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5: Lost Years, No Money: A Story of Amway Failure with Perry Marshall

November 22, 2016

Perry Marshall has been incredibly influential in the sales and marketing worlds, laying the foundation for the $100 billion Pay Per Click industry. But he had to fail first.

In the ‘90s he worked for Amway. After six years, tens of thousands of dollars lost, and significant damage to his marriage, he finally gave up. This episode tells the story of everything that happened in between—and how Perry’s Amway failure spurred him on to the massive success he’s found today.

Green Flag: Nothing but Money on the Horizon

I’d gotten fired a few months before, then I bounced around and got fired a few more times: three times in one summer. I was 21, and it rattled my cage. It upset my notion of a world where if you put your head down and do your work, everything will be fine.

But I got invited to an Amway meeting, and everything changed. Here’s what hooked me: in the meeting, they were saying, “What if you made more money and had more time?” I wasn’t really connecting with it, but my wife said to me, “Perry, if you made an extra $2,000 a month the day you got out of college, what would you do differently than if you didn’t?”

All of a sudden, I got it. I realized I would become a serial entrepreneur to have more freedom and flexibility.

So I went to an Amway rally and got immersed in it in a day. I was introduced to this world where I could make more money and have more options.

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A few days later in class, this guy next to me slowly wrote the number $32,000. He had been offered that amount a year for an engineering job, and he thought it was an astronomical sum of money. For the first time in my life, I looked at that number and didn’t think it was a lot of money at all—all because of the Amway rally.

At that moment, I resolved to dive into Amway. It was terrifying, light years out of my comfort zone. Most of my friends weren’t remotely grown up enough to do this, so I was talking to my friends’ parents for advice.

Still, the horizon was bright and seemed to promise mountains of money.

Red Flag: Spending More Than I Made

For the first six months, it was agonizing, making phone calls and having a perpetual knot in my stomach. But as you’ll usually find, when you grind your way through any deep personal struggle, eventually you start to get acclimated to it.

I realized that in something like engineering, you can work your way through a problem methodically. But sales really hinges on pivot-point moments where a whole bunch of stuff happens in a short period of time, if you do it right. The sales world can move at a tremendously fast speed, but if I stomached it, it could start to be fun.

I wasn’t making a lot of money, but I made some. I squeaked by. Regardless, I was free. I didn’t clock in and out.

I was really bad at sales, but I was learning. Reinventing myself. It was hard, but in another way, exhilarating.

There was a problem, though: the recruiting part never really worked. It took me a long, long time to admit this to myself. I just kept redoubling my efforts.

They program you to believe that everything that works is because of their amazing system, and everything that doesn’t is your fault. You just haven’t read enough books, haven’t grown enough. I bought it.

In the recruiting aspect, I was spending more money than I made. Little by little, though, there was a ball and chain that my failure was dragging behind me. Every month that I hadn’t hit my goals was more evidence that I couldn’t do this.

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I was embarrassed at how little progress I’d made. After four years, I still hadn’t made much money. I listened to more motivational tapes and shoved my uncomfortable feelings down, but meanwhile my intuition told me, “Nobody would inflict this on anybody. You’re killing yourself, and you’d never want anybody you’re recruiting to know how much of a struggle this is.”

The white flag should have come at this point, but of course it didn’t.

Black Flag: Loss of Faith

It took five years for me to reach the lowest point. I was so frustrated, and I went to a meeting where my Diamond was. I went on a walk with him, and I told him the whole thing wasn’t working. All I got from him was a pep talk.

I tried to give myself a pep talk. But my wife pointed out that if I couldn’t make this work with all my effort and skills, did I really think Jose, the nice but average guy I was recruiting, could? Did I really believe that anybody could succeed with Amway?

The answer was definitely no. And if Jose couldn’t do it, then I couldn’t honestly go out to people and say with integrity, “Anybody can do this.” The truth was that a few people could do this, most people couldn’t, and nobody knew the formula for sorting them out ahead of time.

I realized it didn’t work, and for those higher up, it never really mattered whether it was working or not: the only thing that mattered was whether people were buying tapes and books.

It was a breakage model. They would say that “We’re not successful until you are,” but it wasn’t really true. You sell picks and shovels to the gold miners, and you make money whether or not they do.

For all intents and purposes, the only money to be made in Amway was selling tapes and books. The rest was a pretense, the world’s most inefficient means of distributing products and services that still actually functions.

White Flag: A Dark Underbelly

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My white flag moment was a long time coming. Even though I was convinced that Amway didn’t work correctly, I wasn’t convinced that there wasn’t a way to make it work. I was so invested that I spent another year trying to make it work.

Part of the reason I thought I could make it work was that I discovered the world of direct marketing. I started working out advertising approaches to get my phone to ring, and it was kind of working. But there were two things that brought me to hold up the white flag:

1) I sent out some mail, generated some leads, and looked at my numbers. I said, “Wow. The economics of this thing totally suck.”

2) The whole discussion of how the Amway business actually worked started going public. This was around 1997-1998, and the Internet was coming on strong. This completely changed the Amway business because all of a sudden there was a place for public discussion about how the business actually worked.

There was this Emerald in Amway named Jeff Probandt who put up a website, and he explained the whole backstory, how things really worked. A thousand light bulbs went off for me; I realized that certain things they said were code for something else that I hadn’t understood.

For example, you would hear on tapes and in meetings, “When we made a quality decision that we were going to be direct distributors, the very next month we were at $7,500.” I thought that meant they gave themselves big speeches. No, no, no.

They got a second mortgage, bought a bunch of products, and bought themselves over. They made themselves eligible for the tape and book money. That’s what that actually meant.

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There was actually a deep, dark underbelly to this thing that I was just then finding out. I spent a bunch of time unwinding everything I knew until I was emotionally ready to go. I had to reverse-engineer and deconstruct it before I was ready to walk away.

Checkered Flag: Redirecting My Work Ethic

In the end, I lost about six years and many tens of thousands of dollars, which to a guy in his 20s was a lot of money. I did a lot of damage to my marriage as well. My wife mentally wrote this Amway thing off about two years in, and the rest of the time it put a massive strain on our marriage. That was the real cost.

I borrowed heavily from the emotional bank account. And we generated a lot of financial debt, too.

But I could never have found the success I have in the world of sales and marketing without those six years, not without some other profound learning experience. In Amway, those who were successful had to be such good students of the process and have an incredible work ethic and relentless passion and dedication. If you took that level of work ethic and personal development ethic and applied it to any normal business, you would be so much better than anyone else in your field. For all its flaws, the program did teach me one thing: you must work on yourself.

There were two more lessons I learned from my failure story:

  1. How to tell stories – Everything in the Amway world was home-spun. They learned to tell stories, give seminars, and deal with hostile crowds in an organic environment. I got storytelling in my bones from Amway. I translated it to my books and emails. I was already a good writer, but I didn’t know how to craft stories.

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  1. My character could have been shattered – I could have been one of the few to be amazingly successful, becoming an Emerald or Diamond, but if I had I would have become the worst kind of person: believing I had worked through this amazing program and spitting on anyone who didn’t have my same skills and drive. If I’ve learned anything, it’s this: do not wake up on third and tell yourself that you hit a triple.

The lessons we learn are only valuable to us if we decide to apply them. I’ve tried to do that.

Failing Forward

In each episode of How to Lose Money, we’ll be asking our guests to answer a few questions about failure. Here’s what came out of this episode:

  • Looking back on your experience, why did this failure happen to you?

I didn’t listen to my gut.

  • What is the single most important lesson that you’ve learned?

Listen to your intuition, and when something is fundamentally not quite right, stop and don’t plunge forward until you’ve made it right.

  • Who do you turn to when you need help or advice?

I have always had people who are either mentors or alter egos, because their learning is considerably better than mine.

  • How do you strengthen your current business to protect it from this same failure?

You have to question everything. Question your assumptions.

  • If someone found themselves in the same position you were in, what piece of advice would you give them?

I would ask the question, “Are you drinking from a pink Kool-Aid machine? Are you buying into a version of reality that isn’t really reality?”

This episode is based on an interview with Perry Marshall, author of 80/20 Sales and Marketing. To hear this episode, and many more like it, you can subscribe to How to Lose Money.

If you don’t use iTunes, you can listen to every episode here.

Quotations

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