An Anarchist Walks Into an MLM
Why I say no to "network marketing"
Friends and Dogs
In March I was at the grocery store and heard a fellow chatting on his phone in Russian. I took some time to say hello and get his number. This is how I met my buddy Nik.
We got some coffee and strolled around the gorgeous lake near the town center. We hit it off talking about Rich Dad, Poor Dad by Robert Kiyosaki and related concepts. It turns out we have similar taste in books!
He mentioned an interesting tidbit. He has a wealthy friend Dima who helped him and his wife with immigration. Nik and Dima are members of a private mentorship group. This American concept is alien to us in the Soviet bloc.
Now a “private mentorship group” seems like a strange term to me. Yet I was curious and willing to forgive him the language barrier. The idea of a Batman-type wealthy benefactor who helps out refugees is intriguing. I said I was open to learning more.
Over the weekend he said he wanted to meet right away to ask me a few questions to find out whether I was right for the group. In sales it is wise to “qualify your leads”. This means to take the time to determine whether they are the right fit for your service.
A smart leader wants successful and happy clients. Glowing testimonials are an asset that helps the business grow. Disgruntled customers are a liability.
Going out on a Tuesday is a bit challenging for me timewise. My day job keeps me busy from eight to five, then I like to hit a workout, grab dinner and take some time with the dog. The dog enjoys the lake and I can get dinner after, so what the hell let’s go!
Nik’s questions were odd. Again, it’s difficult to communicate across the language barrier but I did my best. The questions made me realize is that I have an easier time taking care of others than I do myself. That trait enables young Russell to chew up quite a bit of my time and money.
Feeling Under Pressure
After the questions, my friend asks whether I can read a book before meeting with Dima. I’m a busy man, but can likely read a book in the next two weeks. My friend talks me into reading it by Saturday afternoon. You see, Dima is a busy guy and his time is valuable. We want to impress him by finishing the book quickly.
I’m a fast reader but I get pretty damn grumpy when people make demands of my time. I agree to read the book and he hands me another book by Robert Kiyosaki, The Business of the 21st Century. The book is pretty thin, but I have to shift things around to get it read for Thursday. Dima wants to move our meeting up from Saturday to Friday night.
The reality is I have other priorities going on. My main goal for this year is to pivot my career into e-commerce and blockchain software. Distractions from that goal are unhelpful.
I’m also trailing behind on housework. For example, I bought this dresser before Christmas and am only beginning to assemble it now in June. The cleaners are coming over on Monday and I need to get this bullshit off my floor.
Ethical Sales
The key to ethical sales is to understand and empathize with your customer’s pain. Your goal as a sales person is to recommend a product or service that solves a problem the prospect has.
Another important concept comes from fluid physics: sales flow from high-pressure to low-pressure areas. When sales people use cringe tactics, customers switch to the competition.
Network Marketing Falls Flat
I’m predisposed to like Rob Kiyosaki. Rich Dad, Poor Dad is a very insightful book that we covered in the Wealth Battle book club1. We also play his game, CA$HFLOW, which is an engaging way to learn about how to take advantage of opportunities. He’s even coming to Freedom Fest this year.
Business of the 21st Century piggybacks on Rich Dad, Poor Dad with several nuggets of wisdom. It starts with this excellent hook:
The economy is in tatters; your job is in trouble - if you still have a job. And you know what? I’ve been saying it for years.
The economic situation today differs from when Rob wrote 21st Century in 2010. In 2010 we dealt with large scale unemployment. Today we suffer more from stagnant worker pay in the face of rising price inflation.
Rob points out that the Federal Reserve banking cartel caused the financial crisis. I thoroughly agree, and have discussed the Fed my previous post.2
This post will focus on the central point of 21st Century as it relates to this story. Rob calls us to action to take control of our futures:
There is no such thing as a safe secure job.
Nobody is going to take care of you.
You can take charge of your future only when you take control of your income source.
A recession is the best time to start your own business.
He details four means of acquiring income: Employment, Self-Employment/Small Business, Big Business, and Investment. He makes a bold claim that the self employment/small business mindset is a trap. He alleges big business is the correct way to build wealth.
This seems like a hell of a claim. From where I sit as an employee and investor, starting a small business seems like a great deal. I know liberty-oriented entrepreneurs like Richard Grove and Tom Woods. They have admirable businesses, families, and time to devote to promoting human freedom.
Still I have some sympathy towards big business. Tyler Cowen makes a compelling case in his book Big Business: A Love Letter to an American Anti-Hero. Coinbase and Amazon are big companies with exciting and admirable missions. Yet I find corporate culture to be bizarre and stifling.
Rob tells his personal story of building a business only to lose it all. He and his wife were $400K deep in debt. They lived out of a broken Toyota in 1985 then rebounded as millionaires four years later. Does this seem like an appealing way to live to you?
Rob recommends “network marketing” as a way to build character and build intangible assets. This includes real world business education, personal development, overcoming fear of failure, a great circle of friends, a network and leadership skills.
The crux of network marketing is that the “distributor” builds up a network of people who run the business. 3 The network members sell the products and services, but the real point is the network itself. This is the same as multi-level marketing, which I recall Rob alluding to in Rich Dad, Poor Dad.
The power of network marketing is not in the product; the power is in the network.
The leaders of the network provide mentorship and training to junior recruits. This duplicates and scales the business. Again, the idea of corporate ladder climbers duplicating themselves into junior recruits feels cultish and dystopian.
Rob lays down a single equation in this book, Metcalfe’s Law. The model relates to the power of communication and social networks. It states the value (V) of a network is proportional to it’s size (N) squared. Network effects are certainly powerful, as we see in the explosion of smart-phones and software platforms.
Rob’s wife Kim contributes a chapter, stating that women need to learn to build their own wealth. They cannot rely on their husbands to do it for them. I am sympathetic to this claim as there are many single mothers out there who would do well to learn the ropes of the capitalist system.
A network marketing sponsor supports, coaches, and nurtures relationships with her apprentices. Kim states this is the kind of relationship in which women excel. She singles out party planning as a fun multi-level marketing business for women.
Rob closes out with some more do’s and don’ts of the industry. He rounds up what it takes and doesn’t take to be successful in the industry. One big recommendation is to give it five years.
Investments certainly take a while to pay off so you need to be committed. Why start if you’re just going to quit? Guess how committed I feel to speculating on multi-level marketing for five years.
Level Up In Baldur’s Gate, Not MLM’s
The MLM/network marketing crowd may be onto something. This business model could be an effective way for people to learn skills, make money, and have a good time. I see how it could be compelling for folks who are new to business coming from the public sector or religious backgrounds. To me, the business model feels like a sycophantic corporate cult.
I see no evidence why this business model would be effective for me. I come from a strong math and programming background. I have done well with investments, particularly in Bitcoin. My previous post introduced why Bitcoin is so valuable. I plan to expand on math and Bitcoin more in future posts.4
I began purchasing Bitcoin in 2016 when it traded around $600. That was already a meteoric rise from when it traded below $1 at launch. Today Bitcoin trades at roughly $67K, which is an over 100X return on my investment in eight years.
Haters can sit in their parent’s basement and say I’m lucky. I’ve lost on bad bets along the way. My key point is that eventually the US dollar and other fiat currencies will have zero purchasing power, just like the Soviet ruble. The open question is how long of a time frame that is and what the exact currency of the future is. Bitcoin is a prime contender for the title.
When you do well with a speculative asset, the wise pivot is to a lower risk asset. In my case, that is cash-flowing real estate and skilling up on software. Fuck pyramid-scheme bullshit. The wiki page on multi-level marketing states:
The overwhelming majority of MLM participants participate at either an insignificant or nil net profit. A study of 27 MLM schemes found that on average, 99.6% of participants lost money.
Education is important and you need to invest money to get educated. I believe the right way to do that is to buy courses in the topics you need to know. If you need to show off to the world that you have a skill, buy a degree or certification. Speculating on buying into a “network” does not seem like a wise play.
Sales is a legitimate way to make money through both online and in-person. You will notice links to my sponsors in these posts. The purpose is to both solve a problem for you dear reader, and earn affiliate commissions in the process. This is a very central practice to the e-commerce industry. This includes big players like Amazon and Coinbase.5
Great software businesses do not rely on network marketing. Coinbase CEO Brian Armstrong built the platform while working at Airbnb as a software engineer. He saw the difficulties of sending payments to South American vendors which spurred him to build a cryptocurrency business.6
The best way to get better at software is to continue working on software. Therefore I will keep learning, building, and writing.
Setting Anger Aside
My primary frustration with this experience was the feeling of pressure and perception of a bait-and-switch tactic7. Learning about the “private mentorship group” required me to quickly read a book. The book pivoted from interesting claims about success in business to pitching a dubious business model.
When I finished the book I felt severely concerned that Nik is in a pyramid scheme. I reasonably inferred that the meeting with Dima would be a pitch to hustle me into buying into multi-level marketing.
My message to my friend was that I am open to talk but will not participate in network marketing. Dima initially turned down meeting me, then reached out on social media. He read my original post and understandably felt it was vitriolic. In this second draft I seek to balance honesty with respect.
I seek to understand people I disagree with. Maybe there are legitimate multi-level/network marketing businesses. Frankly I doubt it.
Yet people have rights to speak their minds and to pursue happiness. Perhaps the network marketing crowd and I can set aside our differences and build something positive.
Discover. Understand. Excel.
It’s a wild world out there. Predators use shady business practices, subterfuge, and violence to their benefit at your expense. You need intellectual self-defense to protect yourself, your family, and community.
Trade in your state-sponsored indoctrination for a method of learning to create self-reliance. Shed self-limiting beliefs. Ignite your potential!
