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"Why Network Marketing is Poised
to Drive the Next Major Economic
Powerhouse!"
Every generation,
among the thousands of brilliant and
merely-bright social commentators, the human
race produces one or two visionaries whose
stunning insights burst the bounds of their own
specialist's expertise and cut across all
disciplines. We have our Benjamin Franklins, our
Buckminster Fullers - and Paul Zane Pilzer, the
man who sizes up seismic shifts in our
economy.
Pilzer is quick to assert that he
has no crystal ball: it's all in the data. But
the three-times New York Times best-selling
author and economic advisor to two presidential
administrations has an uncanny knack for
assembling masses of facts and figures and
seeing the forests those reams of trees
represent. His penetrating insights have
attracted the attention of network marketers for
over a decade.
Now he's back, with a new
message: We are witnessing the explosive birth of
a new trillion-dollar industry, and network
marketers everywhere are poised to be the
vanguard of that explosion.
After two centuries
of economic opportunity for the pioneers of
manufacturing, we have entered the age of
distribution. Today, the greatest opportunity
for wealth awaits those who can deliver what
Pilzer calls "intellectual
distribution."
He is describing
network marketing. He is, as the saying goes,
singing our song.
Q:
Paul, you were the first well-known economist to
have anything kind to say about network
marketing. What got your attention about the
business in the first place?
I think it would be
more accurate to say that the business found me.
It started with my 1990 book, Unlimited Wealth,
which analyzed different sectors of our economy
and projected some interesting changes by the
year 2000.
In the 70's and
80's, we were told, "What's wrong with America
is that we don't make things." So, the bright
young people of that era started to make things
- and they did it so much better, converting all
the expensive raw materials and labor into
plastics and flexible automated manufacturing
processes, that they completely restructured the
economics of retail.
Take a typical $300
item; it could be anything-say, a television,
camera, or dress. In the 1960s, the
manufacturing costs of this item would be $150.
About 50% of the item's cost was in
manufacturing with the other 50 percent in
distribution.
By the 90's, the
same item still sold for $300, but it was a far
superior product with a great many more features
-yet its manufacturing cost had fallen from $150
to $15 or $20! Now 80 to 85 percent of the
product's costs was in distribution; only 15 to
20 percent was in manufacturing.
By 1990, I
explained in Unlimited Wealth, the
greatest opportunities for wealth were no longer
in manufacturing but in distribution. The book
projected that this would continue for the next
decade at least. That's why the richest people
in the world in 1990 were people who found
better ways of distributing things, versus
better ways of making things.
Q:
Can you give us some examples of those "richest
people" who made their fortunes in
distribution?
Back in 1961, Sam
Walton started a company that was committed to
never make its own brand, that would sell only
other name brand goods. By 1990, not only was
Wal-Mart the largest retailer in the world, Sam
Walton was also the richest person in the world
- a man who made his living distributing things
that other people made. (Sam Walton, by the way,
thought very highly of Unlimited Wealth
and emphatically endorsed the book.)
In 1990, Fred Smith
was the most successful airline entrepreneur of
the day. Back in 1976 he had started an airline
with its own fleet of planes and pilots - yet it
didn't fly people! The only purpose of Federal
Express was to move packages: distribution - an
unheard-of thought in 1976.
Ross Perot was one
of the wealthiest people in the world in 1990.
Perot built a $3.5 billion computer company that
made neither software nor hardware. What did EDS
do? It distributed other people's hardware and
software.
Q:
How did your observations about wealth and
distribution get network marketers'
attention?
I did three shows
on "Larry King Live" that year. I was explaining
the book on one of those shows; a man named
Donald Held happened to be watching. Don, a
Senior Executive Diamond with Amway, brought the
show to Dexter Yager's attention. Dexter and a
number of his people read the book and said:
"Hey, here's an economic analysis of why our
business works. This guy has no idea what
network marketing is - but he knows why it
works!"
I had no idea what
Amway was. I didn't even know what network
marketing was. I wasn't trying to promote
anything: perhaps that's one reason my research
rang true. I was just using empirical data,
analyzing distribution in America and the
world.
Dexter's people
decided to book me as a speaker and have me
explain to their people what I said on "Larry
King Live". That's how it all
started.
Q:
That was over a decade ago, and you've since
become a household word to thinking network
marketers everywhere. Obviously, your thinking
hasn't stood still; what has happened in the ten
years since?
I've changed my
focus a good deal. Back in 1990, the
opportunities still lay in physically
distributing products; since 1990 we've seen a
dramatic shift. In my new book, The Next
Trillion, I break distribution into two
functions: physical and intellectual.
Physical
distribution means getting the product to the
consumer-products that the consumer already
knows he wants. That's Wal-Mart: You know
exactly what you want when you walk into
Wal-Mart; you go in, pick it up, and get out of
the store. You don't learn about anything new
there.
Intellectual
distribution is where you learn about a new
product or service that you didn't know existed
before.
Up through 1990,
the great opportunities to earn fortunes in
distribution, the opportunities for the Fred
Smiths, Ross Perots, and Sam Walton's were in
physical distribution. Today, the great
opportunities are in intellectual
distribution.
Q:
For example...?
In 1999, a business
person made Time magazine's man of the year -
especially meaningful because it's quite rare
for a business person to earn that distinction.
Who was it? Jeff Bezos, who revolutionized the
distribution of books with
amazon.com.
Now, look closer:
Jeff Bezos is really in the intellectual
distribution business. You don't sign on to
amazon.com just to physically get the book; you
sign on to learn about the book. You read the
various reviews, look at other books in the
category, you may even log on to find out if
there even is a book on the particular topic you
want.
The truth is, the
great part of the physical distribution boom
that I described in Unlimited Wealth has
already come and gone; the fortunes to be made
there are largely already made. The fortunes
that will be made in the new millennium - at
least in the first decade of the new
millennium-will be more in intellectual
distribution: educating consumers about products
and services that will improve their lives,
products, and services that they didn't already
know existed.
Q:
Why is that where the real opportunities are
today?
Because that is
precisely where the biggest bottleneck is today.
There was a time when the two aspects of
distribution - physical and intellectual - were
commonly combined under the same roof. No
longer.
If you are as old
as I am, you might remember the first few times
you went into a store and said to yourself,
"Hey, I know more about this product than the
clerk selling it!" Twenty-five years ago that
was a shock: who would think of opening a store
where the clerk didn't know anything about the
product?
Today it's
universally accepted. Today, you the consumer
are expected to know about the product.
There are a few specialty retailers left, such
as Nordstrom's. But, in general, the retailers
have completely abandoned the traditional
function of teaching people about products. In
stead they have focused on the function of
efficiently and inexpensively delivering the
product.
Go into a showroom
and talk to a car salesman: does that
salesperson actually own the car you're talking
about? Not likely. Go into an electronics
outlet: how often will you meet a salesperson
who actually owns the particular product you are
considering - or who can even afford to? Seldom.
These people are in the business of showing you
where to find it on the shelf; They're not there
to teach you what it is.
Q: So
where do we learn today?
That's the problem.
The pace of technological change is rapidly
accelerating today, no matter what the industry.
By the time you learn about a product and are
ready to buy it - guess what? There's a better
one!
As I
carefully studied current conditions, I found
that the greatest need in America today is
wellness. This is such a new need that the word
itself, in the context we're using it, is an
entirely a new term.
Q:
Where do you learn about that
one?
Nowhere - that's
what's missing, that's the bottleneck in our
economy. Talk to any manufacturer and he'll tell
you, "We're selling models A, B, C, and D; the
new model F, is seven times better, it's even
better priced - but nobody's buying it yet!" Why
aren't they? Because they haven't learned about
it yet. They call this "backlog."
I saw this with
some educational software we developed in the
early 90s: here was a product that could totally
change a child's life - but telling people about
it was far more expensive than producing it.
Until we found the Amway Corporation in the mid
90s, we were pretty much dead in the water: we
had great new products, but no way of telling
the consumer they existed.
Q:
How does network marketing's way of doing that
contrast with more conventional ways of
marketing - through advertising and other mass
channels?
Network marketing
today is almost wholly intellectual
distribution. When you as a network marketer
discuss a product with a consumer, you don't
actually hand over the product. You rely on UPS
or some other delivery service to have the
product shipped to your consumer.
Even more
fascinating is that network marketing today is
typically done person-to-person by someone who
is also the user of the product. Unlike the car
salesman, electronics salesperson, or clothing
salesperson, the network marketer is an
educated, enthusiastic, experienced user of the
product you're asking about.
Those companies
that prosper in network marketing will focus
almost entirely on intellectual distribution,
teaching people about new products and services
that will improve their lives. Those that really
flourish will have some sort of unique or
proprietary technology. And not just unique, but
efficacious - better than anything else out
there.
Q: So
you've seen the weight of opportunity shift from
manufacturing, to physical distribution, and now
to intellectual distribution. How else has your
own thinking changed? What is the focus of
The Next Trillion?
I started to focus
on the great needs of America - which led me in
some surprising directions. People think of
their needs in a very mundane way - "I need a
new dress that doesn't make me look
overweight.", or "I need a car that gets better
mileage." I looked at it on a more macro level:
we have more fundamental needs such as eating,
sleeping, being healthy, being educated. As I
carefully studied current conditions, I found
that the greatest need in America today is
wellness.
Q:
Can you define "wellness" for us?
This is such a new
need that the word itself, in the context we're
using it, is an entirely new term. I had to come
up with entirely new definitions. First I had to
realize that what we call the "healthcare"
business is really the sickness business.
Our medical industry today has very little, if
anything, to do with health. The $1.4 trillion
we spend on medical care, which is one seventh
of the U.S. economy, is concerned with being
sick and treating symptoms of sickness. It has
very little to do with preventing illness, with
being stronger or healthier. When you go to
people in the medical industry today and say, "I
have arthritis, I don't see as well, I don't
hear as well." They say, "It's because of age -
age, age, age, age." But these are really just
symptoms of poor nutrition.
What
we call the "health care" business is really the
sickness business. The $1.4 trillion we spend on
medical care is concerned with treating the
symptoms of sickness. It has very little to do
with preventing illness, with being stronger or
healthier.
I define "wellness"
as money spent to make you feel healthier,
even when you're not "sick" by any standard
medical terms. To make you stronger, to make
you see better, to make you hear better, to
fight what we might call the symptoms of
aging.
Walk into any
average home in any average neighborhood, talk
to them, see what they need. If we were doing
this 20 years ago, we'd find that most of them
were worried about making a living, about their
new job, about what professions their children
should go into. The primary need for Americans
in our first 200 years was economic. That's no
longer true.
Today we are in the
eleventh or twelfth year of an unbelievable
economic expansion. Here is what you find today
as you walk into each home: They have enough to
eat, they overwhelmingly know where their
economic opportunities are, they know what they
could be doing to make more money, and if
they're not, it's often by positive choice - for
example, because they want to spend more time
with their families. the overall primary need
today is not their wealth - it's their
health.
In the past we've
associated poverty and economic depression with
ill health. When I was young, we often equated "
poor" with thin, starving. "Thin rich man" was
an oxymoron. Today, "poor" and "fat" have become
synonymous. The tables have turned: "rich fat
man" has become an oxymoron!
In
the past, we've associated poverty and economic
depression with ill health. When I was young, we
often equated "poor" with thin, starving. "Thin
rich man" was an oxymoron. Today, "poor" and
"fat" have become synonymous. The tables have
turned: "rich fat man" has become an
oxymoron!
Today, the lower
the income, the more we see obesity. Obesity is
a symptom of poor nutrition. Typically someone
who is obese is also vitamin-deficient, suffers
from fatigue and arthritis or other ailments
that all stem from poor nutrition.
Since 1980, we have
more than doubled the percentage of overweight
and obese people in our country. In 1980, 15
percent of the population was obese; by the year
2000 that number had jumped to 27 percent-that's
77 million clinically obese people! Those
numbers have increased ten percent in just the
past four years and are still growing at beyond
epidemic rates.
Because of people
being overweight or obese, we've also tripled
the propensity to get diabetes in this country,
with similar increases in so many other
diseases. Today, at a time of unprecedented
economic prosperity, we're seeing a huge part of
our population falling off the edge. For me,
here is the most amazing number: 61 percent
of the United States population is
overweight. That number, too, has doubled since
1980.
Now, how did we win
the Cold War and become so prosperous - only to
end up in a world where 61 percent of the
population is as oppressed as if the Russians
had won the Cold War?
Q: Is
there a ray of sunshine here?
More than a ray; in
fact, as grisly as this situation is, it has
also given rise to an entirely new economic
sector, a very positive sector - which is where
I got the title The Next Trillion.
Q:
Why do you call this the "next"
trillion?
Today, the food
industry represents about one trillion dollars
annually; the "sickness business" is another
trillion (actually, about $1.4 trillion). These
two industries feed one another in a fairly
insidious way because such a huge part of
sickness today is caused by the poor nutrition
supplied by the food industry. These two
trillion-dollar industries work together to
support that horrifying 61 percent overweight
number.
Looking at those
numbers, you might think that one day soon,
everyone will be overweight or obese.
That's actually not the case, though. The 39
percent of the U.S. population who are
not overweight comprise 10 to 15 million
Americans who are aging; as they age, they are
getting more healthy, more fit, more strong -
actually younger, by any standard medical
definition.
These people
represent that new economic sector. They are
primarily wealthy people; the first thing they
do as they start to have money is to figure out
how they can be healthier - and they're doing it
outside the medical establishment. They are
going to fitness clubs, watching their food,
taking the proper amounts of vitamins and
minerals, and investigating supplements and
other products that support their
wellness.
When I began to see
this trend clearly, I started wondering , is
there is a business here? The answer stunned
me.
In the year 2000,
wellness in America was already a $200 billion
industry; about half of that is composed of the
$24 billion spent on fitness clubs plus the $70
billion spent on vitamins and minerals. This
$200 billion was hardly a blip ten years
ago.
Q:
Who is spending this Money?
Mostly Baby
Boomers: prosperous people from the ages of 35
to 55. The Baby Boomers are a powerful economic
force; all marketers know that. Baby Boomers
represent only 28 percent of our population -
yet the group represents 50 percent of our
economy.
Baby Boomers are
the first generation we know of in recorded
history who refuse to accept the aging process.
This is fascinating, from a marketing
standpoint. Look at the cars they buy: they're
retro, designed to make them look like they're
in high school. Look at the clothiers they buy;
they're retro, too - they look like the clothes
they wanted but couldn't afford to but in
high school.
Up until now, the
Baby Boomer marketing mind has been all about
how to make them feel younger, how to help them
remember what it was like to be young. Now it's
gone a step further. Today, Boomers are starting
to buy things that actually make them
younger!
This has only just
begun. Most people don't even know there are
such products. As the rest of this 50 percent
buying power group learn about wellness, this
sector will explode. It has already gone from
virtually zero in 1990 to $200 billion today.
It's easy to see that this $200 billion will
become one trillion - or more - by the year
2010.
Q: Do
you get reactions, people saying, "What-a
trillion dollars?!"
Oh, all the time.
But put it in perspective. The first IBM PC came
out in 1981 - and by 1990, PC sales exceeded
automobile sales. Nobody knew what the Internet
was in 1990; consumers were allowed to get on
the Internet with their own accounts and private
email addresses only in 1995. By 2000, the
overwhelming amount of new wealth and new
millionaires in this country were being created
by the Internet. Given how fast these new
industries grow, one trillion in wellness by the
year 2010 starts to look like a conservative
projection.
As
much as we focus on the financial and lifestyle
benefits of the business, the real benefit is
what you can do to change a life - and the lives
of all the people who are touched by that
life.
Q: Does that
same challenge of the bottleneck, the need for
intellectual distribution, apply to the wellness
industry, too?
Absolutely. By
definition, all of wellness is new
technology. There is virtually no place to go
learn about it. If you go to conventional weight
loss clinic, they are focused on marketing their
processed food products to you - they don't give
you lessons in wellness. The information just
isn't out there; all the research in the medical
business is on sickness. Where does the consumer
turn?
The only way to
learn about wellness is through someone close to
you who has had a wellness experience. You see
your college roommate and go, "My God, John, you
look great! You look so healthy - what did you
do?" You bump into a wellness experience and
start to find out that there is a whole wellness
industry out there, with all sorts of new
products and services.
I went every year
to an orthopedic surgeon about my knee. Each
year he'd tell me, "Its worse than last year,
you've gotta have an operation, Paul." At some
point, I started taking glucosamine. Within two
months, the pain was gone. I went back to check
up with my orthopedist; he couldn't believe it.
When he found out that all I'd done was take
glucosamine, he said-jokingly, but also
truthfully - "Don't spread this around,
Paul...I'll be out of business."
Now, how could it
be that a product like glucosamine, a natural
substance which has been around for 50 years
(primarily as a veterinary product for horses),
a product that rebuilds my cartilage and makes
me feel so good...how could it be that nobody
knows about it? That's the classic introduction
to wellness: typically, you have one experience
like that, then you say, what else might there
be that my doctor never told me
about?
This experience set
me on the path of learning about supplements,
vitamins, and minerals. In my research for
writing this book, I was amazed at how much
basic biology and nutrition had escaped my
education. Here I am, a college professor for 20
years, three times New York Times
best-selling author - and I had been frankly
oblivious about food, nutrition, vitamins,
minerals, and natural supplements. That set me
on this path of inquiry.
You couldn't really
have gone into wellness 10 or 15 years ago
because there was no wellness industry. Most of
these products and services are just now coming
out of the laboratory. And when you look into
those laboratories and see what's coming, you
see that this business is really going to take
off. Of anything I've ever been involved with,
the wellness industry looks the most exciting
right now.
Q:
What connection do you see between network
marketing and this wellness
revolution?
It's all about the
difference between what I call "active learning"
versus "passive learning." Conventional
advertising media are not effective at
delivering what they call "intellectually
challenging" information-which is euphemism for
"new ideas."
Think for a minute
about how you watch TV. You're sitting back,
you're relaxed, on your couch; the last thing
you want is to be challenged with new
information. In fact, when you do see something
that challenges you, something that disagrees
with what you already know or think is true,
what do you do?
Q:
You change the channel.
Right! Television
is a very passive medium for learning, so we
can't really use it to teach new ideas. It's the
same with news papers. I used to write op-ads
regularly for various newspapers such as The
New York Times. I'd be at a cocktail party,
excited about a piece I'd written, and ask a
friend, "So, what'd you think about my piece on
such and such?" He'd say, "Paul, I don't read
your stuff. I'm a Democrat!" We don't read the
op-ed pieces that challenge us. We read the ones
that reinforce what we already think.
Most of our
information sources today have become passive
media. You don't spend time with them to be
challenged; when you do encounter something that
challenges you, you change the station or read
the other column.
The only time you
learn actively, meaning that you actually start
taking in and considering new information, is
when you start talking with someone in a
real-life dialogue. First, the person says
something you don't agree with. You think, "oh,
that couldn't be true." Perhaps you don't say
anything, because you're being polite-but your
face gives away the fact that you don't agree.
This starts a dialogue: they come back with a
little more, you start to respond...gradually,
bit by bit, the dialogue changes your
mind.
Correct information
about diet, nutrition, vitamins, minerals, and
supplements is almost all contrary to what we've
heard from our medical community; for many, it
runs counter to how we were brought up. There's
so much inaccurate information, naturally
they're going to be skeptical. The only way they
will actually change their paradigm or start to
learn new information is person to person -
because they're actively engaged in a
conversation.
This doesn't happen
overnight. It may take three, four, five, or six
conversations with different people before your
actually change your mind. That's why wellness,
which is so clearly paradigm - changing
information for so many people, really works
best in a one-to-one interactive environment -
like network marketing.
Q:
What do you see for the decade ahead,
Paul?
I see a one
trillion dollar wellness industry by the year
2010. I see great opportunities for network
marketing and network marketers. I see certain
network marketing companies, because they're the
fastest way to get the new information out
there, leading that industry. I see great
opportunities coming for the network marketing
industry because network marketing is clearly
the best vehicle we have today, in the United
States and around the world, to educate people
about new products and services. There's a great
window of opportunity for network marketing
companies to educate consumers about wellness
products and services. I also see great
challenges ahead for successful network
marketing companies, particularly those involved
in wellness, as the technology continues to
evolve. Network marketing companies need to
remain flexible so they can stay ahead of new
technology. the best wellness products and
services of yesterday may not be the best
products and services tomorrow.
The personal
computer industry is an apt analogy; entire
companies have come and gone because they made,
say, the best fax software-until someone came up
with a better fax software, or because they made
the best high-end monitor card - until every
computer started coming with a high-end monitor
card already built in.
Many of today's
network marketing products will go to retail
fairly quickly. You're already seeing that with
glucosamine and a number of other supplements:
they're starting to get into the conventional
retail channels. To stay competitive, network
marketers are going to have to stay ahead of the
new technology.
I see consolidation
in the industry. Many of the smaller network
marketing companies will not have enough money
for the R&D they need to compete with the
new technologies. I see merging of companies, as
well as companies enlarging their product
offerings. Companies who can serve more of their
customers' needs will be the most
successful.
I see real clinical
trials. The products of the wellness business
are moving toward an era of greater quality
control. Today, a third to a half of the bottles
in retail stores do not have in them what is on
the labels because it's not a regulated
business. The company whose sole business is
wellness has a lot more to lose if they make a
mistake: they often have better quality control.
Ultimately, none of the successful wellness
companies can afford to have a bad quality
product out there.
Make
no mistake: there is a crisis, a trend of
epidemic proportions going in the other
direction in the rest of America. Right now,
network marketing is the only force I see on the
horizon that has the potential to make this kind
of huge change.
Q: As
a part-time rabbi and someone who has been
vegetarian (as you say in your book, for
spiritual reasons), you've become pretty
passionate about wellness, haven't
you?
It has become
something of a mission for me, and I think it is
for network marketers as well. As much as we
focus on the financial and lifestyle benefits of
the business, the real benefit is what you can
do to change a life-and the lives of all the
people who are touched by that life. If you can
add five, ten, fifteen years to someone's life,
think of his children, think of his spouse.
We're wonderfully interrelated in the world
today, and when you can give someone the gift of
wellness, improving the quality of that life
every day and increasing the length of that
life, it's a truly wonderful thing.
Make no mistake:
there is a crisis, a trend of epidemic
proportions going in the other direction in the
rest of America. Right now, network marketing is
the only force I see on the horizon that has the
potential to make this kind of huge
change.
| 
AL Global
