An Interview with
Paul Zane Pilzer
By John David Mann and
John Milton Fogg
Every generation, among the thousands of brilliant and merely-bright social
commentators, the human race produces one or two visionaries whose
stunning insights burst the bounds of their own specialist's expertise
and cut across all disciplines. We have our Benjamin Franklins, our
Buckminster Fullers - and Paul Zane Pilzer, the man who sizes up seismic
shifts in our economy.
Pilzer is quick to assert that he has
no crystal ball: it's all in the data. But the three-times New York
Times best-selling author and economic advisor to two presidential
administrations has an uncanny knack for assembling masses of facts and
figures and seeing the forests those reams of trees represent. His
penetrating insights have attracted the attention of network marketers
for over a decade.
Now he's back, with a new message: We
are witnessing the explosive birth of a new trillion-dollar industry,
and network marketers everywhere are poised to be the vanguard of that
explosion.
After two centuries of economic
opportunity for the pioneers of manufacturing, we have entered the age
of distribution. Today, the greatest opportunity for wealth awaits those
who can deliver what Pilzer calls "intellectual distribution."
He is describing network marketing. He
is, as the saying goes, singing our song.
Q: Paul, you were the first
well-known economist to have anything kind to say about network
marketing. What got your attention about the business in the first
place?
I think it would be more accurate to
say that the business found me. It started with my 1990 book, Unlimited
Wealth, which analyzed different sectors of our economy and projected
some interesting changes by the year 2000.
In the 70's and 80's, we were told,
"What's wrong with America is that we don't make things." So,
the bright young people of that era started to make things - and they
did it so much better, converting all the expensive raw materials and
labor into plastics and flexible automated manufacturing processes, that
they completely restructured the economics of retail.
Take a typical $300 item; it could be
anything-say, a television, camera, or dress. In the 1960s, the
manufacturing costs of this item would be $150. About 50% of the item's
cost was in manufacturing with the other 50 percent in distribution.
By the 90's, the same item still sold
for $300, but it was a far superior product with a great many more
features -yet its manufacturing cost had fallen from $150 to $15 or $20!
Now 8o to 85 percent of the product's costs was in distribution; only 15
to 20 percent was in manufacturing.
By 1990, I explained in Unlimited
Wealth, the greatest opportunities for wealth were no longer in
manufacturing but in distribution. The book projected that this would
continue for the next decade at least. That's why the richest people in
the world in 1990 were people who found better ways of distributing
things, versus better ways of making things.
Q: Can you give us some examples of
those "richest people" who made their fortunes in
distribution?
Back in 1961, Sam Walton started a
company that was committed to never make its own brand, that would sell
only other name brand goods. By 1990, not only was Walmart the largest
retailer in the world, Sam Walton was also the richest person in the
world - a man who made his living distributing things that other people
made. (Sam Walton, by the way, thought very highly of Unlimited
Wealth and emphatically endorsed the book.)
In 1990, Fred Smith was the most
successful airline entrepreneur of the day. Back in 1976 he had started
an airline with its own fleet of planes and pilots - yet it didn't fly
people! The only purpose of Federal Express was to move packages:
distribution - an unheard-of thought in 1976.
Ross Perot was one of the wealthiest
people in the world in 1990. Perot built a $3.5 billion computer company
that made neither software nor hardware. What did EDS do? It distributed
other people's hardware and software.
Q: How did your observations about
wealth and distribution get network marketers' attention?
I did three shows on "Larry King
Live" that year. I was explaining the book on one of those shows; a
man named Donald Held happened to be watching. Don, a Senior Executive
Diamond with Amway, brought the show to Dexter Yager's attention. Dexter
and a number of his people read the book and said: "Hey, here's an
economic analysis of why our business works. This guy has no idea what
network marketing is - but he knows why it works!"
I had no idea what Amway was. I didn't
even know what network marketing was. I wasn't trying to promote
anything: perhaps that's one reason my research rang true. I was just
using empirical data, analyzing distribution in America and the world.
Dexter's people decided to book me as a
speaker and have me explain to their people what I said on "Larry
King Live". That's how it all started.
Q: That was over a decade ago, and
you've since become a household word to thinking network marketers
everywhere. Obviously, your thinking hasn't stood still; what has
happened in the ten years since?
I've changed my focus a good deal. Back
in 1990, the opportunities still lay in physically distributing
products; since 1990 we've seen a dramatic shift. In my new book, The
Next Trillion, I break distribution into two functions: physical and
intellectual.
Physical distribution means getting the
product to the consumer-products that the consumer already knows he
wants. That's Walmart: You know exactly what you want when you walk into
Walmart; you go in, pick it up, and get out of the store. You don't learn
about anything new there.
Intellectual distribution is where you
learn about a new product or service that you didn't know existed
before.
Up through 1990, the great
opportunities to earn fortunes in distribution, the opportunities for
the Fred Smiths, Ross Perots, and Sam Waltons were in physical
distribution. Today, the great opportunities are in intellectual
distribution.
Q: For example...?
In 1999, a business person made Time
magazine's man of the year - especially meaningful because it's quite
rare for a business person to earn that distinction. Who was it? Jeff
Bezos, who revolutionized the distribution of books with amazon.com.
Now, look closer: Jeff Bezos is really
in the intellectual distribution business. You don't sign on to
amazon.com just to physically get the book; you sign on to learn about
the book. You read the various reviews, look at other books in the
category, you may even log on to find out if there even is a book on the
particular topic you want.
The truth is, the great part of the
physical distribution boom that I described in Unlimited Wealth
has already come and gone; the fortunes to be made there are largely
already made. The fortunes that will be made in the new millennium - at
least in the first decade of the new millennium-will be more in
intellectual distribution: educating consumers about products and
services that will improve their lives, products, and services that they
didn't already know existed.
Q: Why is that where the real
opportunities are today?
Because that is precisely where the
biggest bottleneck is today. There was a time when the two aspects of
distribution - physical and intellectual - were commonly combined under
the same roof. No longer.
If you are as old as I am, you might
remember the first few times you went into a store and said to yourself,
"Hey, I know more about this product than the clerk selling
it!" Twenty-five years ago that was a shock: who would think of
opening a store where the clerk didn't know anything about the product?
Today it's universally accepted. Today,
you the consumer are expected to know about the product. There
are a few specialty retailers left, such as Nordstrom's. But, in
general, the retailers have completely abandoned the traditional
function of teaching people about products. In stead they have focused
on the function of efficiently and inexpensively delivering the product.
Go into a showroom and talk to a car
salesman: does that salesperson actually own the car you're talking
about? Not likely. Go into an electronics outlet: how often will you
meet a salesperson who actually owns the particular product you are
considering - or who can even afford to? Seldom. These people are in the
business of showing you where to find it on the shelf; They're not there
to teach you what it is.
Q: So where do we learn today?
That's the problem. The pace of
technological change is rapidly accelerating today, no matter what the
industry. By the time you learn about a product and are ready to buy it
- guess what? There's a better one!
Where do you learn about that one?
Nowhere - that's what's missing, that's the bottleneck in our economy.
Talk to any manufacturer and he'll tell you, "We're selling models
A, B, C, and D; the new model F, is seven times better, it's even better
priced - but nobody's buying it yet!" Why aren't they? Because they
haven't learned about it yet. They call this "backlog."
I saw this with some educational
software we developed in the early 90s: here was a product that could
totally change a child's life - but telling people about it was far more
expensive than producing it. Until we found the Amway Corporation in the
mid 90s, we were pretty much dead in the water: we had great new
products, but no way of telling the consumer they existed.
Q: How does network marketing's way
of doing that contrast with more conventional ways of marketing -
through advertising and other mass channels?
Network marketing today is almost
wholly intellectual distribution. When you as a network marketer discuss
a product with a consumer, you don't actually hand over the product. You
rely on UPS or some other delivery service to have the product shipped
to your consumer.
Even more fascinating is that network
marketing today is typically done person-to-person by someone who is
also the user of the product. Unlike the car salesman, electronics
salesperson, or clothing salesperson, the network marketer is an
educated, enthusiastic, experienced user of the product you're asking
about.
Those companies that prosper in network
marketing will focus almost entirely on intellectual distribution,
teaching people about new products and services that will improve their
lives. Those that really flourish will have some sort of unique or proprietary
technology. And not just unique, but efficacious - better than anything
else out there.
Q: So you've seen the weight of
opportunity shift from manufacturing, to physical distribution, and now
to intellectual distribution. How else has your own thinking changed?
What is the focus of The Next Trillion?
I started to focus on the great needs
of America - which led me in some surprising directions. People think of
their needs in a very mundane way - "I need a new dress that
doesn't make me look overweight.", or "I need a car that gets
better milage." I looked at it on a more macro level: we have more
fundamental needs such as eating, sleeping, being healthy, being
educated. As I carefully studied current conditions, I found that the
greatest need in America today is wellness.
Q: Can you define
"wellness" for us?
This is such a new need that the word
itself, in the context we're using it, is an entirely new term. I had to
come up with entirely new definitions. First I had to realize that what
we call the "healthcare" business is really the sickness
business. Our medical industry today has very little, if anything, to do
with health. The $1.4 trillion we spend on medical care, which is one
seventh of the U.S. economy, is concerned with being sick and treating
symptoms of sickness. It has very little to do with preventing illness,
with being stronger or healthier. When you go to people in the medical
industry today and say, "I have arthritis, I don't see as well, I
don't hear as well." They say, "It's because of age - age,
age, age, age." But these are really just symptoms of poor
nutrition.
I define "wellness" as money
spent to make you feel healthier, even when you're not "sick"
by any standard medical terms. To make you stronger, to make you see
better, to make you hear better, to fight what we might call the
symptoms of aging.
Walk into any average home in any
average neighborhood, talk to them, see what they need. If we were doing
this 20 years ago, we'd find that most of them were worried about making
a living, about their new job, about what professions their children
should go into. The primary need for Americans in our first 200 years
was economic. That's no longer true.
Today we are in the eleventh or twelfth
year of an unbelievable economic expansion. Here is what you find today
as you walk into each home: They have enough to eat, they overwhelmingly
know where their economic opportunities are, they know what they could
be doing to make more money, and if they're not, it's often by positive
choice - for example, because they want to spend more time with their
families. the overall primary need today is not their wealth - it's
their health.
In the past we've associated poverty
and economic depression with ill health. When I was young, we often
equated " poor" with thin, starving. "Thin rich man"
was an oxymoron. Today, "poor" and "fat" have become
synonymous. The tables have turned: "rich fat man" has become
an oxymoron!
Today, the lower the income, the more
we see obesity. Obesity is a symptom of poor nutrition. Typically
someone who is obese is also vitamin-deficient, suffers from fatigue and
arthritis or other ailments that all stem from poor nutrition.
Since 1980, we have more than doubled
the percentage of overweight and obese people in our country. In 1980,
15 percent of the population was obese; by the year 2000 that number had
jumped to 27 percent-that's 77 million clinically obese people! Those
numbers have increased ten percent in just the past four years and are
still growing at beyond epidemic rates.
Because of people being overweight or
obese, we've also tripled the propensity to get diabetes in this
country, with similar increases in so many other diseases. Today, at a
time of unprecedented economic prosperity, we're seeing a huge part of
our population falling off the edge. For me, here is the most amazing
number: 61 percent of the United States population is overweight.
That number, too, has doubled since 1980.
Now, how did we win the Cold War and
become so prosperous - only to end up in a world where 61 percent of the
population is as oppressed as if the Russians had won the Cold War?
Q: Is there a ray of sunshine here?
More than a ray; in fact, as grisly as
this situation is, it has also given rise to an entirely new economic
sector, a very positive sector - which is where I got the title The Next
Trillion.
Q: Why do you call this the
"next" trillion?
Today, the food industry represents
about one trillion dollars annually; the "sickness business"
is another trillion (actually, about $1.4 trillion). These two
industries feed one another in a fairly insidious way because such a
huge part of sickness today is caused by the poor nutrition supplied by
the food industry. These two trillion-dollar industries work together to
support that horrifying 61 percent overweight number.
Looking at those numbers, you might
think that one day soon, everyone will b e overweight or obese.
That's actually not the case, though. The 39 percent of the U.S.
population who are not overweight comprise 10 to 15 million
Americans who are aging; as they age, they are getting more healthy,
more fit, more strong - actually younger, by any standard medical
definition.
These people represent that new
economic sector. They are primarily wealthy people; the first thing they
do as they start to have money is to figure out how they can be
healthier - and they're doing it outside the medical establishment. They
are going to fitness clubs, watching their food, taking the proper
amounts of vitamins and minerals, and investigating supplements and
other products that support their wellness.
When I began to see this trend clearly,
I started wondering , is there is a business here? The answer stunned
me.
In the year 2000, wellness in America
was already a $200 billion industry; about half of that is composed of
the $24 billion spent on fitness clubs plus the $70 billion spent on
vitamins and minerals. This $200 billion was hardly a blip ten years
ago.
Q: Who is spending this Money?
Mostly Baby Boomers: prosperous people
from the ages of 35 to 55. The Baby Boomers are a powerful economic
force; all marketers know that. Baby Boomers represent only 28 percent
of our population - yet the group represents 50 percent of our economy.
Baby Boomers are the first generation
we know of in recorded history who refuse to accept the aging process.
This is fascinating, from a marketing standpoint. Look at the cars they
buy: they're retro, designed to make them look like they're in high
school. Look at the clothes they buy; they're retro, too - they look
like the clothes they wanted but couldn't afford to but in high
school.
Up until now, the Baby Boomer marketing
mind has been all about how to make them feel younger, how to help them
remember what it was like to be young. Now it's gone a step further.
Today, Boomers are starting to buy things that actually make them
younger!
This has only just begun. Most people
don't even know there are such products. As the rest of this 50 percent
buying power group learn about wellness, this sector will explode. It
has already gone from virtually zero in 1990 to $200 billion today. It's
easy to see that this $200 billion will become one trillion - or more -
by the year 2010.
Q: Do you get reactions, people
saying, "What...a trillion dollars?!"
Oh, all the time. But put it in
perspective. The first IBM PC came out in 1981 - and by 1990, PC sales
exceeded automobile sales. Nobody knew what the Internet was in 1990;
consumers were allowed to get on the Internet with their own accounts
and private email addresses only in 1995. By 2000, the overwhelming
amount of new wealth and new millionaires in this country were being
created by the Internet. Given how fast these new industries grow, one
trillion in wellness by the year 2010 starts to look like a conservative
projection.
Q: Does that same challenge of the
bottleneck, the need for intellectual distribution, apply to the
wellness industry, too?
Absolutely. By definition, all of
wellness is new technology. There is virtually no place to go learn
about it. If you go to conventional weight loss clinic, they are focused
on marketing their processed food products to you - they don't give you
lessons in wellness. The information just isn't out there; all the
research in the medical business is on sickness. Where does the consumer
turn?
The only way to learn about wellness is
through someone close to you who has had a wellness experience. You see
your college roommate and go, "My God, John, you look great! You
look so healthy - what did you do?" You bump into a wellness
experience and start to find out that there is a whole wellness industry
out there, with all sorts of new products and services.
I went every year to an orthopedic
surgeon about my knee. Each year he'd tell me, "Its worse than last
year, you've gotta have an operation, Paul." At some point, I
started taking glucosamine. Within two months, the pain was gone. I went
back to check up with my orthopedist; he couldn't believe it. When he
found out that all I'd done was take glucosamine, he said-jokingly, but
also truthfully - "Don't spread this around, Paul...I'll be out of
business."
Now, how could it be that a product
like glucosamine, a natural substance which has been around for 50 years
(primarily as a veterinary product for horses), a product that rebuilds
my cartilage and makes me feel so good...how could it be that nobody
knows about it? That's the classic introduction to wellness: typically,
you have one experience like that, then you say, what else might there
be that my doctor never told me about?
This experience set me on the path of
learning about supplements, vitamins, and minerals. In my research for
writing this book, I was amazed at how much basic biology and nutrition
had escaped my education. Here I am, a college professor for 20 years,
three times New York Times best-selling author - and I had been
frankly oblivious about food, nutrition, vitamins, minerals, and natural
supplements. That set me on this path of inquiry.
You couldn't really have gone into
wellness 10 or 15 years ago because there was no wellness industry. Most
of these products and services are just now coming out of the
laboratory. And when you look into those laboratories and see what's
coming, you see that this business is really going to take off. Of
anything I've ever been involved with, the wellness industry looks the
most exciting right now.
Q: What connection do you see
between network marketing and this wellness revolution?
It's all about the difference between
what I call "active learning" versus "passive
learning." Conventional advertising media are not effective at
delivering what they call "intellectually challenging"
information-which is euphemism for "new ideas."
Think for a minute about how you watch
TV. You're sitting back, you're relaxed, on your couch; the last thing
you want is to be challenged with new information. In fact, when you do
see something that challenges you, something that disagrees with what
you already know or think is true, what do you do?
Q: You change the channel.
Right! Television is a very passive
medium for learning, so we can't really use it to teach new ideas. It's
the same with news papers. I used to write op-ads regularly for various
newspapers such as The New York Times. I'd be at a cocktail
party, excited about a piece I'd written, and ask a friend, "So,
what'd you think about my piece on such and such?" He'd say,
"Paul, I don't read your stuff. I'm a Democrat!" We don't read
the op-ed pieces that challenge us. We read the ones that reinforce what
we already think.
Most of our information sources today
have become passive media. You don't spend time with them to be
challenged; when you do encounter something that challenges you, you
change the station or read the other column.
The only time you learn actively,
meaning that you actually start taking in and considering new
information, is when you start talking with someone in a real-life
dialogue. First, the person says something you don't agree with. You
think, "oh, that couldn't be true." Perhaps you don't say
anything, because you're being polite-but your face gives away the fact
that you don't agree. This starts a dialogue: they come back with a
little more, you start to respond...gradually, bit by bit, the dialogue
changes your mind.
Correct information about diet,
nutrition, vitamins, minerals, and supplements is almost all contrary to
what we've heard from our medical community; for many, it runs counter
to how we were brought up. There's so much inaccurate information,
naturally they're going to be skeptical. The only way they will actually
change their paradigm or start to learn new information is person to
person - because they're actively engaged in a conversation.
This doesn't happen overnight. It may
take three, four, five, or six conversations with different people
before your actually change your mind. That's why wellness, which is so
clearly paradigm - changing information for so many people, really works
best in a one-to-one interactive environment - like network marketing.
Q: What do you see for the decade
ahead, Paul?
I see a one trillion dollar wellness
industry by the year 2010. I see great opportunities for network
marketing and network marketers. I see certain network marketing
companies, because they're the fastest way to get the new information
out there, leading that industry. I see great opportunities coming for
the network marketing industry because network marketing is clearly the
best vehicle we have today, in the United States and around the world,
to educate people about new products and services. There's a great
window of opportunity for network marketing companies to educate
consumers about wellness products and services. I also see great
challenges ahead for successful network marketing companies,
particularly those involved in wellness, as the technology continues to
evolve. Network marketing companies need to remain flexible so they can
stay ahead of new technology. The best wellness products and services of
yesterday may not be the best products and services tomorrow.
The personal computer industry is an
apt analogy; entire companies have come and gone because they made, say,
the best fax software-until someone came up with a better fax software,
or because they made the best high-end monitor card - until every
computer started coming with a high-end monitor card already built in.
Many of today's network marketing
products will go to retail fairly quickly. You're already seeing that
with glucosamine and a number of other supplements: they're starting to
get into the conventional retail channels. To stay competitive, network
marketers are going to have to stay ahead of the new technology.
I see consolidation in the industry.
Many of the smaller network marketing companies will not have enough
money for the R&D they need to compete with the new technologies. I
see merging of companies, as well as companies enlarging their product
offerings. Companies who can serve more of their customers' needs will
be the most successful.
I see real clinical trials. The
products of the wellness business are moving toward an era of greater
quality control. Today, a third to a half of the bottles in retail
stores do not have in them what is on the labels because it's not a
regulated business. The company whose sole business is wellness has a
lot more to lose if they make a mistake: they often have better quality
control. Ultimately, none of the successful wellness companies can
afford to have a bad quality product out there.
Q: As a part-time rabbi and someone
who has been vegetarian (as you say in your book, for spiritual
reasons), you've become pretty passionate about wellness, haven't you?
It has become something of a mission
for me, and I think it is for network marketers as well. As much as we
focus on the financial and lifestyle benefits of the business, the real
benefit is what you can do to change a life-and the lives of all the
people who are touched by that life. If you can add five, ten, fifteen
years to someone's life, think of his children, think of his spouse.
We're wonderfully interrelated in the world today, and when you can give
someone the gift of wellness, improving the quality of that life every
day and increasing the length of that life, it's a truly wonderful
thing.
Make no mistake: there is a crisis, a
trend of epidemic proportions going in the other direction in the rest
of America. Right now, network marketing is the only force I see on the
horizon that has the potential to make this kind of huge change.
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