Thursday, December 19, 2013

Why Is Robert Kiyosaki Trying to Shoehorn MLM onto his Cashflow Quadrant in the WRONG Quadrant?

One of the most frequent pro-MLM arguments from fans of network marketing is "Robert Kiyosaki likes it!" (with an implied "he knows what he's talking about!")

Previously, MLM Skeptic has documented that Kiyosaki was actually an Amway rep (and a rather unsuccessful one, as he never touted his success there, or rather, NEVER EVER mentioned it) once upon a time, his book only became successful because it was "discovered" by Bill Galvin, a then diamond Amway rep, who recommended his sales organization, i.e. Yager Team, adopt it wholesale, as a part of the "Amway Tool Scam".  With the sales numbers "kickstarted" via MLM, Kiyosaki went to Warner Business Books and FINALLY (after YEARS of trying) got a real publisher instead self-publishing.

Thus, let's just say that Robert Kiyosaki is not exactly an impartitial expert when it comes to network marketing. Because he owes his entire publishing success to it, he's unlikely to say bad things about it.

But let's analyze the book Rich Dad Poor Dad, and its sequel, Cashflow Quadrant instead, and how it REALLY applies to MLM.

Most people who got the "recruiter's version" of "why you should choose MLM" will basically explain to you that MLM is in the "B" quadrant of Cashflow Quadrant, which looks like this, from a MLMer...

Employee works for Business owner, "has a job"

Self-Employed, or specialists, controls/owns their own job

Business owners own a system, so they can sit back and their business will continue to make money. (they hire employees)

Investor owns investments... money makes more money.

Sounds pithy, yes? Nothing *really* wrong with that. But... Where does a MLMer fit in on this quadrant?

The MLMers will say that it's in "B" quadrant. In fact, even Kiyosaki claimed that "network marketing is what I recommend for people who want to move to the B quadrant".


Let's consider the facts:  what exactly do you own when it comes to network marketing?

You own your customer list, and you own your "genealogy" (i.e. your downlines), nothing more. In fact, in some cases, you own even less than that, esp. if it's written into your affiliate agreement that you don't own ANY OF WHAT.

You do NOT own a system. You paid to use a marketing system. You are just a salesperson. So that makes you neither B nor I. At best, you're E or S.

Ah, but you say, but I own a sales team! That's something, right?

No, as I said. You don't own that, esp. when most MLMs will SUE YOU if you try to poach your downline and move them to some other MLM you are joining.

What does that leave you?

NOTHING other than some "business skills"... But that just moves you from E to S, not to B.

Ah, but you say, wait, but I can sit back and let my team work and I still get paid! That's residual income like a business, and that puts me in the B quadrant, right?

Wrong again, if you're dealing with a GENUINE MLM company trying to stay legal. Amway Safeguard Rules, established in 1979 as a result of FTC vs. Amway, stated that "10 Retail Customer Rule" is required, i.e. every affiliate / distributor must sell to ten (or more) different retail customers every month in order to earn their commission. Here's the original version from Amway:
4.22. Retail Sales Rule: In order to obtain the right to earn a performance Bonus during a given month, an IBO must: (a) make not less than one sale to each of 10 different retail customers (e.g., Members or Clients); or (b) have at least 50 PV of sales to any number of retail customers; or (c) have $100 at Retail Sales Rule Cost. Retail Sales Rule Cost shall mean the published IBO cost for all items on any orders sold to a Member or Client, or the actual price paid to Partner Stores by Members or Clients. If applicable, Partner Store Retail Sales Rule Cost is applied in the month when the Corporation credits Partner Store volume to an IBO's business.
You have to sell retail EVERY MONTH to TEN DIFFERENT CUSTOMERS to continue to earn the right to receive your commission on sales made by your downline.

You can NEVER go hands off. You CANNOT sit back and relax. If you can, or the rule was never enforced, you are NOT in a MLM, but its illegal cousin, pyramid scheme.

MLMers were NEVER in the B quadrant. They are, at best, S quadrant... with a few exceptions. However, those exceptions are highly illegal.

The most successful MLMers created a business AROUND their MLM opportunity and used that business to feed their MLM organization.

In the infamous "Amway Tool Scam", the various "Amway Motivational Organizations" created a business of making and selling "sales aid" and "motivational tools" to the junior members. Amway may have been honest dealing with its affiliates and paid them decently, but the Tool Scam took those money and fed it up to the organization leaders.

In a different version, organizations such as Shawn Dahl's IncomeAtHome troll the nation with radio ads and online ads with potentially deceptive advertising looking for recruits to be fed into the downline pool in Herbalife and Vemma. It is a copy of a scheme (organized by Shawn Dahl's mother in law!) that was already declared pyramid over in Canada.

Those guys own a system... A system designed to FEED their MLM, but is SEPARATE from the MLM, through fraud and deceit.

Joining a MLM does NOT give you a piece of the system. It makes you an E or S with delusions of B.

But listen to Kiyosaki say that again:

"network marketing is what I recommend for people who want to move to the B quadrant"

He didn't say network marketing people are in the B quadrant. He later said what he meant was you can LEARN SOME SKILLS that will enable you to move to the B quadrant.

But his hands keep moving from S and E to B.

Conflicting and self-contradictory message, isn't it?

Just like "Rich Dad" is a myth... like Harry Potter.

Yes, Kiyosaki said that.
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  1. Good analysis. Kiyosaki is always pimping his seminars. He is making money from selling books and seminars and not from applying what he is teaching.

    1. He was pimping MLM long before Y2K... Here's proof.

  2. He said... "to move to quadrant B" so network marketing was not what he considered to be a B-quadrant activity, but one that would take someone who didn't already have in place the means to move to the B quadrant to be able to do so

    1. Owning a job (S, self-employed) is very different from Owning a business (B, business owner)

      But isn't what I said at the end?

  3. Every business model has its bitter and better! Every model has its own kind of business which fits better and cant fit to all types if businesses! The facts which Robert advocates is that you need to change your set of values and have some skills to move from one quadrant to other! So the MLM offers the low investments and business skills to move to B. On MLM you cant be off 100% and earn the income! You get the residual income and not a passive income! Its best decision though you have made to move from E to S and own the franchise for low price! Its good to work hard but its best to work to something that you own and you cant be fired! The things that you will pass o. Into your generation!

    1. The problem is... What system *did* you learn in an alleged MLM? Is it sales techniques... or RECRUITING techniques?

      The former is useful in a wide variety of businesses. A good salesperson can sell everything from jumbo jets down to nuts and bolts.

      The latter is only useful in a pseudo-MLM pyramid scheme.