The Set Up
It was two days after I lost my job. I was browsing through the business section in Borders Books when a young professional-looking man approached me. "Hey, nice jacket," he said. I turned to see that we were wearing identical raincoats. At first I thought, what a cheesy pick-up line. But I decided his intentions were probably innocent, and we began talking about work and business.

He claimed to be an independent business consultant. I told him a little bit about my lay-off, my background in journalism and my recent experience as an analyst and writer for a high-tech market-research firm. "Wow, sounds like you’ve got some great experience," he said. "I have a friend that started his own high-tech distribution company and he is doing quite well. You seem like you would be a good person for him to meet."

"What’s the name of his company?" I asked.

"The company is called Quixtar," he said enthusiastically. "They distribute products over the Internet. I’m doing a little work for them while I pursue some of my own business ideas. It’s a great way to make money on the side while you do other things. You should come to one of our meetings this week at the Sheraton Hotel. It would give you the chance to meet my friend Dan. He’s really the one who can answer all your questions."

As a recent high-tech casualty I was open to the idea of networking with friendly young professionals. Trusting my instincts that this guy wasn’t a crazy Ted Bundy freak, I saw no harm in following a potential job lead. As it turned out, my bookstore friend, John, was far from a psychopath. Instead, he was an Independent Business Owner (IBO) with Quixtar.

When I returned home I conducted a Web search and quickly uncovered a mountain of negative information about Quixtar. In Google’s on-line forum, Google Groups, one person wrote, "Watch out for Quixtar reps, they target you in Borders Book stores, and never leave you alone!" At that moment I felt like a giant, red bull’s-eye.

Visiting mlmsurvivor.com, I learned Quixtar was founded in 1999 and is the Web-enabled version of the $4 billon company, Amway. Known for its obsessed sales reps pawning off household products on friends and family, Amway is one of the world’s largest multi-level marketing (MLM) companies. I learned further that as of August 2002, no new Amway registrations were possible. By January, all Amway reps were to be Quixtar reps.

Apparently, Amway was creating a new brand via Quixtar, all hidden in a cloak of eCommerce hype. I decided the only way to confirm or deny my skepticism was to attend the meeting and find out what Quixtar had to offer.

The Sermon & The Pitch
Inside the Sheraton hotel, I was surprised to find at least 150 people lined up outside of a large conference room for the Quixtar gathering. Most were professionally dressed and there was a strong mix of men and women, ranging from young to old.

I waded up alongside the crowd until I spotted John at the front of the line. I was immediately introduced to his friend, Dan. "So glad you could make it Jenn," Dan said. "I’m really excited for you to meet some of the people here tonight!"

I was ushered in the room ahead of the rest of the line, where I was immediately introduced to a number of different people, including a newscaster from Channel 8; Dan had noted my background in journalism. The newscaster shook my hand, beaming from ear to ear. "Nice to meet you Jenn! Ya know, Quixtar is the best company you’ve never heard of," he said excitedly.

"I’m here to learn more," I replied.

"Great! But be sure to use your journalistic skills to do some research and find out what we’re really about!"

At that moment, I felt as though I had stepped into an episode of the Simpsons. Was this guy for real? Obviously, if he had any journalistic skill at all, he would’ve been as skeptical as I was about this company. Not to mention I had yet to find any positive information about Quixtar, or its relationship to Amway.

After we took a seat, the crowd’s chatter began to die down. It was time for Mr. Dean Kosage to be introduced. The crowed erupted in applause as the blond, good-looking and well-dressed Kosage strutted out onto the stage.

What was supposed to be a 45-minute speech ended up being a three-and-half-hour-long sermon about attitude, values and the importance of making money. According to Kosage, a supposed millionaire, we could easily be rich beyond our wildest dreams. We just needed to have faith in our ability to live an easier life. "I’ve made more than I ever imagined. I’ve done nothing special but have the guts to try," preached Kosage. "I’m here to empower you, to make you walk out of here and realize you’re a lot smarter than you think."

Interlaced among his ambiguous topic points were cult-like religious undertones and degrading insults. We were told, for instance, that our parents had brainwashed us to work 40-hour-long weeks. "Unfortunately, some of you have been raised by loving parents who are incredibly stupid. And you don’t like hearing it, but it’s the truth," Kosage said defiantly. "You’re going to have to realize that you’ve grown up with a victim attitude. Quite honestly, you’ve learned the language of losers."

He also made a point of referencing his Christian background, which seemed completely out of place and unnecessary. "I don’t say this to spew my spiritual beliefs, but I happen to be Christian. I’m very bold, but don’t confuse boldness and confidence with arrogance. Arrogance is when I insinuate you could never do what I do. But you’re supposed to be meek before God and bold before man."

Only a small portion of Kosage’s sermon was dedicated to Quixtar’s business model and the benefits of participating with Quixtar as an IBO. He explained that Quixtar is a private, profitable company outperforming companies such as Amazon. He credited Quixtar’s success to the fact that it doesn’t use advertising, doesn’t have stockholders and doesn’t have debt. Instead, it has IBOs. "Companies like Quixtar are looking for people like YOU to refer them business because you outperform advertising. You’re less expensive, and you’re less of a risk because if you don’t refer people to us, we don’t pay you," said Kosage. "We use the high-touch method. Not just high-tech!"

This was the pitch, although it was never stated simply: Quixtar wanted us to promote their products and recruit others to do the same. In return, we would receive financial reward in the form of a "bonus." I later learned this is the basis of Quixtar’s business model and the essence of MLM. MLM emphasizes recruiting others to sell products instead of spending money on advertising or selling products directly to consumers.

Multi-level Marketing: The Business of Enrollment
At first glance, MLM seems like a good idea. Why spend millions on advertising? But the differences between MLM and illegal pyramid schemes are subtle. Pyramid schemes are considered illegal because there is not an exchange of services or products for money. Setting Quixtar apart is the fact that its recruits do not pay their recruiters to join the organization, which is typically the case with illegal pyramid schemes. But similar to a pyramid scheme, Quixtar IBOs have to register new IBOs in order to reap a financial gain.  In both business models only a few people on top make money, and organizers rely on manipulative tactics to attract fresh recruits.

"The product of this business is enrollment. Everything you encounter is part of the sales pitch," said Robert Fitzpatrick, president of Pyramid Scheme Alert www.pyramidschemealert.org and author of False Profits: Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and Pyramid Schemes. "A lot of it is about changing your life and inducing a new way to live."

The cost to become an IBO is minimal ($50 to $75), but IBOs spend hundreds, sometimes thousands, more to become "inspired." In order to change their lives and maintain the faith that millions can be made, IBOs are encouraged to attend meetings and purchase motivational materials such as books, tapes and CDs. IBOs are also encouraged to purchase the Quixtar products they sell. According to Fitzpatrick, IBOs buy, consume, store or throw away 82 percent of Quixtar products.

The majority of IBOs make no money at all after the cost of attending events and purchasing training materials and Quixtar goods. MLMsurvivor.com concluded that the average IBO earned $23 a month in the year 2000. Even the handout materials I received at Quixtar’s meeting supported these dismal earnings. In fine print at the bottom of The Independent Business Ownership Plan brochure it states: the average monthly gross income for the "active" IBOs was $88.

The profitability of Quixtar is dependent on the constant cycle of recruiting and inspiring new members. In the last 20 years more than 6 million Amway reps have gone through the cycle, reaping millions for the Van Andel and DeVos families, owners of Quixtar and Amway’s parent company, Alticor.

I wondered how many people were actually believers versus deceivers? According to Fitzpatrick, MLMs induce an enormous amount of self-manipulation. "At the end of the day IBOs have to deceive themselves in order to deceive you because once you’re inside the organization, you understand the only way to make money is by recruiting others," said Fitzpatrick. "A lot of people want to believe and believing will help people succeed."

Don’t call me. I’ll call you.
I was relieved when Kosage’s sermon was finally over. It was like watching the Jerry Springer show and trying to determine if the madness I was witnessing was fact or fiction. Clearly, this was a business opportunity that required recruiting and inspiring others. I too could sell faith in the belief that Quixtar offered a new way of life and an easy way to become rich. In the end, however, I passed on the business of selling faith. I decided to leave that job up to pastors, ministers and priests.