1:41:00 PM - MLM == Pyramid Scheme
Had a great conversation today with a close friend of mine. I helped him reassess one of his investments, and hopefully save him a lot of money, time and heartache. The names have been changed to protect the innocent (guilty?).
Conversation with CloseFriend1 on 8/27/2008 10:01:53 AM: (10:01:55 AM) kennethpwoodruff: dude (10:01:57 AM) kennethpwoodruff: really? (10:02:02 AM) kennethpwoodruff: who hooked you into this? (10:02:48 AM) CloseFriend1: i have 2 neighbors that are already doing it (10:02:53 AM) CloseFriend1: and making money (10:03:25 AM) kennethpwoodruff: that still doesn't make it "not a pyramid scheme" (10:03:50 AM) CloseFriend1: no doubt (10:04:07 AM) CloseFriend1: it's just better than any one of them that I have seen before (10:04:13 AM) kennethpwoodruff: you're going to have to make $23K / year just to break even (10:04:29 AM) CloseFriend1: how do you figure? (10:04:40 AM) kennethpwoodruff: There are cost of being ACN Rep. About 499 USD to begin, about 149 yearly - annual fee, monthly fees about six bucks and administrative fee of $1. It is about 230 USD yearly. At 1% commission, total billing would have to be over $23,000 or about $1940/mo. That's about 40 average customers. And this is to break even! (10:05:41 AM) kennethpwoodruff: did you do your research before you signed up? (10:05:52 AM) kennethpwoodruff: also, how much have you paid so far? (10:07:15 AM) CloseFriend1: yeah...i looked at it a good bit.... the comp structure is actually very good. it builds up quickly and you aren't counting any of the bonus structure... (10:07:41 AM) CloseFriend1: the 499 is pending.... i have 10 days to fully backout (10:07:50 AM) kennethpwoodruff: ok (10:07:54 AM) kennethpwoodruff: here's some stuff for you to read (10:07:56 AM) kennethpwoodruff: http://www.crimes-of-persuasion.com/Crimes/Delivered/ACN/ACN%20MLM.htm (10:08:01 AM) kennethpwoodruff: http://www.arystoteles.pl/nmf/acn-scam.php (10:08:14 AM) kennethpwoodruff: http://www.ideamarketers.com/?ACN_Review_Scam_or_Not&articleid=377906 (10:08:58 AM) kennethpwoodruff: http://www.mlmwatchdog.com/Report_ACN.html (10:10:05 AM) kennethpwoodruff: http://bizop.ca/blog2/due-diligence/is_acn_a_pyrami.html (10:10:24 AM) kennethpwoodruff: how much cash have your neighbors pulled in? (10:10:51 AM) CloseFriend1: guy across the street has made $2k in less than a month. (10:11:02 AM) kennethpwoodruff: how many of his friends did he have to signup? (10:11:14 AM) kennethpwoodruff: is that the california guy? (10:12:10 AM) CloseFriend1: no. Ted is a tech professional like us. You get 2 people started (plus yourself). (10:12:30 AM) CloseFriend1: not sure how many he has underneath him right now (10:12:46 AM) kennethpwoodruff: you need to find out (10:12:54 AM) CloseFriend1: I went to the meeting last night...the structure made sense (10:13:38 AM) kennethpwoodruff: so are you going to try to sell the product? or just get people to sign up? (10:15:55 AM) CloseFriend1: ok...so I ordered the video phone, which comes free (with $107 setup). If the thing works, then I will try to get others to get the phone service so we can talk to each other and use the thing (10:16:18 AM) kennethpwoodruff: dude (10:16:20 AM) kennethpwoodruff: really? (10:16:20 AM) CloseFriend1: pretty low risk...if it blows up (10:16:33 AM) CloseFriend1: you are out what...600 total? (10:16:34 AM) kennethpwoodruff: Skype is free (10:16:49 AM) CloseFriend1: if it works...could mean good money (10:16:53 AM) kennethpwoodruff: I video chatted with Zach yesterday for an hour and half, and he's in India (10:17:13 AM) kennethpwoodruff: no need for special hardware (10:17:23 AM) kennethpwoodruff: or being tied down to a location (10:17:35 AM) CloseFriend1: you had to have a web cam though right? (10:17:36 AM) kennethpwoodruff: gonna make your parents get one at home and the lake house? (10:17:44 AM) kennethpwoodruff: web cam cost $40 (10:17:52 AM) kennethpwoodruff: Hollie's laptop has one built in (10:18:56 AM) kennethpwoodruff: do you have to commit for a certain period of time? (10:19:00 AM) CloseFriend1: well...Amway sucks and yet I still know people who made a ton doing it...and this isn't selling $20 tubes of toothpaste (10:19:31 AM) kennethpwoodruff: just giving you my opinion while you still have time to back out (10:19:38 AM) CloseFriend1: sure...i appreciate it (10:19:48 AM) CloseFriend1: i'm trying to be objective as well and not get lost in the numbers (10:20:01 AM) kennethpwoodruff: personally, I would take that $700 and use it for online poker tournament entry fees. Think you stand to make a lot more that way (10:20:20 AM) kennethpwoodruff: (10:18:56 AM) kennethpwoodruff: do you have to commit for a certain period of time? (10:20:33 AM) CloseFriend1: sorry...was typing another message (10:21:01 AM) CloseFriend1: it's the same ol' deal...you can do as little or a much as you want as a seller.... (10:21:24 AM) CloseFriend1: if you buy the product, the video phone is 2 years to get it for free like any cell phone (10:21:44 AM) CloseFriend1: or $199 to cancel early....same ol' shit (10:21:53 AM) kennethpwoodruff: what's the monthly rate? (10:22:00 AM) CloseFriend1: 29 bucks (10:22:03 AM) kennethpwoodruff: dude (10:22:08 AM) kennethpwoodruff: I think you need to make a spreadsheet (10:22:19 AM) kennethpwoodruff: I'm losing track of how much this is costing you (10:22:59 AM) kennethpwoodruff: 696 for 2 years of phone service (10:23:04 AM) kennethpwoodruff: 107 setup fee (10:23:08 AM) kennethpwoodruff: 499 startup (10:23:33 AM) kennethpwoodruff: 149 / year (10:23:45 AM) kennethpwoodruff: monthly fees? (10:24:21 AM) CloseFriend1: get 2 people going...and get 200 back....one more per person...get 600 back....so 4 people later....800 already back in your pocket just in the bonus. (10:25:10 AM) CloseFriend1: 6 people....another grand (10:25:40 AM) CloseFriend1: there is no doubt that this is the same old Multi Level Marketing structure.... (10:26:03 AM) CloseFriend1: i'm as skeptical as anyone....but like I said...minimal risk just to see how it pans out (10:26:54 AM) kennethpwoodruff: so (10:27:02 AM) kennethpwoodruff: 6 people = 1600 correct? (10:27:09 AM) CloseFriend1: 1800 (10:27:27 AM) kennethpwoodruff: ahh (10:27:30 AM) kennethpwoodruff: got it (10:27:30 AM) CloseFriend1: you don't even have to know them (10:27:35 AM) kennethpwoodruff: so (10:27:57 AM) kennethpwoodruff: 1800 - 1451 initial investment = 349 (10:31:10 AM) kennethpwoodruff: so how many people do you have to sign up each month to make this worth it? (10:31:26 AM) CloseFriend1: you should go tomorrow and just see what it sounds like....that way I have another set of ears in there to help filter the bullshit (10:32:58 AM) CloseFriend1: no monthly quota....if you get 7 layers into it....you start pulling 10% off of each persons monthly fees.....before the 7 it goes up incrementally for each layer you get to (10:33:31 AM) kennethpwoodruff: I already know what it sounds like (10:33:35 AM) kennethpwoodruff: it's going to sound like roses (10:33:41 AM) kennethpwoodruff: and that we're all going to be millionaires (10:33:54 AM) kennethpwoodruff: Just please promise me you wont push it at church (10:34:07 AM) kennethpwoodruff: I want to be able to drink beer with you in heaven (10:34:13 AM) CloseFriend1: :-) (10:37:53 AM) kennethpwoodruff: BTW, I'm quitting Accenture (10:37:58 AM) kennethpwoodruff: I'm going to play softball full time (10:38:07 AM) CloseFriend1: professionally? awesome... (10:38:19 AM) kennethpwoodruff: other than being home and stuff, that's what I miss most about being on the road (10:38:58 AM) kennethpwoodruff: played SS and batted 3rd, I freaking love softball. Especially in the C league (10:39:05 AM) kennethpwoodruff: we put up 14 in the 1st (10:39:26 AM) CloseFriend1: wow... (10:39:40 AM) kennethpwoodruff: missed a homer over the monster by 5 feet (10:39:56 AM) CloseFriend1: i hate that net (10:40:05 AM) CloseFriend1: and the pole (10:40:07 AM) kennethpwoodruff: I didn't deserve to have it go out (10:40:11 AM) CloseFriend1: i've been robbed a few times out there (10:40:17 AM) kennethpwoodruff: I put a really bad swing on it (10:41:45 AM) CloseFriend1: happens (10:41:52 AM) CloseFriend1: i'm ready to try out my new bat tonight (10:53:14 AM) kennethpwoodruff: if you only read one of the articles I sent, read this one: http://www.crimes-of-persuasion.com/Crimes/Delivered/ACN/ACN%20MLM.htm (10:53:22 AM) kennethpwoodruff: does a good job of explaining the pyramid (10:58:04 AM) CloseFriend1: i understand....there wasn't ever a doubt about the structure.... (10:59:04 AM) CloseFriend1: i'm just trying to decide if there is actual money here or not... (11:00:06 AM) CloseFriend1: did you look at the Trump video? (11:00:17 AM) kennethpwoodruff: I don't trust Trump as far as I can throw him (11:00:26 AM) kennethpwoodruff: and he's a big guy (11:00:52 AM) CloseFriend1: sure is... (11:02:45 AM) CloseFriend1: so....get out quickly is what you think? (11:03:03 AM) CloseFriend1: i keep going back and forth (11:03:07 AM) kennethpwoodruff: yes (11:03:10 AM) kennethpwoodruff: cancel the phone (11:03:14 AM) kennethpwoodruff: pay the $200 cancellation (11:03:32 AM) kennethpwoodruff: and chalk it up as a learning experience (11:06:07 AM) kennethpwoodruff: I think the biggest problem you should think about it is that if you sign up all your friends, especially the ones that can't afford it, you're going to lose a lot of friends (11:06:20 AM) kennethpwoodruff: eventually the pyramid crumbles (11:06:38 AM) kennethpwoodruff: http://en.wikipedia.org/wiki/Bent_pyramid (11:07:00 AM) kennethpwoodruff: this is a more accurate depiction, a few people at the very top (11:07:07 AM) kennethpwoodruff: making some money (11:07:16 AM) kennethpwoodruff: and a shit ton at the bottom losing money (11:07:38 AM) kennethpwoodruff: This company has been around a long time (11:07:47 AM) CloseFriend1: 16 yrs (11:07:56 AM) kennethpwoodruff: so it's about time for a new generation of suckers (11:08:18 AM) kennethpwoodruff: but probably not enough to put you in the top position (11:10:09 AM) CloseFriend1: no where near the top position...in DFW, this only started 6 weeks ago. looked like about 40 people in the room last night (11:10:30 AM) CloseFriend1: but there have to be a ton of people above Todd who is starting the Dallas group (11:11:03 AM) kennethpwoodruff: right, so look at that article, and it explains based on population how many people have to signup under you (11:11:05 AM) CloseFriend1: but why would a smart business man like this guy (3 proven companies in the last 10 years) get into this? (11:12:05 AM) kennethpwoodruff: well, he's the guy at the top in Dallas, he'll probably make some money, especially if he manages to signup 40 people who believe in it (11:12:18 AM) kennethpwoodruff: the problem is that it usually doesn't make it down to the level you expect (11:12:36 AM) CloseFriend1: i could see that happening (11:12:41 AM) kennethpwoodruff: take any pyramid they show you and divide it by 4, and that's the absolute most you could possibly do (11:13:07 AM) kennethpwoodruff: there is NO WAY everyone is going to signup the number of people they tell you (11:14:46 AM) CloseFriend1: "send a dated Notice of Cancellation within 10 days" to blah, blah....Concord, NC.... i'm reading the terms....so, would that be just a piece of paper that I type up? I hereby cancel....yada, yada....? (11:18:07 AM) kennethpwoodruff: sounds like it (11:18:23 AM) kennethpwoodruff: just make sure you read the fine print (11:18:28 AM) kennethpwoodruff: have you given anyone money yet? (11:18:34 AM) kennethpwoodruff: put a stop payment on your check (11:18:49 AM) CloseFriend1: it is all online (11:19:47 AM) kennethpwoodruff: might be able to call your bank and work with them (11:20:00 AM) kennethpwoodruff: if you paid by Amex, you have a good shot at getting them to stop it (11:20:26 AM) kennethpwoodruff: just make sure they don't have the ability to withdraw directly from your account (11:24:00 AM) CloseFriend1: looking through all of terms (11:25:30 AM) kennethpwoodruff: I recently had to talk dad into returning a Time Share he bought in Fort lauderdale thinking he was going to be able to trade it for Hawaii (11:25:44 AM) kennethpwoodruff: his waiting period was only 48 hours, and he laid out $18k (11:25:55 AM) CloseFriend1: fuck (11:26:08 AM) kennethpwoodruff: got out of it, and cancelled the check (11:27:39 AM) CloseFriend1: good thing (11:33:17 AM) kennethpwoodruff: also, when you send the letter, make sure you send it registered (or certified, whichever is cheaper) so that you get confirmation that they received it (11:33:29 AM) kennethpwoodruff: otherwise, they can play the "we never got your letter" game (11:33:40 AM) CloseFriend1: registered...with return receipt (11:40:05 AM) CloseFriend1: i hate this (11:42:52 AM) kennethpwoodruff: just for your edification, and I spent a LOT of time considering a couple of these in college. I think we spent over 100 hours debating some schemes that were not put together nearly this well. And these schemes were "Signup 10 People" and get put on a list to get a TV. Everytime 25 people signup and pay $75, the one on the top gets a TV. We watched about 10 people get TVs, while the list grew exponentially at first, and then suddenly stopped (11:43:12 AM) kennethpwoodruff: we both came close to losing a lot of money, but ultimately decided not to
---
(12:47:03 PM) CloseFriend1: thanks (12:47:25 PM) CloseFriend1: i needed that sanity check (12:47:37 PM) kennethpwoodruff: glad I can help (12:47:55 PM) kennethpwoodruff: don't feel bad, lots of smart people have fallen for these (12:48:18 PM) CloseFriend1: no doubt... if you sat in there, you'd know why it was so appealing (12:48:32 PM) CloseFriend1: good product...people that you know making money (12:48:51 PM) kennethpwoodruff: I understand, I bet the guy talking is really slick (12:49:03 PM) CloseFriend1: his suit must have cost 1 million dollars (12:49:10 PM) CloseFriend1: his watch was 2 mil (12:49:19 PM) kennethpwoodruff: and don't get me wrong, some people will make money, but not nearly as much as expected (12:49:31 PM) CloseFriend1: i'm pissed looking back on how this went down (12:50:09 PM) kennethpwoodruff: think you're going to be able to get your money back? (12:50:42 PM) kennethpwoodruff: when your phone gets there, you can always refuse delivery (12:52:11 PM) kennethpwoodruff: does wifey know about any of this (12:52:37 PM) CloseFriend1: already cancelled everything (12:52:43 PM) CloseFriend1: should only cost me 22 dollars (12:52:52 PM) CloseFriend1: for the website setup that was nonrefundable (12:53:14 PM) CloseFriend1: i just faxed in the cancellation, but i will probably mail a copy as well (12:53:22 PM) kennethpwoodruff: probably a good idea (12:53:26 PM) CloseFriend1: wifey knows....she was interested too (12:53:53 PM) CloseFriend1: we'll stick with the webcam (12:54:38 PM) kennethpwoodruff: :) (12:54:51 PM) CloseFriend1: so forget all of this crap
Comments:
Keep in mind that I never suggested that the company wasn't on the "up and up" on my website.
Like you, I tried to have a rational conversation with my viewers so that they could properly assess the seemingly wonderful opportunity presented to them.
Your points were very good and should not incur the wrath of the board of former judges and state attorneys now working for ACN.
For me, in college, it was the free bottle of booze pyramid. I ended up having to abstain.
# posted by Les Henderson : Thursday, August 28, 2008 2:24:00 PM
Thanks Les.
I know nothing about their business processes. I also choose to make no statement about whether or not they are a good company.
The problem I have is that the numbers simply don't make sense. If you blindly accept someone's assumptions in any business dealings, you put yourself in a vulnerable position.
My advice: make yourself a spreadsheet where you lay out all the data, model a few scenarios, and see if it still makes sense. If you don't have the ability to do so, find someone who does.
Kenneth, I posted some your dialogue over at bizop, hope you get some traffic out of it!
You observation that if you just calculate the expected outlays and returns is excellent - but, equally as important is getting the "potential mark" to understand the importance of doing the cold, cool calcuation.
# posted by michael webster : Thursday, August 28, 2008 8:28:00 PM
I can't believe I read that whole thing. That was so long.
# posted by Keisha : Thursday, September 04, 2008 12:58:00 PM
I read it too. Poop smells bad.
# posted by Ryan : Wednesday, September 10, 2008 11:38:00 PM
ACN is a sneaky "legal" pyramid scheme. I read the whole thing as well, glad that dude got his friend out of it. I already lost 3 friends to ACN - I'm not going to tell them that its a pyramid, I want them to learn. Reason for this is, this is the 2nd time they have fallen for a scheme - the one before was the Mili Group here in Southern California, similar but only a Ponzi scheme. They've been trying to get me to join ACN for a month, they recently joined and haven't received a check, but I'm certain they will not be happy with their check, they only have gotten 2-3 people in.
Their so-called "meetings" (AKA Cult gatherings) they want you to be as dumb as possible, even if you did not understand anything they just said they still want you to join. When I was at their meetings, there was no way in hell could convince me that their company was legit...although it maybe by the system, ethnically it is illegal and a scam. One of the reps that invited my friends to the meeting as well as me and my brother tried so hard to pressure us to join. They mean nagged on my brother when he said "I still need more convincing"...their response: "What do you need convincing about?" & "There's nothing to be convinced about..." My brother also saw it was a scam, and thankfully didn't join either.
All in all ACN doesn't want new people to know about them, unless it's a recruit telling them - they are sneaking that way. The less you know, the more vulnerable you'll be to join their cult when they lie about the lifestyle you can have at their gatherings, and that's why they are so big because of the $500 recruiting - a new reps failure is the key to their success.
# posted by Nakazato Hiro : Tuesday, December 30, 2008 9:20:00 PM
is this site real....
# posted by Roba : Thursday, July 16, 2009 7:15:00 AM
By brother has just signed up to ACN and he is convinced that he'll make a million dollars within a year. Instead of trying to sell it to me after I warned him, he just told me that I'll be working for the next '30-40 years only to end with a pathetic pension while he'll be laughing all the way to the bank, saying "I told you so!"' I'm sure he'll be able to get a lot of people to sign up with that line! I also like your point about Skype. I forgot about that one and will bring it up to him. Video phones seem kind of pointless now that we have the internet available to us.
# posted by Susan : Thursday, July 30, 2009 3:18:00 PM