on yet another site, despite him being aware of it being false through my discussions with him on QuixtarBlog.

So, one falsly constructed post in October 2004 is repeated elsewhere in less than a week and is still being repeated around the internet two years later. In just my brief googling I’ve discovered 10 different people repeating the myth more than 20 times on at least 9 different websites. How many other people have repeated it on how many other sites we’ll never know. And how many hundreds, indeed thousands of people have read this “psycho-fact” we’ll also never know.

The Internet is a marvellous tool for research, but as always, be wary of where the information comes from. We all have our biases, we all have our wish to be right. Something may be repeated by many people in many places – but that doesn’t mean it’s true!

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