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Wave Four
Network Marketing: the Most Powerful Business Force of
the 21st Century
FEATURE
Richard Poe
Intro by John Milton Fogg: By the time you read this, the premiere issue of our new Network Marketing
LIFESTYLES will be out and about. (Probably sold out and about the only way you can get a copy is to
phone in your one, two or three year subscription.)
Lots of Upline readers have asked me-- confidentially, honestly John, just between you-an'-me-- "How
good is the magazine, really?" Well, this being Network Marketing, I thought we'd show and tell you just
how "good" it is.
To tell you: Network Marketing LIFESTYLES is absolutely incredible! The articles, the pictures, the people
we've profiled-- truly incredible! Duncan Anderson and his staff have done an extraordinary job on the
first issue and promise to make the next one and the next even better! You cannot afford to miss a
single issue-- ever-- of your magazine. Yes, it is that good!

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To show you: Here's Wave Four by Richard Poe, reprinted with generous permission from the first issue
of Network Marketing LIFESTYLES. Flat out, it's the best third-party credibility article I've ever read (and
wish I'd written).
Friend Poe is the best writer in the business-- and I have the right to that opinion-- and there is no
greater champion of Network Marketing on the planet. None! If you like Poe's piece, and you think
you'd be interested in seeing Stephen Covey on The Seven Habits of Highly Effective Network Marketers,
and reading about The Young Networkers-- Generation-X superstars-- and Nikken's Team Diamond, and
Tom "Big Al" Schreiter, and Robert Allen of USANA, and Ray Gebauer of Mannatech, and Kim Klaver, and
Laura and Richard Kall of NuSkin/Big Planet, Dave and Coli Butler of FreeLife, George and Deedee Shaw
of Shaklee, and Brilliant Compensation, and MLM and the Law, and learning about Your Money, and,
and, and all the other people and pieces in this jam-packed first issue-- order your subscription today!
Call Poe's piece an appetizer. Chew well and enjoy... --JMF
Blood was running in the streets. Angry mobs toppled cars, smashed windows, seized hostages and
stormed government offices. Violence raged through several cities across China. When it ended, ten
people lay dead and more than a hundred injured.
Was this a scene from the Boxer Rebellion? Chairman Mao's Cultural Revolution? The massacre at
Tienanmen Square? No. It was the Chinese people's reaction, just last April, to a government ban on
Network Marketing and all other forms of direct selling.
"It's necessary to stop the operation of pyramid sales," said Wang Zhongfu, director of China's State
Administration for Industry and Commerce, "since it has begun to hurt social stability and economic
development."
The crisis aroused little interest in the foreign press. But for millions of Chinese, the ban threatened their
deepest hopes and dreams. So what else is new? Network Marketers and government regulators have
been locking horns in every corner of the globe for 50 years. Somewhere, at some time, most successful
multilevel marketing companies have been condemned as "pyramid schemes." Cynics could easily
dismiss the Chinese ban as but one more example-albeit an extreme one-of Network Marketing's
familiar regulatory woes.
But something was different this time. Unknown to China's Marxist rulers, a new era had dawned in
Network Marketing, an age of unprecedented power for the industry. Chinese officials would discover,
in just a few weeks, that they had picked a fight they could never hope to win. They had stumbled
directly into the path of an onrushing tidal wave.
This wave was set in motion by technological advances, drawing momentum from man's natural
yearning for liberty, propelled further by the corporate drive for quick, cheap access to markets. This
gentle ripple we call Network Marketing had grown to a storm surge, an irresistible maelstrom of
freedom and enterprise that I call "Wave Four."
In the years ahead, Wave Four will shake our economy to its roots. It will leave this world a freer and
more prosperous place. And it will transform Network Marketing into one of the most potent business
forces of the new millennium.
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Network Marketing-- the Choice of Presidents

"You strengthen our country and our economy, not just by striving for your own success, but by offering
opportunity to others . . ." The man who spoke those words was President of the United States at the
time. It was a videotaped statement specially prepared for sales representatives of Direct Selling
Association (DSA) member companies. The DSA is a trade organization based in Washington, D.C.,
composed mostly of Network Marketing companies. He went on: "I've followed your industry's growth
for years now . . . Your industry gives people a chance, after all, to make the most of their own lives and,
to me, that's the heart of the American Dream."
Could it be Ronald Reagan, singing the praises of
free enterprise and individual initiative? George
Bush, on a feisty day? Neither. That was William
Jefferson Clinton. When even big-government
Democrats have to reach over and toss you a bone,
you know that you've become one of the Big Dogs.
Not bad for an industry that was nearly abolished
by the Federal Trade Commission only 20 years ago.

In the years ahead, Wave Four will shake our

economy to its roots. It will leave this world a
freer and more prosperous place.

Network Marketing did not attain such power overnight. The process has been unfolding for more than
50 years. According to Nicole Woolsey Biggart, management professor at the University of California
(Davis), the first multilevel compensation plan was introduced by Nutrilite (now a division of Amway) in
1945. This inaugurated what I call "Wave One," the Wild West phase of Network Marketing. As
described in my book, Wave 3 (Prima, 1994), this was the industry's frontier period. Companies grew
with reckless abandon. But government regulators targeted them with equal recklessness, often making
up the rules as they went along.
The chaos of Wave One came to an end only in 1979, when, following an acrimonious investigation, the
Federal Trade Commission ruled that Amway-- and, by implication, Network Marketing in general-- was
a legitimate business, not a pyramid scheme. Encouraged by the friendlier legal climate, the industry
entered what I've called Wave Two. Breakthroughs in computer technology let entrepreneurs run
companies from their desktops. The 1980s saw unprecedented growth in the sheer number of startups.
But during Wave Two, the average person still faced fearsome obstacles in building a distributor
organization. Former International Business Machines salesman Don Held experienced first-hand the
rigors of networking during Wave One and Wave Two. Starting his Amway business in 1969, Held built
his downline the hard way. Not only did he have to recruit and train new distributors, but he had to
hand-write their commission checks every month. The 900-square-foot house he shared with his wife
and six children was transformed into a warehouse. Every bulk order from his downline had to be
processed, packaged and shipped by hand. During the summers, when Held's children were out of
school, the whole family would pile into a 30-foot motor home and travel the country like gypsies,
building the business as they went. "Network Marketing, in those days, was as primitive as a Model-T,"
Held recalls.

In future years, the 90s will be remembered as the

decade when Network Marketing became a
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Held was blessed. He had the drive and persistence

serious industry.
to succeed in the face of every obstacle. He
became a millionaire within five years, and today
collects hundreds of thousands annually. But he
often wonders how much more quickly he might have achieved his dreams had he started out today.
"It's a whole lot easier for those fellows now," Held muses.
Like other multilevel companies, Amway revolutionized its methods in the 1990s. Customers now order
products from an 800 number and receive shipments directly from the company. All a distributor has to
do is collect his commission check, issued each month from a company computer. Prospecting videos,
audiotapes, teleconferences and satellite TV broadcasts have largely automated the recruiting process.
Dedicated voice mail systems have streamlined communications within downlines. Fax-on-demand
services have freed upline leaders from having to answer repetitive questions. Three-way phone calls let
raw recruits listen while their more experienced sponsors close new prospects. Compensation plans
have larger commissions flowing to distributors for less work.
Held points to a couple in his downline, Joe and Doris Shaw, who became Executive Diamonds-earning
the same commission level as Held-after only three years in the business. "I've got people in my
organization who are making, in their second year, what I made in my tenth year," Held says.
Wave Three had begun.

A Decade of Growth
In future years, the 90s will be remembered as the decade when Network Marketing became a serious
industry. According to a June 23, 1995, article in The Wall Street Journal, the total number of Network
Marketers in the US increased 34 percent between 1990 and 1994. The number of full-time distributors
doubled between 1993 and 1994 alone. Network Marketing today is a $90 billion-dollar global business,
with some 27 million Networkers participating around the world, according to the Direct Selling
Association. A weighted measure of publicly traded MLM stocks called the Upline Index outperformed
the Dow Jones Industrial Average and the S&P 500 by nearly 80 percent in 1995.
Network Marketing also has transformed the direct selling industry. Ten years ago, most direct sellers
worked on straight commission. They were not allowed to recruit others to sell, or to draw commissions
from the sales of recruits. In 1990, 75 percent of the Direct Selling Association's member companies
used such non-multi-level compensation plans, according to DSA president Neil Offen. Nine years later,
all but 22.7 percent are full-fledged Network Marketing companies. One of the most important converts
to Network Marketing has been the multi-billion-dollar direct sales giant, Avon Products.

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Many rank-and-file sales reps opposed Avon's first experiments with Network Marketing, called the
Leadership program.
"What if Avon gets a bad name over it?" Avon lady Lisa Wilber asked herself at the time. Rattled by all
the MLM exposs she had seen in the press, Mrs. Wilber told her district manager, "I'm not going to do
it."
But after a year and a half selling full-time in Avon's non-multilevel program, she was working 80 hours
per week and earning only $10,000-to-$15,000 per year. "Even at the top earning level of 50 percent,"
she says, "in order to earn $100,000, you had to sell $200,000 worth of product. That's one heck of a lot
of lipstick."
Mrs. Wilber finally gave in and joined Leadership. The first year, most of her $12,000 in earnings had to
be reinvested in the business.
To make matters worse, Avon offered little training or support for the fledgling program. "Multilevel
marketing, back then, was viewed just as a pyramid scheme," remembers Walter Bracero, head of
Avon's Network Marketing program. Bracero admits that MLM's poor public image contributed to
Avon's lukewarm support. "So what we did was we played it low key, and didn't push it very hard."
With no corporate infrastructure to rely on, Mrs. Wilber was forced to build her own. She started a
newsletter for her downline, filled with tips and inspirational stories. She sent chocolates to her people
on their birthdays and postcards to remind them of key events. She also started a "thousandaire" club
for people selling more than $1000 per month, and awarded certificates to top achievers. She made
frequent visits to downline leaders in other states, and offered training seminars.
By 1997-- Mrs. Wilber's fourth year in Leadership-- she was earning $137,000 per year. Avon executives
had begun to take notice. Spurred by Mrs. Wilber's success, and that of other Leadership pioneers, Avon
threw its weight behind Network Marketing.
The company will not disclose how many on its sales force are now MLM distributors, but some
estimate it at 10 percent of the company's domestic direct selling force of 500,000. According to
Bracero, Avon is making its Network Marketing program "one of our key priorities for 1999."
Wave Four: The Tsunami
Avon's conversion is but one example of a movement now sweeping corporate America. For years,
Fortune 500 executives have observed the Wave Three phenomenon from afar. Emboldened by
Network Marketing's growing respectability, they are finally starting to cash in on it themselves.
Network Marketing, in the new millennium, will no longer be the exclusive preserve of entrepreneurial
mavericks. Through distribution deals, strategic alliances, mergers and acquisitions, Network Marketing
sales forces are, even now, being integrated into the global strategies of the largest and most powerful
corporations.
"In the future," says marketing consultant Faith Popcorn, "we'll be looking at Network Marketing the
way we look at regular marketing,"

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Popcorn has observed this trend in her New York-based BrainReserve consulting practice, which serves
blue-chip clients such as IBM, American Express and Eastman Kodak. A few years ago, Popcorn recalls,
BrainReserve clients routinely dismissed her urgent warnings to prepare for the Information Age-- two
key facets of which, she told them, would be competition from the Internet. "They would say, `Oh, we're
not worried about the Internet,'" Popcorn recalls
Then sales conducted over the Internet quadrupled in the past two years, leaping from $2 to $8 billion.
"Now when we do our futurescapes, we show clients who their most worrisome competitors are likely
to be," she says. More and more, the competitors who arouse her clients' greatest fears, she observes,
are turning out to be Network Marketing companies.
Paul Zane Pilzer learned to respect the industry's power-the hard way. For years, he attempted to sell
his educational CD-ROMs through conventional channels, such as direct mail, retail stores and schools.
His company, Zane Publishing, based in Dallas, poured $25 million into marketing. But every distribution
channel lost money. All, that is, except one-- Network Marketing.
Pilzer was introduced to the industry in 1991, he was promoting his book Unlimited Wealth through TV
talk shows and other media. On an audiotape he made with Tony Robbins called Powertalk, Pilzer
explained that the big money in the 1990s was to be found, not in building better mousetraps, but in
finding better ways to distribute those mousetraps.
In the movie The Graduate, Pilzer related, a well-meaning businessman offers Dustin Hoffman's
character, Ben, a single word of career advice: "Plastics." That was good advice, back in the 1960s, when
the best money was to be made in finding ways to reduce the cost of manufacturing-by making objects
from plastic instead of metal, for instance. But this was no longer true.
"As a result of advancing technology," said Pilzer, "the actual production cost of an item has fallen to
where it typically represents less than 20 percent of the retail price." There's not much room anymore
to push production costs down. Distribution costs, on the other hand, now account for 80 percent of an
item's price. For that reason, said Pilzer, the big opportunity now lies in finding ways to distribute
products more cheaply.
Pilzer had been a professor of Economics, a vice president at Citibank, N.A., and an economic advisor to
Presidents Reagan and Bush; he had never heard of Network Marketing. But Amway distributor Don
Held, listening to the Robbins-Pilzer tape, was thunderstruck.
"He was saying that the big money now was in distribution," Held remembers. "When I heard that, I
said, My God, that's what Network Marketing is!'" Held tracked down the famous economist and
retained him to speak at an upcoming Amway rally.
"When I got onstage, everybody took out a pad and paper and started taking notes," Pilzer recalls. "They
got very serious. I felt I was with my students, prepping for a final." Pilzer became a Network Marketing
celebrity overnight. For the next few years, he spoke at scores of Amway and other Network Marketing
conventions. In 1996, he started distributing his CD-ROMs through Amway, as a sideline to conventional
marketing methods. "I wish I could tell you I saw Network Marketing as the opportunity from the very
beginning," says Pilzer. "But I didn't."

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As his other income streams dwindled to nothing,

Pilzer's sales through Amway increased each year,
Wave Four Network Marketers will provide a
until Network Marketing distribution accounted for Distribution Freeway through which thousands of
every penny of his $8 million revenues. Just last
client corporations will move their wares.
year, Pilzer bowed to the inevitable, reorganizing
his company to distribute exclusively through
Amway. "We have failed at retail," he admits. "We
have failed at direct mail. But we have succeeded beyond any of our expectations Network Marketing."
The Distribution Freeway
Why did Pilzer's product sell so brilliantly through Network Marketing? The industry, says Pilzer, offers
the personal touch. Customers browsing through a Barnes & Noble or Blockbuster store are looking for
books and videos, not educational CD-ROMs. They hardly even noticed Pilzer's displays. But Amway
distributors use the CD-ROMs to help their own children succeed in school. Their personal testimonies
to friends and family arouse interest in the products, and close sales.
Hundreds of prominent companies now distribute through multilevel firms. Transnational behemoths
Dupont and Conagra have teamed up to launch Legacy USA, a Network Marketing subsidiary that sells
proprietary nutritional products. IBM is selling Internet training programs through Big Planet, a division
of Nu Skin International. Amway sells cars for GM, Chrysler and Ford, appliances for Hotpoint and
Whirlpool, and long-distance service for MCI. "Our catalog today looks like a small version of the classic
Sears catalog," says Held. It is a sign of our times that the Sears catalog in fact no longer exists, but the
Amway catalog does.
In the old days, smart entrepreneurs invented better mousetraps and used Network Marketing to carry
them to market. But, in the years to come, MLM companies will no longer need to invent new products.
Their business will be selling everyone else's "mousetraps." Wave Four Network Marketers will provide a
Distribution Freeway through which thousands of client corporations will move their wares. In the 21st
century, Network Marketing will emerge as the most powerful way to reach consumers.
Internetworking
The fast lane of the Distribution Freeway will be the Internet. Shrewd observers of the high-tech scene
noticed years ago that Network Marketers were leading the way in commercial applications of the
World Wide Web. At a time when corporate America dismissed the Net as all hype and no substance,
Network Marketing distributors were building downlines through website promotion and e-mail
blasting.
"Network Marketers look at every edgy opportunity," says Faith Popcorn.
Avon's Walter Bracero agrees. "`Internet' is short for `internetworking.' MLM is about networking, and
there's probably no quicker way to establish a network than through the Internet today. We are looking
at leveraging the Internet very heavily." Avon has already made a good start, in that direction, with
Avon.com, named the number-one retail website
of 1998 by Computer World.

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America Online has become a hotbed of recruiting "With the downsizing of big companies, the whole
activity through its Network Marketing message
economic structure of work is becoming different
boards. Amway plans to launch a "virtual mall"
from anything it's ever been before." -- Michael
later this year. One of the hottest sites in the
Gerber
business is MLM.com, launched in 1997 by Craig
Wennerholm and his partners. This online Network
Marketing newsroom gets more than 100,000 hits
per month, after only a year and-unlike much-touted Net-based companies such as Amazon.comMLM.com has already broken even through ad sales.
And now that mainstream business has begun to catch on to the basic use of the Internet and World
Wide Web, some Network Marketing companies and distributors are taking it to the next level.
"Back in 1996," says Wennerholm, "MLM'ers were using web pages mainly as an electronic brochure, to
tell their story. Now we're seeing more and more companies utilizing e-commerce capabilities. It has
become an interactive business tool to process orders and new applications, to query databases for
customer information, or even to notify people of upcoming events. I really think that's where the
industry is going."
Network Marketers of the future will use the Internet to receive real-time corporate videos of training
sessions, company announcements and opportunity meetings-- programming they can now get only
through pricey satellite broadcasts. That's the prediction of Stuart Johnson, whose company, VideoPlus
in Lake Dallas, Texas, sells communications products and services to Network Marketing companies.
"All that's needed is more bandwidth," Johnson says, "which is going to come from cable modems and
higher speed DSL telephone connections. Right now, there are only one or two million homes, out of
100 million, that have that technology. That's going to grow substantially over the next two years."
The Death of Jobs
In their 1991 book The Great Reckoning, economic forecasters James Dale Davidson and Lord William
Rees-Mogg predicted Wave Three, pegging the 1990s "a decade of Tupperware parties, Avon ladies and
Amway dealers." Now their latest book, The Sovereign Individual, forecasts nothing less than the "death
of jobs."
"Before the industrial era," they point out, "permanent employment was almost unknown." The word
"job" used to mean a one-time task that you were hired to do-- never a permanent position. No one
expected lifetime employment, much less a pension or gold watch.
Rees-Mogg and Davidson predict that "jobs" in the Information Age will once again refer to specific and
temporary tasks. "Already, major corporations such as AT&T have eliminated all permanent job
categories," they observe. "Positions in that large firm are now contingent."
The change from permanent jobs to temporary ones will traumatize many people unused to fending for
themselves.

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"With the downsizing of big companies, the whole economic structure of work is becoming different
from anything it's ever been before," says Michael Gerber, author of The E-Myth and president of the EMyth Academy, a small business consultancy. "But it's not going to be six billion people out on the
streets selling pencils. People are going to have to have a system, a framework, a context." Gerber
predicts that "turnkey" businesses such as franchising and multilevel marketing will provide the support
structure necessary for easing the transition from evanescent "jobs" to enduring self-employment.
A Turnkey System
Last year, Citigroup-- the world's largest financial services company-- cut its workforce by six percent,
laying off 10,400 people. But its Network Marketing subsidiary, Primerica, kept on growing. Citigroup
personifies the Wave Four transformation, in which "jobs" fade, while turnkey self-employment
opportunities grow.
"Standard & Poor's views Primerica's agency force of over 110,000 . . . to be its primary competitive
strength . . ." says a 1997 S&P report. Evidently, the analyst who wrote that passage had never heard of
Network Marketing before. He describes it in the clinical but wonderstruck terms of a lepidopterist
encountering a new species of butterfly. "The system is . . . very low-cost . . . yet the agents bear many
attributes of a controlled system. Agent compensation is enhanced by a multi-tiered system of
commissions that promotes new agent recruitment and allows each agent to build an organization for
himself."
Primerica representative Tyrone Taylor uses that
"multi-tiered" system to fight a one-man crusade
against poverty. Reared on the mean streets of
Detroit, Taylor's mission in life is to spread
prosperity among his fellow black Americans.

People in this industry have long observed that

when overall unemployment rises, Network
Marketing recruiting goes up.

"My downline is 98 percent African-American,"

says Taylor. "The only thing that separates a poor person from a rich person is knowledge. My passion is
to produce financially independent people in my community." In the process, Taylor has built a
considerable degree of financial independence for himself. He earned over $425,000 last year from his
downline.
Hard Times = Good Times
Experts agree that the Information Age will bring hard times to many people. "Technology makes
companies more and more efficient-- with fewer and fewer people," says Pilzer. "The most profitable
companies are the ones doing the most downsizing. That process will continue to accelerate. But
downsizing is positive, because it frees up quality people for new opportunities elsewhere."
Opportunities such as Network Marketing, that is. People in this industry have long observed that when
overall unemployment rises, Network Marketing recruiting goes up. Many veteran networkers insist that
hard times are really the best times for the industry.
"Most people aren't self-motivated," says Don Held. "They really don't do anything until they absolutely
have to. During a recession, people who have been procrastinating say, `Wait a minute, what other
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choice do I have?' I've been with Amway 30 years, and I've seen all the cycles. Amway grows
unbelievably during rough times, because people need the money."
Rod Cook, editor of MLM Insider, decided to test this folk wisdom by looking up some statistics from 20
years ago on three major Network Marketing companies. Cook found a 50 percent growth spike during
the 1973-75 recession. "When the recession came, they took off like a rocket," he says. "Even after the
recession petered out, their growth rates remained higher than before."
The Juggernaut
The industry's defenders have argued for years that Network Marketing was an idea whose time had
come. But, in the Wave Four era, MLM will no longer require defenders. The massive power of its
corporate clientele will be the only calling card it will need.
In last year's Chinese crisis, we gained a glimpse of the power MLM will wield in the future: No sooner
had the Chinese outlawed direct selling than they began to feel its backlash.
"It is a serious matter," said US Trade Representative Charlene Barshefsky, at a news conference in
Beijing, only three days after the ban was announced, "when a government simply bans the activities of
legitimate, indeed legitimately invested, companies." Speaking on behalf of American corporations such
as Amway, Avon and Mary Kay Cosmetics, Barshefsky continued, "These companies have invested over
$120 million in China and provide income to over two million Chinese. Obviously, the goal here is to reestablish these companies' operations as soon as possible."
In remarkable show of corporate solidarity, insurance, consumer products, electronics and even airline
companies expressed support for Amway and other direct-selling companies hurt by the ban, according
to Richard Holwill, Amway's Director of International Affairs. They recognized that an attack on direct
selling was an attack on all legitimate businesses in China.
"The ban could spark a US-China trade dispute on the eve of President Clinton's state visit in June,"
warned Business Week magazine. Direct Selling Association president Neil Offen discussed the ban in a
personal meeting with the President, who made the issue one of five priority items on the agenda for his
June 1998 China visit.
By the time the US delegation arrived, the Chinese had already repealed most of the ban. Negotiations
continue over certain issues, and the parties involved are close-mouthed on the details. But Chin-ning
Chu, president of Asian Marketing Consultants Inc., of Antioch, California, confirms that Network
Marketing has resumed in China, with the government's tacit approval.
Only 20 years ago, our own government questioned the very right of this industry to exist. But today,
the world's greatest superpower champions Network Marketing across the globe. Major corporations
flock to MLM. Dictatorships crumble before its onslaught. This is the roar of Wave Four, thundering like
a distant but fast-approaching tsunami. Someday soon, that tidal wave will strike. When it does, work
and commerce will never be the same.
RICHARD POE wrote the best-sellers Wave Three and The Wave Three Way to Building Your Downline.
He is also co-author, with Dr. Win Wenger, of The Einstein Factor. His most recent book is Black Spark,
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White Fire. The forthcoming Wave 4, will appear from Prima Publishing Inc. later this year. Mr. Poe is
based in New York City-- you can visit his website at http://members.aol.com/richardpoe.
If you have any questions about Wave Four Network Marketing please contact us.

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