Re: Creating Wealth -- a modest proposal

From: Mike Lorrey (
Date: Mon Oct 29 2001 - 10:24:32 MST

Damien Broderick wrote:
> So what if, instead, I use a sort of benign pyramid scheme:
> I send Eliezer, Spike and Robert an attached e-copy of the 85,000 word
> novel apiece (after politely inviting and receiving their request for it).
> Thereafter they can do what they wish with it, but I ask nicely that if
> they enjoy the book they send me a buck (by whatever appropriate means,
> judge might care to read it.
> If those gullible marks in turn accept a download, out it goes--at modest
> expense and effort to Eliezer, Spike and Robert, whose job is then done.
> Then those cats in turn send me a buck (should they care to accept this
> mission, and find the thing an enjoyable read), and so on in a snowball
> that makes me rich within 20 iterations and gives many people an enjoyable
> experience (I have to tell you, the new novel ENDLESS is a lot of fun).
> Has this idea got legs?

Within a specific subculture, network marketing has significant legs.
The problem for you is to find the right first three people to contact
who already have established 'downlines' in the market you have a
product for. I can relate to you the experience of a friend of mine in
that business:

Bill had been an Amway guy right out of high school. He got hooked on
the concept, but too naive to realize that particular enterprise had
matured years ago such that there was significant memetic immunity to it
in a large segment of the target population, and that the organization
itself was overpriced and insular, feeding on itself with motivational
tapes, etc. When he finally realized this, he went off and sought newer
markets. He did Herbalife, then he hit it big with the water filter
business of NSF, so that they sent him to open up Germany to the
product, where he made several hundred thousand in two years. Not bad at
all for a guy with a high school education.
He came back to the US to help MCI get its long distance phone service
network marketed under LCI, but MCI wound up defrauding the enterprise
and Bill lost a huge chunk of money, to the point that within another
two years he was sleeping on a friend's couch. He finally hooked up with
a nutritional supplements organization called Life Plus that had its
structure set up right, and he, by this time, knew all the heavy hitters
in the network marketing world, several of whome he recruited to Life
Plus, thereby establishing a downline of over 40,000 people within 6
months. By the end of a year he was making $45,000 a month in income
with no expenses outside of maintaining a 1-800 number for conference
calls. He is now retired.

I did some computer work for him, setting him up with his satellite
internet setup, etc. and he had asked me to go over an article he had
gotten on a study by the Harvard Business School on the network
marketing business. Harvard did a good job of analysing it and
determining what created a successful network marketing enterprise, and
when was a good time to get in and get out of the business.

Most network marketing schemes take a minimum of a year to reach a
critical mass of 'pioneer' members. These are typically people with
experience in network marketing, who have extensive networks of people
they have done similar work with in the past. As soon as a critical mass
of these seeder 'pioneers' join the organization, the growth of the
network quickly grows in a third order "s" curve pattern, reaching
market saturation within 3-5 years. If you get into the organization
within that period, you have a good chance of making a decent profit on
the system. A successful network should have at least 100,000 members
within two years of its founding, and over a million within 5 years.

After that point, though, society in general has developed a sort of
memetic immunity to the sales pitches of new members, primarly because a
critical mass of 'naysayers' have gone through the program and not had
the necessary attributes to be successful at it, so they quit, blaming
the product and the organization as frauds rather than admit their own
unfitness for that sort of work. These naysayers are the 'T cells' of
society, seeding it with "network marketing is a fraud" or "this company
is full of crooks" memes that specifically help others reject the
memetic sales pitches of new members.

At that point, a smart networker will try to find a new product. Not all
products work in a network marketing scheme. You generally want them to
be something that makes the customer come back for more on a repeated
basis. Nutritional supplements, for example, are excellent candidates,
because people who are into them will order them on a monthly or
bi-monthly basis to maintain their fitness program. Water filter
products have to replace the filter elements a few times a year or maybe
less often, but this is a repeat business.

The Insurance business works well in the network method, as monthly
premiums offer perpetual residual income for people in the upline for
years and decades to come.

Would literature work in network marketing? I think so, but it would
require that novels be serialized, I think, or else a large number of
authors should band together to form a book club that sells at a
significant discount to members.

How do you recruit members? Some just want the product and are not
interested in 'sullying their hands' with trying to hawk a product to
others. Others are interested only in getting enough of their friends to
buy it that they themselves wind up paying nothing. While these two
groups are a fine end-of-chain customer, those starting a network want
to recruit people who have significant networks of people who have a
regard for their opinions, and are similarly motivated to make money
promoting a good product at a good price.

There has to be something in it for them, too. You want six levels of
direct payback in the network that range from 5-15% commission at the
different levels, plus at least a 1% total network payup on your total
downline beyond the 6 levels.

How do you do it online? It works best online as a referral system,
where each member has a PIN number that new members give when they apply
to establish them in a downline, so they get their own PIN number as a
subsidiary of that recruiter. After that point, the referer really
doesn't need to promote product, push sales, or do any of the sort of
annoying hard sell BS that typifies pre-1990 network marketing (the
reason why I call Amway the "Church of the American Way"). Thereafter,
members just enter their PIN number when ordering product directly from
the website of the producer, and the computer handles all residuals
calculations for the entire network.

Despite the obvious 'snake oil' reputation that many early network
marketers have established in the general population, selling
questionable products at inflated "wholesale" prices, I have the firm
belief that this sort of marketing will predominate as the internet
further democratizes society, especially once governments get more
libertarian and start removing special protections that help
corporations trend toward bigness, and as news channels multiply into a
cacophanic din of hawkers and pitchmen. At that point, the most credible
sales people you will know are your best freinds, family, and neighbors.

No doubt there will be plenty of reactionaries who pine for the days of
only three network channels and recognisable celebrities that hawked
recognisable brand names to a trusting audience of drone consumers. I'm
betting that this group will wane as time goes on.

This archive was generated by hypermail 2b30 : Sat May 11 2002 - 17:44:16 MDT