Last Friday we reported on the infighting at Amway/Quixtar. For twenty years, with the cooperation of Amway headquarters, the top Amway distributors – i.e., the kingpins – have monopolized a sordid business known as the “tools and functions” trade. That trade is the sale of motivational materials and seminars to lower level distributors recruited into the Amway multi-level marketing pyramid.
The hype trade is so lucrative that the kingpins make more money from that than from getting a cut of the sale of Amway kits to their downline (lower level) distributors. In fact, the Amway kit – that package of goods a distributor buys from Amway ostensibly to resell – is something like a lossleader for the kingpins. It’s the bait that brings in the new recruits to sell motivational materials to. A group of mid-level distributors want to get into the “tools and functions” trade also and has sued Amway in U.S. district court to get a piece of the action.
You see, folks, Amway is like a Ponzi scheme. It keeps going only so long as new suckers are brought into the bottom of the pyramid. The “tools and functions” trade breathed new life into the rotten business by letting the kingpins shift income from Amway kits downline and then replacing it in spades by selling hype tapes, books, and seminars. Amway headquarters also bought a little time by putting lipstick on the pig when they repackaged Amway as Quixtar a few years back.
But there are fewer and fewer marks getting sucked into the pyramid. So to sustain their income the upline distributors need to sell more than just Amway kits to the same group of bottom-level distributors. That’s why the mid-level distributors need to supplement their Amway kit income by selling motivational products downline like the kingpins do. For obvious reasons, the kingpins want to keep their monopoly over the hype trade. Amway headquarters bought peace with the kingpins over twenty years ago by letting them have that monopoly. So there’s now a battle to bust the hype monopoly. However it shakes out, the Amway pyramid is crumbling into dust, because the battle is a symptom of its collapse. Like all Ponzi schemes, in the end there isn’t enough income to sustain it.
Now to begin answering the question we raised at the end of last week's article: Why does this matter to the residents and taxpayers of Grand Rapids? Well, Amway's founders, Rich DeVos and the late Jay Van Andel, understood the arthimetic of their racket and saw the writing on the wall. So before the Amway pyramid rolled back far enough to expose them for the non-billionaires they were, they began erecting new pyramids, literally, right smack in the center of River City. This time they would be their own kingpins, the marks would be the taxpayers, and the hype would be the glue that held everything together.
Next week we'll show you how the River City kingpins kept their scam going on your dime. (Click here for the final installment, "The Illusion of Wealth".)