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.
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.