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Orrin Woodward’s Scam Debunked Again

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Back when I exposed MonaVie as a scam, there were a couple of individuals at the top that were of note. One of them is Orrin Woodward that was written up in Forbes for running a pyramid within a pyramid. He's moved on from selling his motivational tools to MonaVie distributors to selling a rebranded version of motivational tools in his own MLM called LIFE. (I noticed this analysis of LIFE and according to a chart there, it looks like 0.35% of the people (Leader and above) make 99% of the average monthly income per person).

Previously, I exposed him for spreading disinformation in one of his blog posts. Recently, a reader brought another blog post of his to my attention.

In the post, Orrin recounts his past as a systems engineer. He pitches himself as a mathematical genius having developed a board game for baseball using probabilities that he wasn't supposed to learn until halfway through engineering school. As long as we are bragging, I programmed a baseball game in Basic in the 6th grade using the same probabilities. Lesson here: You don't need an engineering degree to build a baseball game. Most of the statistics for baseball are readily available for all players and it is a matter of simply picking a random number (or dice roll) relative to the player's performance to simulate what the player is going to do.

Orrin then segues to MLM/pyramid schemes.

He starts off with this statement: "Only 1 out of 100 people actually makes 50k or more per year." Actually it is closer to 1 in 1000 in just about every MLM. The 1 out of 100 people is usually just the number of people who simply make any money after expenses. Already the statistical genius is off by a factor of 10.

However, it is even worse than that. If you look at the people who make 50K a year, they are the same people at the top, year after year. Sure there may be one or two new ones and some defect to other MLMs, but for the most part the person at the top stays at the top. However, when you look at the lower 99, you see that there is a massive churn rate (as much as 90% in some organizations) as these people realize that they aren't making money. Over 5 years you can have a case where 4000 people lose money for that one person to retain his 50K income from MLM.

Later in the post, he admits that: "... in my example above... I threw out the hypothetical 50k." So much for the person really interested in statistics and numbers.

Shockingly it seems to me that Orrin Woodward seems to admit that this is a pyramid scheme.

"However, this doesn’t mean the other 100 people cannot also bring in customers and members who enjoy the life-changing products and do the exact same thing as the person who brought them in. And, when they do, they will have built a team (on average) of 100 people so the 1 out of 100 number remains.

...

Indeed, the model is hard-wired, or designed for a leader to service a community of 100 people in order to reach 15,000 points and thereby achieve the Leader level in LIFE Leadership to make anywhere from 20k to upwards of 50k (with the CAB program included - see the IDS and Comp Plan brochure attached at the bottom of this post). Therefore, the real question a new person should be asking is not the 1 out of 100 snapshot, which merely reports that a Leader must build 100 people communities, but rather, how fast can one build 100 people communities?"

If someone were to describe to you a pyramid scheme they might use a similar explanation... "You bring in 100 people and each of them bring in 100 people... etc." In fact, the FBI says about pyramid schemes, "At the heart of each pyramid scheme is typically a representation that new participants can recoup their original investments by inducing two or more prospects to make the same investment... Be wary of 'opportunities' to invest your money in franchises or investments that require you to bring in subsequent investors to increase your profit or recoup your initial investment."

Simple mathematics shows that this isn't sustainable. It's extraordinarily difficult to bring 100 people in, especially because 90% of people are smart enough to see that it is a pyramid scheme. What makes it even more mathematically impossible is that as you begin to recruit your 100 people, you are creating competitors for yourself. After you've recruited 10 people, they are going after that small pool of uninformed people. To make it much, much worse, there are already a bunch of people out there who are actively competing against you before you even start.

Orrin Woodward then goes to make an analogy using a car assembly line:

"At any given moment in time, if a snapshot of the assembly line were taken, the line would have hundreds of unfinished cars frozen in mid-process. From this snapshot, no one in his right mind would argue that only 1 out of 100 cars is ever completed, or that 'the chances' of that assembly line making a car would be a mere '1 out of 100!' This would be absurd reasoning since the other cars are still 'in process' and will be completed shortly, if the assembly line is given a chance to continue producing cars, as it is designed to do.

In effect, the nature of the assembly line guarantees that only one car will finish per every 100 (in the example above) on the line because this is the way the process was designed. It is hard-wired or hard-built to do it in just this way."

There are a few big differences that make this a very flawed analogy:

  • A steering wheel on the assembly line doesn't have to contribute money and doesn't have bills to pay. That should be the most obvious. You are not a steering wheel and you shouldn't let Woodward compare you to one.
  • A steering wheel is never going to be a completed car... nor is it going to try to. The MLM opportunity is about pitching to the parts that you can be the car.

In short, inanimate objects don't have the same requirements and responsibilities as people do. There's no multi-level aspect to the assembly line analogy that Orrin is pitching. While the assembly line most certainly will complete the car in progress, the multi-level aspect creates many assembly lines that mathematically can never finish their cars because they run out of parts.

We can safely add this to the list of MLM Mind Games: Poor Irrelevant Analogies.

Orrin finishes with the typical flawed motivational push:

"True, not everyone is willing to work that hard, nor will they go that fast, but the leadership of LIFE is committed to creating a process wherein someone can if they are willing to do what it takes. The question for you is: are you ready, willing, and able?"

By now you should realize that mathematically it isn't about effort. It is similar to telling a golfer that he can hit 10 consecutive holes-in-one if he just practices enough. The circumstances surrounding any conceivable success are so improbable that effort is irrelevant... a non-factor.

It seems to me that Orrin Woodward is running a numbers game here. The idea is to spread this to enough people and hope to hook a percentage of them, who may not be informed or intelligent enough to know better. It would be for the same reason why you may have received an email from a Nigerian Prince offering you riches if you just help him out. These scammers know that a large percentage of people will just ignore the nonsense and go about their day. That small minority of a large enough population who fall for it is very significant. It's all that is necessary for the few people at the top to make a LOT of money.

Update

A reader pointed out that there's a thread on the Life Forums about this. Here is a screenshot. It is sad to read all the defrauded sheep responding saying that the business is "based on truth", when they erroneously claim that corporate America is a pyramid scheme. (It's not, pyramid schemes rely on endless recruitment and corporations are a hierarchical organization. If only we could de-program these brainwashed people who can't see the difference.

One person tried to draw an analogy to how the music industry is evolved from vinyl, to cassettes, to CDs, to iTunes and MLM has evolved the same way. It hasn't. The music industry is still music despite the format. MLM is still MLM despite the presentation of irrelevant analogies.

Posted on March 8, 2014.

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7 Responses to “Orrin Woodward’s Scam Debunked Again”

  1. […] Visalus, Vemma, Asea, and others. This weekend, he took another critical look at Orrin Woodward1, deconstructing the arguments put forth by Orrin that LIFE is not a pyramid […]

  2. MommaThree says:

    Nailed it. Needed this in 2003.

    • Lazy Man says:

      I wish I could fire up my time machine to help you out. Alas my flux capacitor is on the fritz.

      At least people can get it now. If you tell 5 people and they tell 5 people…

  3. Melanie Morgan says:

    Lazyman,

    Excellent article! Thanks for breaking it down logically and clearly for others.

    I know Orrin knows it takes a lot more than “100 people” to ‘make’ 50 grand and making 50 grand is not profiting 50 grand! There are thousands we paid a year in expenses!

    Why doesn’t he use the ‘actual’ numbers and facts of someone who is making 50 grand in Life? I know this answer but sadly it is how others get distracted with the enticing “wealthy lifestyle” and “dreams” (emotional carrot) rather than see the reality, but then how can they when real critical information is intentionally withheld or brushed over the people? That is the MLM game, get them hooked and keep them dependent!

    Thank You for your time and effort, doing a great service for the public! I too wish there were a way to snap desperate people out of the fog that gets thicker the deeper a person gets involved. But the work you and others do are helping!

    Sad to me how many people plead for help to get their loved ones out or are trying to prevent them from being sucked in! Keep up the great work!

  4. Working Man says:

    I just had to comment.

    I’m working on his multi-million dollar mansion in Port St. Lucie Florida.

    Right next door to his other multi-million dollar mansion.

    Glad I googled him.

    This is where his profits are going.

    Hope these people feel better about their “investment”.

  5. Jen says:

    [Editor’s Note: I was away on vacation when all these comments came in. All comments are moderated so they went to the holding queue until I could get back. Now I see so much to respond to, I will do it in-line. In some cases, I had to limit the amount quoted because of the limit on the size of comments by the publishing system. I’ve moved this to the more recent article because it should have been left there.]

    Onto the more recent article.

    Simple mathematics shows that this isn’t sustainable. It’s extraordinarily difficult to bring 100 people in, especially because 90% of people are smart enough to see that it is a pyramid scheme. What makes it even more mathematically impossible is that as you begin to recruit your 100 people, you are creating competitors for yourself. After you’ve recruited 10 people, they are going after that small pool of uninformed people. To make it much, much worse, there are already a bunch of people out there who are actively competing against you before you even start.

    You are making comments based on lack of information and mathematics with no substance. He is saying 100 people in a community, not that you personally have to recruit 100 people. And as you are adding to your team, you are not creating competitors for yourself. A cut of anything they sell gets divvied upline. Any sales that they have, add to your points and help determine your paycheck. So whereas there is a portion that will not be on your paycheck (25% personal retail) if someone else does a customer sales vs you. There is still money to be made regardless of which one of you makes the sale. It’s a commission based sales team.

    [Editor’s Response: It is even harder to bring in 100 people in a community than the 100 people overall as I suggested. And yes, you don’t have to recruit 100 people yourself, but again, for one person to have a 100 person team, the pyramid scheme explodes very quickly. See the image on Wikipedia and realize that only covers a pyramid scheme of 6 people.

    You only get commissions if they are in your downline and only give commissions to your upline. If you were to view this as a genealogical family tree you wouldn’t earn money from your brothers or sisters or cousins, etc. If you go up the tree and back down through different lines, you’d see that you’d make no money on those sales and in most MLMs there are thousands of those people attempting to sell and recruit where you’d get no money. These numerous competitors fulfill the very small addressable market which becomes saturated. Hence you see a huge a huge churn rate in MLM as they realize they can’t recruit people.]

    Orrin Woodward then goes to make an analogy using a car assembly line…


    He is not comparing people to a car. He is making a point about development. At the beginning of the line, the car bits don’t look all that impressive. But as time passes and more parts are added to the car it begins to look more like a car. So if you take a picture of the car at any stage along the line, that isn’t when it is all done and use that to define what a car is, it is going to be grossly misrepresented. What Orrin is actually saying is that the same thing holds true to the business. If you take a snapshot of a business prior to it being at the place where it is working towards, it is going to be a gross misrepresentation.

    [Editor’s Response: That’s fine, but you missed the point I made, “While the assembly line most certainly will complete the car in progress, the multi-level aspect creates many assembly lines that mathematically can never finish their cars because they run out of parts.” The only way one can develop their “business” is to create exponential “businesses” that can not mathematically be completed. This is also a common definition of a pyramid scheme. You can’t take a snapshot of business that relies on dragging others into the metaphorical quicksand and say, “Hey this snapshot look fine.”]

    It seems to me that Orrin Woodward is running a numbers game here. The idea is to spread this to enough people and hope to hook a percentage of them, who may not be informed or intelligent enough to know better. It would be for the same reason why you may have received an email from a Nigerian Prince offering you riches if you just help him out. These scammers know that a large percentage of people will just ignore the nonsense and go about their day. That small minority of a large enough population who fall for it is very significant. It’s all that is necessary for the few people at the top to make a LOT of money.

    LOL, I’m really starting to believe that you know nothing about business and sales. Sales is a numbers game. You introduce enough people to your product and you are bound to get sales. If you take training to become a better sales person, you are bound to get even more sales. The purpose is to help people with issues they may be dealing with in their lives as well as to find the people who really have determination to make a business out of it. Everything you say seems to imply that if you sell anything to anyone, you must be a scammer. If you head a sales team, you must be a scammer. If you study sales and marketing to improve your business, you must be a scammer. Sounds a little off.

    [Editor’s Response: Sales is a numbers game. However, fraud as I point out is one as well. If you read my 2000 articles, you’ll know that I have no problems with sales or even heading a sales team. I don’t mind marketing as long as it is honest. However, if you are going to try justify a pyramid scheme by talking about everyone as a snapshot of an assembly line, you are going to get called out for your flawed analogy. If you want to run a sales business there are single-level affiliate programs that you can run without the pyramid scheme. I’m all for that. I’m also for marketing that is honest doesn’t try to mislead people with obviously inaccurate analogies.]

    Been following the links and finding more good stuff.. From the mathematics article.

    Let’s use an example assuming that you and your entire downline purchase $200 per month of juice. Let’s also assume that you have 10 individuals on each side, for a total downline of 20. This means your entire downline is spending $4,000 per month (20 x $200). You would be paid 10% on only one leg, (10% of $2,000) or $200 gross commissions. You broke even. Therefore for every 1 person in the “opportunity” who breaks even, 20 must be cash flow negative. What is true for one individual “tree” is true for all. There is no way for anybody to make money without 20 people losing no matter how much effort or what system you are plugged into, it is a simple case of mathematics..

    While in this equation may be accurate, the reality is skewed. This is assuming that no one makes any customer sales at all. You have to make customer sales if you are going to be a successful business owner. Those would be your cashflow negatives because they are not looking for a payday, they are looking for a product and well people pay for products that leave them with less money. Kind of the way commerce works.

    [Editor’s Response: You must mean this article, but you didn’t read it in your earlier comments that you published at the same time as this comment.

    A small amount of customer sales is not going to significantly change the math. However, it would be fair to assume no customer sales at all because no one is going pay $40 for juice (as covered before). The illegal medical claims show the desperation of the sales people. If people are interested in the juice, they are going to sign up as distributors and get it for around $32 instead of paying $40 as customers. So again, you don’t have retail sales money, but recruiting money, which we showed was terrible. This is not the way commerce works at all… this is how a pyramid scheme works.]

    Another page your linked to: MLM Mind Games: Poor Irrelevant Analogies

    The issue with this article is in the fact that you are denying the validity of the comparison based upon something that isn’t relevant in the comparison.
    They talk about Real estate in terms of sales teams where the broker is allowed to create their own sales team and the commission checks go up the line.
    The comparison to McDonalds had to do with buying a proven system that has been market tested to get results if the training is followed.
    Which are completely relevant comparisons

    [Editor’s Response: Real estate is not a “pay to play” scheme that gets people to buy houses to qualify for commissions. This is a major factor in differentiating a legitimate MLM from a pyramid scheme And indeed real estate brokers don’t attempt to recruit people at all. I know, I’ve bought a lot of real estate and expressed interest in becoming an agent, yet not one ever tried to recruit me. It is very, very different. I’m not even sure that commissions go up the line infinitely. I haven’t seen that from real estate agents. In any case, it is clear that the motivation is to recruit people who complete sales, not people who recruit others.

    The McDonalds comparison fails because McDonalds obeys the laws of supply of demand while MLM fails the laws of supply of demand. McDonalds won’t create supply (a franchise in the same area) unless the demand is there. MLM is happy to create a billion suppliers even when there is no buyers. McDonalds cares if its franchises fail. MLM companies don’t care because they are still making money. That’s why they are quick to blame the people rather than the circumstances they put them in.

    The comparisons are not relevant, because they are fundamentally different. Just because you can find one area where they are similar doesn’t make them relevant. You can’t say that a dog is the same as a cat because they both have teeth and eyes]

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