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Amway/Quixtar Negative Sum Game Definitions

A positive sum game is a game where the participants, as a whole, take home more money then they brought to the game. An example of this could be a diversified basket of blue chip stocks. As the company's profits grow, because of expansion of the business, the stock of those companies can increase in value. Wealth for the shareholders (game players) is created as the company grows when it provides value-added services to the economy. This assumes the company is making a profit. Companies not making a profit are negative sum games. Most McDonalds franchises are positive sum games. The game player, the franchise holder, takes more in revenue from customers than he pays out to his labor and vendors. All McDonalds franchises combined together will report a net profit.

A zero sum game is a game in which the participants, as a sum, take home all the money they brought. A home poker game, an investment pyramid, or chain letter are all zero sum games. The participants take all monies home that they brought to the game. Some participants may take home more or less than what they brought, but all the participants together, take home all the money that was brought to the game.

A negative sum game is one in which the participants take home less than what they brought with them. Lotteries, casinos, racetracks are all negative sum game. The administrators of these games be it the state, casino, or race track all take money out of the pot which leaves less for the game players to take home.

Ten Customer Rule, changed in 1997 to the 50 PV Rule. This rule states that a distributor must sell to 10 non-distributors customers, or sell at least 50 PV per month to non-distributor customers, in order to receive any bonus. It was partly based on the existence and enforcement of this rule that the FTC ruled in 1979 that Amway was not an illegal pyramid scheme.

Description of typical Amway Distributorship "Optional" Overhead Costs

Description of Overhead Expense (all prices approximate)

Single

Couple

Couple with Children

The kit

$160

$160

$160

First set of tapes

$200

$200

$200

20 Recruiting tapes/Ad packs

$140

$140

$140

Recruiting videos

$17

$17

$17

Teaching videos

$17

$17

$17

1 "show the plan book"

$35

$35

$35

2 "Blue bags" for recruiting $25/each

$50

$50

$50

White Board, Easel, Pens

$80

$80

$80

Profiles of Success Book

$30

$30

$30

Standing Order Tape $6/wk

$312

$312

$312

Pace Setter Tapes 26/year

$156

$156

$156

Book Of the Month 6/year

$78

$78

$78

Monthly Diamond newsletter showing open meetings $25/yr

$25

$25

$25

Long distance calls to recruit out of town friends $5

$260

$260

$260

Postage to send out recruiting tapes (Priority mail $3/each5/week)

$780

$780

$780

Stuffing for the blue bag 1 popcorn/gum/cookies 4x/month=$1.77 bag

$85

$85

$85

Travel costs to show the plan (20 miles/weekx.30/mile)

$312

$312

$312

Baby sitting for showing the plan $4/hrx2/wk

$416

Monthly meeting at hotel for recruiting $4/personx12/year

$48

$96

$96

Food at night owl after hotel meeting $5

$40

$80

$80

Travel cost to hotel meeting (10 miles x $.30x12)

$36

$36

$36

Baby sitting for hotel meeting $4/hrx3x12

$144

Monthly Sunday mini-rally $10/person 8x/year

$80

$160

$160

Travel cost to mini-rally (25 miles x $.30x8)

$60

$60

$60

Dinner after mini-rally $10

$80

$160

$160

Baby sitting for mini-rally $4/hrx5x8

$160

Function tickets (4 per year @ $65 each, 1 person)

$260

$520

$520

Lodging at function (4x2 nights, $40/night shared room)

$320

$320

$320

Travel costs to the function (4x400 miles x $.30/mile, shared car)

$240

$240

$240

Meals at function ($10x5)

$50

$100

$100

Baby sitting for mini-rally $4/hrx48x4

$768

Amvox messaging service (local access assumed) $22.35/month

$268

$268

$268

Separate checking account to run the business $7.50/month

.

$100

$100

First year Costs

$4,218

$4,776

$6,264

Recurring costs

$3,490

$4,148

$5,636

Table of Contents

Amway/Quixtar:
A Negative Sum Game

Direct Distributor Group

Distributor Group Expenses

What Happens When We Add Bonuses?

Now Let's Get Real

Forget The "Tools"

What About Fast Growth?

Definitions

This page last updated on 3/29/2004