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October 20, 2006

How It Works -- Pyramid Scheme, Part III

Today, as I promised, I will explain how TEAM works. In parts one and two of the pyramid scheme saga, I described the sales pitch I received to become an "Independent Business Owner" with TEAM, and I reviewed three of the business models on which TEAM is based.

What TEAM offers is a website that, like Amazon, allows users to buy products from a whole range of partner businesses, such as Barnes and Noble and Disnesy. This website concentrates ordering so that, like Wal-Mart, TEAM can buy from its partner businesses in large enough volume to leverage a discount.

The difference is that, unlike Wal-Mart, which passes a bit of that savings on to customers, TEAM's website does not offer any kind of discount to its users. Rather, it divides the differential between what the customer pays and what the supplier gets between the people who recruited that customer. What it is is a commission. For example, as a consumer, I could buy a book for $20 from www.barnesandnoble.com or I could buy the same book for the same $20 from www.the-team.biz. However, because TEAM brought the business to B&N, they get a commission. Who gets that commission? It gets split up among the person who recruited me (which would be Darren), the person who recruited him, and so on, all the way up to the founders of TEAM, Chris Brady and Orrin Woodward.

In a sense, it is almost like a consumers' cooperative, although it is totally uncooperative. Co-ops work by allowing consumers to buy products together in order to get a discount from the supplier; they then split the discount among themselves. For example, the People's Food Co-op buys 50 lb. sacks of brown rice. No individual consumer could eat 50 lbs. of brown rice before it went off, but together, the people who shop at the PFC can. Because the Co-op doesn't make a profit, it sells the brown rice to the customers at the same price per pound as it gets the rice from its supplier, or adds a slight markup to rent the the storefront and to pay employees. In contrast, TEAM takes that discount and pays everyone up the chain from the consumer, such that people who recruit more customers make more money.

This is not illegal. Darren was offended when I referred to it as a scam, arguing that scams are, by definition, illegal. I used the lottery as an example of a legal scam. But at least the proceeds from the lottery go to the government, rather than into the pockets of unscrupulous individuals.

So, if the TEAM isn't illegal, what is wrong with it? My main objection is that it is totally dishonest. A business sells either a product or a service. What the TEAM sells is a dream. Granted, there is a product, which is what makes this scheme legal. But there is no reason why anyone would buy the product from the TEAM. With very few exceptions, they don't sell anything you can't get somewhere else. They don't even offer a discount on the product. Rather, everything is marked up. Orrin Woodward, TEAM's founder, even admitted that a person who typically spent $300 a month on household goods would probably spend $350-400 on the exact same products buying them through TEAM's website. So TEAM is selling products, and it is selling a service (the convenience of buying online at one website), but there is absolutely no reason why a person would buy these products from TEAM, rather than buying the exact same products for a lot less money from a website like Amazon.

In order to get people to buy from this website, TEAM makes people think that their livelihood depends on it. Rather, they convince people to believe that, by buying from this website, they are actually investing in a business that will eventually earn them money beyond their wildest dreams.

Let me back up for a minute to describe the TEAM's definition of a business. TEAM's business philosophy is based on Robert Kiyosaki's Cashflow Quadrant. Imagine a 2x2 grid with the letter E in the upper left corner, S in the lower left corner, B in the upper right corner, and I in the lower right corner. The left side of the grid represents active income -- working for money. E is employment, working for someone else, and S is self-employment, working for yourself. The right side represents passive, or unearned income. I stands for investment; B stands for business. So what is the difference between S and B? An example that comes to mind is hairdressing. An S hairdresser works out of her house; a B hairdresser owns a salon. In other words, S business owners make money from their own labor, while B business owners make money from other people's labor.

TEAM basically works by convincing people that they can become B business owners by recruiting people to work under them. The sales pitch I received from Darren on Tuesday included absolutely no information about what the business actually was; he just told me that it would fund a lifestyle in which I wouldn't have to work. Instead of telling me what he was selling, or what I would be selling, he asked me where I wanted to have my vacation home. Instead of describing a typical work day, he promised me that, if I worked hard at the beginning, I would be able to retire soon and raise a family. What TEAM is selling, then, is not a product, but a dream. In business terms, Darren is selling a franchise. His business isn't selling products, but selling the right to sell products. In other words, he is selling me his business. The products are incidental. Yesterday I compared TEAM to McDonald's in the sense that both are franchise businesses. There is, however, a major difference. The McDonald's franchisee buys a burger store, but he doesn't sell burger stores; he sells burgers. His profit is based on selling burgers. The burgers serve a purpose. Imagine if you went into McDonald's and they were flipping burgers in the background, but what they were really trying to sell you is your own burger store. Or imagine if you couldn't even buy a burger unless you first bought a burger store.

That is exactly how TEAM works. I can't just go to their website and buy an energy drink. First I have to become an "Independent Business Owner." So Darren isn't selling products, or a convenient way of ordering products. He is selling a business, a vision, a dream. I say vision and dream because it isn't really a business. Orrin Woodward owns a business. He consolidates orders for online businesses and recruits people to recruit people to recruit people to buy from those businesses. In fact, by this point, he probably doesn't have to recruit people any more because he has so many people under him recruiting people. He has achieved B business-owner status. He can just sit back and watch the bucks roll in.

In contrast, Darren doesn't own a business. Rather, he is simply a recruiter for Orrin Woodward's business, paid in commission. Unfortunately, he isn't smart enough to realize this. Orrin Woodward has told him that he is an Independent Business Owner, and he believes it. This phrase, however, is Orwellian; it doesn't mean what it says. In fact, in TEAM's literature, Independent Business Owner is always capitalized because it is trademarked by Alticor, the parent company of both TEAM and Amway. Once you trademark a term, it can mean whatever you want it to mean. Similarly, when I worked at Starbucks, my job title was Partner, but I sure as heck wasn't a partner in the business!

So how does one become an Independent Business Owner with TEAM? There is an initial investment of $270. That $270 gives one the privilege of buying marked-up goods from the TEAM website and the opportunity to begin making commission by bringing people in under oneself to buy products as well. But, again, why would they want to buy those products? Well, the truth is, they wouldn't want to unless they thought they could eventually earn money by recruiting people under them. But that isn't all. TEAM promises to help its Independent Business Owners (IBOs) succeed in their "businesses" through a series of seminars and workshops, not to mention a whole raft of motivational books and CDs. So in addition to the initial investment, TEAM members also spend $50 a month for these workshops and seminars, and $25 a pop for book/CD packages. IBOs also buy all their consumer products from TEAM's website, which raises their own cost of living by at least $100 every month.

Darren estimates that he has "invested" about $12,500 in his "business" so far. He has been doing it for four years. When I asked how much he has earned, he said I wouldn't believe him if he told me. Why wouldn't I believe him? "Well," he answered, "because it isn't very much." No, Darren, I believe it isn't very much! But he kept saying "yet." He hasn't earned much "yet," but he is sure that he eventually will, and he won't stop until he does. He will keep on "investing" $3000 a year until he sees a return. When I asked why he was so sure he was going to see a return, he that he believed it because the person who recruited him told him so.

The sad part is that Darren truly believes that he is failing at this business because he isn't good at it. On the McDonald's website, the corporation tells potential franchisees that "profitability depends on many factors including operating and occupancy costs, financing terms and most important, your ability to operate the business effectively." TEAM tells its members the same thing: if you don't succeed at this, it is your own damn fault. After all, look at how much money Orrin Woodward has made! Furthermore, when I told Darren that the TEAM is a scam, he refuted my argument, saying that it wasn't a scam; I just thought it was a scam because he didn't explain it very well. Poor guy -- he is blaming himself. Then he offered to lend me a CD by Orrin Woodward explaining to team members how to deal with criticism of the "business." If this business were legitimate, such a CD wouldn't even exist.

Darren has been brainwashed, and it is easy to understand why. The more money you invest in something like this, the more desperately you want it to work, and the less willing you are to see the truth.

Posted by eklanche at October 20, 2006 11:58 AM

Comments

This whole thing is crazy! First, the idea that he is "investing" is the problem. One: Why don't people ever want to invest in something that will actually earn them money? Like stocks, or bonds or something? and Two: Why are people so gullible? When it comes to scams, there are always people willing to buy into them. I wonder if it is what you say--they are buying the lifestyle. The lifestyle is the American Dream--which we are all told is "real." People will suspend all belief to really think they could have that American Dream--a vacation home and a fancy car.

Posted by: kisha at October 20, 2006 02:05 PM

I still can't believe people at still doing Team of Destiny aka Team. I lost over 12 thousand dollars and it's a scam. I want to talk more, please email me at girardtowns2@yahoo.com I can't contact nobody from Team, they can't put up their contact information online or the news papers.

Posted by: girardtowns2@yahoo.com at November 12, 2006 11:30 AM

I cant believe you people are just sitting around here bad mouthing something you fully dont understand. I would love to see one of you go out start an traditional business, wait to see the monthly over head. My friends business has to do atleast 130k a month in sales just to make it to break even. Now $18 dollars a week on books, and at average a book that cost $18 dollars that is not a bad price to pay for your overhead, plus the cds and books are ment for teaching. So if you actually read them and listen to them, they will work for you. They dont work if they just sit there and collect dust. I got in this business 3 years ago, I fell out because of listening to people who dont know what there talking about. Now I'm back in its been 2 1/2 months and my business is booming, I havent had this kind of relationship with my friends and family in years, and my income is awsome, all because of this business. So go ahead say im brain washed, say its a scam (one that pays good financialy and personaly) say its a cult I dont care and the rest of use dont care what you say we dont need you and guess what you'll hear from us again and again.

Posted by: scottburnz@yahoo.com at November 22, 2006 09:50 AM

I cant believe you people are just sitting around here bad mouthing something you fully dont understand. I would love to see one of you go out start an traditional business, wait to see the monthly over head. My friends business has to do atleast 130k a month in sales just to make it to break even. Now $18 dollars a week on books, and at average a book that cost $18 dollars that is not a bad price to pay for your overhead, plus the cds and books are ment for teaching. So if you actually read them and listen to them, they will work for you. They dont work if they just sit there and collect dust. I got in this business 3 years ago, I fell out because of listening to people who dont know what there talking about. Now I'm back in its been 2 1/2 months and my business is booming, I havent had this kind of relationship with my friends and family in years, and my income is awsome, all because of this business. So go ahead say im brain washed, say its a scam (one that pays good financialy and personaly) say its a cult I dont care and the rest of use dont care what you say we dont need you and guess what you'll hear from us again and again.

Posted by: scottburnz@yahoo.com at November 22, 2006 09:54 AM

Scott -- glad to hear it's working for you. Maybe you could take some of that "awesome income" and invest in spelling lessons.

Posted by: eklanche at November 22, 2006 10:00 AM

Hey did I ever say I won a spelling bee.

Posted by: scottburnz@yahoo.com at November 22, 2006 10:03 AM

My fault its $18 a week on cds which I would so rather have my 7 month old son listening to then that garbage on the radio.

Posted by: scottburnz@yahoo.com at November 22, 2006 10:14 AM

You guys do know you are what makes us want to go out into the living rooms of america and help these people strive for there dreams why make fun of them if thats what they want to persue just because you dont have any dreams yourself

Posted by: scottburnz@yahoo.com at November 22, 2006 10:24 AM

"I cant believe you people are just sitting around here bad mouthing something you fully dont understand."

And I can't beleive, Scott, that you're wasting your time trolling the web for Team dissenters when you could be driving to your second home in your new sports car.

Posted by: dmerch at November 22, 2006 10:07 PM

I run a successfull IT consulting company (7 years) and a brand new fantasy sports online business. I was recently contacted by a TEAM member and given the same spiel regarding a new product called "Monavie". It's based on the virtues of the Acai berry of Brazil as a superfood.

When first told of this business I asked this particular Team member if this was a pyramid scam ... because that's what it sounded like. He profoundly said no. He showed me all the great literature on the product ... but ultimately I resisted him, even though he would talk to me about it every day ... and I mean every single day at work.

I started to ask him some questions ... like ... if I started this "business opportunity", can I take the product and go sell them as a distributor? "No" was the answer! I asked why not since I would be a business owner and all he could say is that selling in this manner conflicts with the Team model.

I met with a very high level Team member and was given the scoop on how valuable the Team Leadership program is ... to which I said it sounds like Business 101 stuff to me.

I am sitting here looking at this literature. To be an "active" member that could possibly make money on this product, I must sign up to buy the product and have it auto shipped every month, or else I am taken off of the active list. I asked why do I have to buy a product if I only wish to sell it ... and was again rebuffed as being naive about how business works.

Today I told this Team member that I wasn't interested because it doesn't sound very profitable to me. If I can only make money by selling people the product and get them to join Team ... then it wasn't an effective business plan.

I realize it takes spending money to make money ... but that should be to promote, organize and start a business ... this is a scam 100%.

Posted by: kleibinz@yahoo.com at October 6, 2008 12:28 PM

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