Monday, December 10, 2012
Trust me - I run a pyramid marketing scheme
And now my review:
Multi-level marketing schemes are a highly profitable business for those running them. If you manage to get two to twenty thousand people selling things to their friends and giving you a cut you are going to get rich.
The road to those riches are laced with the dreams of all the people who hold tupperware or candle parties or even worse - sell weight loss schemes or insurance.
Listed multi-level marketing schemes (such as Nu-Skin) are a really strange investment. The basic proposition is that they offer investors is the claim they have a really profitable businesses conning people out of their money and getting them to cash in their friendships.
The pitch summarises: I am a crook but you can trust me. I am your crook.
That is a surprisingly common pitch in financial markets. Chinese property developers listed in Hong Kong make the same pitch - but in their case the pitch is that I am a guy with lots of guanxi. I can get a property forcibly acquired from peasants at a deflated price and have it rezoned high rise. And I can thus make a profit. But I don't have the money to develop it - so you - dear Hong Kong investor can help me out. You see I am a crook - but you can trust me. I am your crook.
It rarely ends well. The last person they always screw is the bag-holder with the equity.
Shorting multi-level marketing schemes or for that matter Hong Kong property developers however is an exercise in painful endurance. Stalingrad gets mentioned.
You can even get a real one - one that does distribute some of the loot to shareholders and can survive a long time (Avon, Tupperware). Some of the products even become respectable. [I used to share house with a lesbian Avon lady who was the best sales woman in Australia. And was surprisingly respectable to boot. And she never tried to sell me make-up.]
Spectrum: At one end there is Avon. Cosmetics are a product that overtly sell a dream and it is hard to argue anyone is defrauded.
At the other there is insurance and weight loss products.
Roddy takes us through ViSalus - the best weight-loss product MLM I have ever seen. And there are a lot of them. And he shows us some over-the-top sales techniques with sales people who look like models and party like rock stars.
And it is a good story - but I keep coming back to Mediolanum (an Italian insurance company). Nobody has ever beaten the sales culture of that place. I met Ennio Doris (the CEO) once with his not one but two beautiful translators. Life is good at the top of a sales machine.
This video is funny. But it is really funny when you realize that this is the boss of an insurance company trying (successfully) to excite a bunch of insurance salesmen. [If you have a higher resolution copy of this video please send...]
If this video is a guide then ViSalus could go for a very long time.
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