The Next Millionaires by Paul Zane Pilzer

The Next Millionaires by Paul Zane Pilzer

Many people spend their lives worrying about money: How to earn a living, keep up with expenses, buy a house or save for their future. When it comes to making money, what worked yesterday often doesn't work as well today, and may not work at all tomorrow.

     The knowledge many people have of business today is similar to a doctor's knowledge of medicine at the beginning of the 19th century. In the early 1800s, doctors administered medicines and observed which ones cured which diseases. But when a medicine worked, doctors didn't know why. Bacterial infections hadn't yet been discovered—let alone the antibiotics and immunizations we now use to treat them. 
     Once these secrets were discovered, doctors learned more about how the human body works, and they were able to cure many of the diseases—such as smallpox, typhoid and polio—that had been the scourge of mankind for millennia.
     To create wealth and succeed in business today and tomorrow, you must understand how economics work—why people behave as they do, and why businesses succeed and fail. Without understanding economics, many people fail because they are trying to capitalize on an opportunity that has come and gone … or they are simply too slow to react to new trends. This is truer today than ever before because our business environment's changing

THE END OF SCARCITY
     The most important message for direct sellers is this: If you want to become wealthy in the next five years, technology—using new and improved ways to get things done—is your best friend.
     Many economists and writers on economics today don't understand how wealth is created. The study of traditional economics is defined as the study of scarcity—how to distribute a limited supply of critical resources such as farmland, minerals, food, fresh water. Communism, socialism, capitalism, and so on, are all theories of how economies should function.
     I believe that there is no real scarcity. What matters is the technology you're using. Throughout history, every time society was about to run out of a supposedly scarce resource—like coal—people invented new resources—like oil—to replace it. Today we use technology more effectively than ever to get more out of "scarce" resources or replace them with better ones.

In 1974, when the U.S. faced its first critical shortage of gasoline, cars averaged 10 miles per gallon. By 1981, the U.S. solved most of its oil shortage by replacing mechanical carburetors in cars with electronic fuel injectors, raising average automobile gas mileage to 20 miles per gallon or more. This had the same effect as doubling our supply of oil.
     In my book, Unlimited Wealth, I write that it isn't physical resources that make you wealthy; it is technology that makes you wealthy. Otherwise, Japan, which in the 1980s had the lowest per capita level of physical resources such as land, fresh water and oil in the developed world, should have had the lowest amount of wealth per capita— but it had the highest. The former Soviet Union, a nation with the largest per capita amount of physical resources, would have had the highest level of wealth. But it had the lowest—so low, that by 1991, the USSR ceased to exist as a single nation.

TECHNOLOGY : WHAT IS HOT TODAY WILL BE OBSOLETE TOMORROW
Look at the sheer speed of technological change in our time. In 1930, there were 30 million farmers in the U.S. barely producing enough food for 100 million people. By 1980, there were only 3 million farmers left producing one and a half times the food required for 300 million people. Is this because they acquired more farmland? No, it was because farmers got more technology and increased their productivity per farmer 45 times and their productivity per farm 100 times.
     In 1980, approximately 300,000 people worked in the U.S. making and repairing $300 mechanical carburetors when the automakers embraced $25 electronic fuel injectors—which doubled fuel economy and almost halved pollution. By 1985, when the last U.S. carburetor plant closed, these 300,000 people were out of work. The destruction of that industry took only five years—one-tenth the amount of time it took for most of America's farmers to become redundant.
     In 1985, when the digital audio CD came out, about 100,000 people in the U.S. worked making vinyl records. By 1990, there wasn't a vinyl record plant left in the U.S. and these 100,000 people where thrown out of work.
     Similarly, it took 20 years, from 1976-1996, to go from zero to 135 million VCRs in U.S. households, but only two years, 2003-2004, for the DVD to decimate the VCR industry and eliminate the jobs of almost 100,000 people working with VCRs and VHS tapes.
     Because technology is now changing faster than ever before, in every industry, the person who attains the most wealth is the one who manages or has the most technology versus the most physical resources.

THE WEALTH OPPORTUNITY TODAY IS IN DISTRIBUTION
     Back in the 1960s, when you went into a department store and bought something, about 50 percent of the retail price represented distribution costs and 50 percent represented manufacturing costs. Over the next two decades, many people became millionaires by finding cheaper ways of making things, often by shipping production overseas and using new materials like plastics. These 1960s entrepreneurs lowered the cost of manufacturing so much that soon, the price of a typical retail item represented only 20 percent manufacturing costs and 80 percent distribution costs.
     Then, beginning in the late 1970s, innovative entrepreneurs found ways to drive down that 80 percent distribution cost. Three entrepreneurs whose companies took off during that period, making them among the richest men in the world, included Sam Walton, whose Wal-Mart stores pioneered the use of technology to control inventory and lower costs; Fred Smith, whose Federal Express company linked the country and much of the world with rapid, guaranteed delivery service; and Ross Perot, founder of Electronic Data Systems (EDS), a pioneer in the computer storage of business and government records, which is to say, the distribution of information.
     You might think this suggests that the big money in distribution has already been made. Not so! Despite a massive lowering of distribution costs by Wal-Mart and others, distribution costs today still make up approximately 80 percent of total retail prices. Why? The advent of new manufacturing methods and the emergence of China as the "world's manufacturer" have been lowering the cost of manufactured goods!

THE #1 BUSINESS OPPORTUNITY : "INTELLECTUAL" DISTRIBUTION
     The success of Wal-Mart and other mass merchants has created new opportunities—particularly for those individuals seeking a part-time or full-time home-based business—that could exceed the opportunity seized by the distribution billionaires of the last three decades. Ironically, this opportunity was created by the very success of the mass merchants themselves—and it is tailor-made for direct sellers to exploit.
     For 100 years, prior to the emergence of Wal-Mart, Target and Costco, retailing in the United States was dominated by department stores like Macy's, Filene's and Marshall Fields. These distribution giants of their time simultaneously performed the two critical functions of distribution:
     (1) Intellectual Distribution—Teaching consumers about products and services that will improve their lives, typically items that they either don't know exist or don't know are now affordable; and
     (2) Physical Distribution—Physically
delivering to consumers the products and services they already know they want.
     Then consumers started spending a smaller proportion of their money on "durable" goods such as major appliances and televisions, and more on "consumable" goods like cleaners, paper towels and batteries. Consumers who buy supplies just want to get them and go. For this purpose, the one-story, big-box stores, with their focus on convenience and speed, decimated the multi-story department stores.
     However, to be convenient and fast, the mass merchants left out a critical aspect of the buying transaction. Mass merchants ignored the intellectual distribution part of the equation. Mass merchants don't take the time to teach anyone about new products. They sell their customers exactly what they already knew they wanted before they walked in the store.
     Educating people on new products and services is now the #1 business opportunity for those who are looking to create long-term wealth. Manufacturers in virtually every field create new products on an hourly basis—often products that can deliver great benefits, lower prices or both to consumers. But in today's mass-communications world, there is no efficient way to teach consumers about these newer and better products. The mass merchants don't do it and the department stores of yesteryear are no longer in business. This creates an enormous opportunity, especially for people looking to start a home-based business.
Today's new fortunes in distribution are being made by retail entrepreneurs who focus almost entirely on teaching consumers about new products and services. They don't handle the products, but rely on services like UPS or Federal Express to physically deliver them.
     Hasn't the Internet successes of recent years solved this intellectual distribution component? Actually, it hasn't. Sure, one of the Internet entrepreneurs, Jeff Bezos, the founder of Amazon.com, became Time magazine's "Person of the Year" in 1999 for pioneering online intellectual distribution. If current trends continue, the fortunes of new intellectual-distribution billionaires like Bezos (age 40, net worth $4.3 billion) and eBay founder, Pierre Omidyar (age 36, net worth $8.5 billion), are poised to surpass the physical distribution billionaires of yesterday.
     However, these online visionaries are filling only a small percent of the critical need in our economy for intellectual distribution. This is partly because their medium, the Internet, represents less than one-tenth of total retail sales. But mostly, it's because, when it comes to motivating consumers to try a new product or service, there is currently no substitute for one-on-one, person-to-person contact, which no computer can provide.
     Direct selling is the perfect intellectual distribution business for today's economy. A home-based business doesn't require a storefront, warehouses, employees or massive back office support operations. It only requires one person—you—willing to handle the education, the intellectual component of the distribution process.

DIRECT SELLING—THE LATEST (AND OLDEST) METHOD OF INTELLECTUAL DISTRIBUTION
     To change the brand a consumer uses, or to get him or her to try a product he or she doesn't know exists, the consumer must have direct contact with another human being. The department stores of yesterday did this automatically. They routinely staffed each part of the store with salespeople trained in their department's specialty.
     The demise of these stores has left manufacturers grasping at straws when it comes to finding a method to efficiently teach consumers about their new products and services.
     Only one form of intellectual distribution appears to be able to fill this gap: the modern direct selling industry.
     Direct selling is actually the oldest form of selling. For most of human history, direct sellers were peddlers and the primary distributors of tools and technologically-based goods. They initially handled both intellectual and physical distribution for their wares, until the development of third-party shipping and postal systems allowed them to concentrate on intellectual distribution and simply take orders. Then, in the 19th century, many direct sellers put down roots and became general store and department store merchants.
     Today, the modern direct selling industry is poised to become the distribution method of choice for all new products and services. Direct sellers bring the best both intellectual and physical distribution to their consumers: 
(1)Direct sellers speak one-on-one with consumers;
(2)Direct sellers use the best third-party methods of physical distribution, such as Federal Express or UPS, to deliver the merchandise; and
(3)Direct sellers use the Internet and other instant technologies to keep consumers informed of minor updates and to facilitate re-ordering and maintain back-office accounting functions.      

FOUR PREDICTIONS FOR THE NEXT FIVE YEARS
1) The next five years offer you better opportunities to become wealthy than any time in the past 100 years. This is because of new technology and recent changes in U.S. law.
2) The businesses that will prosper most will be in distribution. However, this will not mean distributing physical boxes of product, but providing information about innovative products and a convenient means of ordering them. I call this intellectual distribution.
3) Direct selling is the most effective way to create wealth through intellectual distribution.
4) The number of U.S. millionaires will increase 50 percent, from 7.2 million today to 10.8 million by 2010. Many of these 3.6 million new U.S. millionaires will make their fortune in the direct selling industry.

Professor Paul Zane Pilzer has served as economic advisor to two U.S. Presidents and is the author of five best-selling books, including Unlimited Wealth, The Next Trillion and The Wellness Revolution. His books have been published in 24 languages. Pilzer has started several entrepreneurial businesses—earning his first $1 million before age 26 and his first $10 million before age 30. Over the past twenty years, he has started and/or taken public five companies in the areas of software, education and financial services. Pilzer lives in Utah with his wife and four children where they are avid snowboarders, mountain bikers and chess players. To learn more about Paul Zane Pilzer, please visit www.paulzanepilzer.com.