Photographs by Felipe Buitrago
Ain't this the life: Elias Ordaz (left) and Damien Canerot, his 'upline' in the company, are true ViSalus believers.
ViSalus has taken root in Silicon Valley. Is it a brave new world of health and success, or just a pyramid scheme?
By Matt Stroud
"Hey, Joey, what does ViSalus do?" says the cameraman in a YouTube video called "ViSalus Tailgate Tour '06." Tom Cochrane's "Life Is a Highway" plays in the background.
"It makes you rich," says a smiling, brown-haired boy, who can't be older than 3, looking up at the camera that looms above him.
"That's right, Joey," says the cameraman. "It makes you rich!"
Surfing the web on a warm Friday evening in mid-February, I come across an ad on MySpace that says my life will change forever if I go to a "history making" event at the Fairmont Hotel at 7pm. Plus, "refreshments provided." So I go.
I'm about 15 minutes late. And it's not easy to find—I have to make two laps around the hotel before running into a man named Rick, who's carrying a conga drum. He asks if I'm heading to the "Ignite."
I say, "I think so."
"Follow me," he says, and then smiles like he's got a secret. "I can show you the way." Then he winks.
We walk into a big, darkened conference room—the Fairmont's Imperial Room, which is the size of a small high school gymnasium. The first thing I notice is the 10-foot tall Apple keyboard set up on a stage where spotlights are shining on a chiropractor named Dr. Jackie Buettner. I know her name because her picture, her name and her profession are projected above the huge keyboard behind her. In front of her, there are 20, maybe 30 rows of chairs, filled with more than 300 people. Though I'm late and the room is dark, a group of three young women approach within seconds, congratulating me for attending the event, patting my shoulders, offering to show me to a seat. "I'm fine, I'll stand," I say. But they insist: "Take a seat, please." So I do.
"What is this?" I ask one of them.
She laughs. "This is the beginning of a wonderful journey! I'm glad you're here!" Then she walks away.
I turn to the stage, where I hear Dr. Buettner say, "Within hours of sampling the ViPak, I could feel the energy wash over me." The crowd cheers. She speaks louder: "It just really is the best thing on the market today." The crowd cheers again. "It ... just ... works," she says, beaming.
Multiple speakers take the stage over the next 45 minutes, with similar claims. The huge keyboard, I find out, represents a website that ViSalus uses to recruit, and to get people interested in the product. It's called PathConnect, and it's described as "the more sophisticated, more ambitious MySpace." I'm intrigued, but at the end of the hour, Ryan Blair, ViSalus' CEO, says he's inviting everyone who wants to achieve "financial independence" to join him for the next part of the event. For a fee.
That's when I split.
Inside the ViPak
What I'd stumbled onto was a multilevel marketing (MLM) company called ViSalus Sciences, which recruits distributors to sell an anti-aging and energy supplement called the ViPak. The ViPak costs $125. And, though it states very clearly on the packaging that if results are to be achieved, users should ingest the product for at least 90 consecutive days, adjust their diet and develop a healthy exercise regiment, the ViPak lasts a month if taken as directed.
It was developed by a Michigan-based otolaryngologist (or ENT, for "ear, nose and throat" specialist) named Dr. Michael Siedman, who dabbles in herbal medicine. Siedman is prominently featured, with what can only be described as a knowing doctoral grimace, on ViSalus' web and promotional materials. He also helped develop ViSalus' new energy drink, Neuro, which will be available through distributors in May.
ViSalus Sciences was incorporated, according to Better Business Bureau reports, as a Troy, Michigan-based limited liability corporation, in March of 1997. The company was founded by Nick Sarnicola and Blake Mallen, who were, at the time, distributors for another MLM company called The Free Network—a firm that went under because it provided obsolete services in long distance calling, dial-up Internet access, and paging. After The Free Network folded, Mallen and Sarnicola devoted their time to ViSalus, and, by March 2005, they began promoting their health and wellness company in the Bay Area, targeting San Francisco first, then Antelope Valley, and San Jose.
Since I found ViSalus on MySpace, I figure it might be wise to look there to find the ViSalus associates in San Jose with the least obnoxious pages. Eventually, I end up finding a 22-year-old named Elias Ordaz who is willing to meet.
I meet Ordaz at Village California Bistro and Wine Bar in Santana Row, near where he lives with a roommate. In addition to ViSalus, Elias runs a mortgage lending business through a broker called Providential Investments, in Ceres, Calif. He won't tell me exactly how much he makes (though he hints it's close to $5,000 some months), or how many distributors he has underneath him, but he's a "Regional Director" in the ViSalus company, which means that he is considered "active," and that his group—his pyramid, if you want to describe the organizational flow, though no one in a multilevel marketing business dare use the adjective "pyramid," since they're usually paranoid it will be connected to the noun "scheme"—has three Qualified Legs and two Director Legs, plus $12,500 in Group Qualification Volume. In plain English, he sells consistently, and has also recruited some consistent sellers. He entered into ViSalus two years ago, after being approached while working at a Starbucks:
"I was the supervisor," says Ordaz. "He approached me with an opportunity. He said: 'Are your business options open?' And I was interested in entrepreneurship, so, basically, what happened was he offered me to sit down with him and take a look at a new company that's barely launching. He said it was brand new and there was only 40 people in the company. So I sat down with him. His name is Damien, and he's now my direct upline."
"Upline" is an MLM term for the person directly above you, who signed you into the company—and who, as a result, you pay first.
Ordaz was going to San Jose City College for kinesiology—he wanted to be "a doctor in some kinda health field." But that didn't last long. After a couple years, he got his general education associates degree, and sat down with Jason Lew, the first person to hit the top of ViSalus' compensation plan, and decided he wanted into ViSalus. Ordaz borrowed $500 from his grandfather and bought into the company.
Ordaz is tallish, about 6 foot, and he wears a black shirt, a silver tie, khaki pants and a half smile. He's more gentle than I expected. More honest. You can tell he wants to sell—even that he wants to sell me on ViSalus, while I'm reporting—but it's difficult to identify whether or not he's got the stereotypical sales eagerness. It doesn't seem like he does. He's not boisterous, he doesn't over sell, his voice is calm and he thinks before he speaks. On occasion, he'll try to spout the directness, the forceful assuredness that the ViSalus execs present on stage, but he often loses the energy to push, and moves onto vaguer statements like "You'll see," and "Trust me." Which are hard to swallow, considering he admits to having no formal training in wellness or health care or supplements, which he's trying to sell to me—someone who has even less experience in herbal supplementation than he does. I take a One a Day vitamin everyday, but I'm not sure why.
When asked about the true value of the ViPak—specifically, what makes it different from Herbalife, Pharmanex, Usana, Noni or any of the other hundreds of herbal supplement MLM firms around the world—he struggles to provide an answer:
"It's a system. An all-natural supplement," he says.
But what makes that different from any other supplement?
"It just works," he says. "I use it every day, and it just ... it just works."
During our conversation, Ordaz says that if I really want to talk about the company, I need to speak with either his boss, Damien Canerot, or to the company's CEO, Ryan Blair.
Blair is ViSalus' 29-year-old spokesman. His image, like Dr. Siedman's, is used on ViSalus' press and web material, but his primary responsibility seems to be Motivator. Part Tony Robbins, part Mary Kay, he travels from city to city delivering a you-can-do-it philosophy, and tales of a hardened youth crippled by an abusive, drug-addicted father, who abandoned his family when Blair was a teenager.
Later, the legend goes, Blair dropped out of high school, was "headed nowhere fast, and the entire world was crumbling around [him]." But then, through his mother, he met a rich real estate entrepreneur who eventually became his stepfather, and found quick success as an entrepreneur, developing and selling tech companies. He now shares his conquests with ViSalus audiences.
My first time meeting Ryan Blair is on a Saturday in March at the Radisson on North Fourth Street in San Jose. He's tall, easily 6 foot 3 inches with a sculpted face, curly blonde hair, tanned skin, blue eyes and an expensive suit. He's cordial and composed, and his answers to my questions seem mostly rehearsed. We sit down to chat, and the first thing that comes up is his Los Angeles house, which he supposedly purchased the Monday prior, and renovated from looking "like a crack house" into presentable shape, with the help of 16 contractors, for a Thursday party.
"I'm a very driven and motivated person," he says.
We chat, though it's mostly exposition on his part. Topically, we move toward multilevel marketing. If the ViPak is so great, why not distribute to GNC or independent health stores, and avoid the various stigmas often associated with pyramid schemes?
"There are problems with GNC and health stores," he says. "When you go to GNC, you often get an 18-year-old person who has no knowledge whatsoever of the products on the shelves. Brand marketers—the people who are winning right now—are not necessarily providing the best products or the best education for their consumers. For example, AirBorne [a successful over-the-counter health formula] does not have scientific backing, so, therefore, you can not judge a company's success by the success of their product. Success is often determined by the success of the marketing campaign."
I ask him about Ordaz, who isn't a health practitioner or a doctor, or anyone even remotely affiliated with science or wellness. How is that different than an uneducated GNC employee selling supplements over-the-counter?
"Well, in our training and education program, there's always a health component," he says. "And, besides that, salespeople who represent pharmaceutical companies aren't always health experts, but there is a doctor, or a program to educate the salespeople to do what they need to do."
Blair says that to be successful, the company has to have specific types of people.
"First, we need to have authorities—doctors and practitioners—and that's a lot of my focus: educating the educators. ... Second, you need the connectors, the people who are naturally going to talk about the things they love—and the person you met sounds like a connector. He may well talk to you about a movie he loved the other day, or a mechanic that he loves, driving you to those products. If you look at books like The Tipping Point, you can really understand how great organizations are built, and how great programs are built. We understand those elements, and made sure to incorporate those elements into our company."
"Don't you think the wellness industry has already tipped?" I ask him, following up his reference to Malcolm Gladwell's popular book on social trends. The system Blair describes roughly parallels Gladwell's model of using "mavens," "connectors" and "salesmen" to spread social epidemics.
"In California, yes, but not in the rest of the country," he replies.
"How about MySpace?"
"Ah," he says.
We briefly discuss PathConnect, the "goal-oriented MySpace" which was incubated, says Blair, by ViSalus, and is now its own separate company (though distributors who join ViSalus at the $499 level get free PathConnect advertising).
Blair explains PathConnect as the natural evolution of motivational speaking. "Tony Robbins and all these guys have it completely wrong. They have no idea how my generation—our generation—is going to progress and the tools we're going to utilize to become successful," he says. "Sure, these motivational speakers will say, 'Set your goals,' but they wouldn't then tell you how to find the people to help you achieve your goals. And if they did, it was a very difficult process. The innovations around PathConnect are really around someone stating their intent and meeting another person in the community with a similar intent, or having achieved something similar to learn from. The phenomenon of The Secret and the book and the movie are so massively phenomenal because society wants that message, and I believe PathConnect can not only give that message, but it can give you a tool at the same time."
He doesn't see Visalus as a get-rich-quick scheme—in fact, he claims it's the opposite.
"The fascination with signing up with a system of entrepreneurship or getting into some deal or real estate agent or whatever just to become rich, I mean, people are selling shortcuts to success," says Blair. "The lottery? Frickin' America itself is selling a shortcut to success. Buy a lottery ticket and you can be a millionaire! It pisses me off so much! So, for me, I always say that there are no shortcuts to success. There is nothing you get to keep that comes easy. I never won the lottery. My success has been work ethic and discipline, and that's what I tell people."
What all the fuss is about: The ViSalus program of supplements includes the 'Multi Mineral & Vitamin Formula,' the 'Super Charged Anti-Oxidant,' the 'Anti-Aging & Energy Complex' and 'Omega Vitals.'
Big Dreams and Pyramid Schemes
Multilevel marketing, network marketing, pyramid marketing—whatever you want to call it—is an arrangement in which individuals associate with a parent company as independent contractors. Just like Amway and countless others, independent contractors (or franchisees) are not paid insurance, 401k, or anything ancillary by the parent company, but, instead, compensated based on (1) sales of a products or service (like the ViPak), and (2) sales from recruited associates. Hence the pyramid concept: Someone sells to me, I sell to two friends, they sell to two friends, and so on, with profits split by rank, paid to each member, on the way to a final destination: the top.
Entire books have been written analyzing the potential pitfalls of multilevel marketing, like Robert L. FitzPatrick and Joyce K. Reynolds' False Profits and Dean Van Druff's What's Wrong With Multi-Level Marketing. But legally, there is often a gray area. "Ponzi schemes," named after 1920s scammer Charles Ponzi, are illegal pyramid schemes in which people pay into a program in order to sell the program. For instance, one person may pay $100 to a recruiter in order to become a recruiter himself, in the hopes of getting a certain number of others to pay him $100 to become recruiters, and so on. In order for no one to lose money on such a scheme, the supply of new recruits must never run out—but, of course, it always does, and often quickly.
However, the courts have ruled that despite their pyramid profit structure, companies such as Amway that utilize a multilevel marketing structure are legal if they do not charge people to join or to recruit other distributors.
"There are a lot of factors that come into play," says Dr. Jeff Kallis, an attorney and marketing professor at San Jose State University. "They don't have to adhere to the same truth-in-advertising laws as other companies, first of all. But if you like the product, and you can get in early enough, and if you have a wide enough set of contacts, and you've got sales skills to be really successful, you can build it into a very lucrative business."
He warns, though, that, if an independent contractor gets into it after an MLM has been around a while, there's not a lot of future. Why? Because a legal MLM still depends on the fact that you have lots and lots of levels beneath you to make money. Take Amway as an example.
"If you can develop five levels beneath you in Amway, you're probably working in the Brazilian rainforest," says Kallis. "Because almost everybody who wants to be in Amway has been exposed to it. So, in order to do well in MLM, you have to be an initial person who helps establish the initial chain."
With that in mind, it seems that one of the smartest decisions ViSalus could have made was to take on Silicon Valley first. The 2007 Silicon Valley Index, released by Joint Venture: Silicon Valley Network, revealed a huge disparity between the incomes of tech workers and those of Silicon Valley retail workers, who have an average annual salary of $29,301. Add this to the fact that workers in Silicon Valley pay, on average, 30 percent more for housing than anywhere else in the nation, and that only 33 percent of the jobs in Silicon Valley are in the tech sector. There's a certain pressure to get rich here—to be like some of the richest and smartest people in the world, who are stopped at the same traffic light you are, but sitting in a new BMW instead of a 1990 Honda Civic DX. How does a lesser-educated, unconnected, nontech worker match the income potential of a Stanford graduate? What type of education would be necessary to even come close to earning capital on their level? Does ViSalus offer a reasonable solution to close the financial gap?
"The advantage of MLM is that it doesn't require anywhere near the amount of money to get started. The advertising, your promotion, your initial people are just your friends and people you run into, and your ability to motivate them," says Kallis. "If you really want to set up a company and market it normally, then you're talking about a sales force, you're talking about warehousing, and that's a lot harder, more expensive."
'It Just Works'
The alternative-medicine industry to which ViSalus is connected is a billion-dollar business. The company's promotional materials claim their product was created from "two decades of NIH [National Institute of Health] funded research, and formulated by one of the top 1 percent of medical Doctors in the Nation." The four supplements included are called the "Multi Mineral & Vitamin Formula," the "Super Charged Anti-Oxidant," the "Anti-Aging & Energy Complex" and "Omega Vitals." But the health claims the company makes about their pills are supported mostly by anecdotal evidence, which is what concerns Dr. Michael Shermer, publisher of Skeptic magazine.
"To get FDA approval, you have to do those kinds of big, huge, massive experiments and epidemiological studies, which are basically natural experiments. And, it takes millions of dollars, and a staff of people, and a team of statisticians, and years to do, and that's the only way to test it," says Shermer. "So no one does it. It's time consuming, it's expensive, it's hard to do, it's hard to get the data, and so it's much easier to just rattle off anecdotes. 'Hey, this guy did it, and he said ... his tumor went away, or his gray hair disappeared, or whatever.' And, because humans are naturally anecdotal thinkers, those anecdotes are our folkways of adapting and thinking about the world, so we just fall for it every time."
Such anecdotal evidence, he says, is usually based on a few examples of people who claim to have experienced its effect.
"Next on Oprah, you know? Look at this person who tried this, and look how good their life turned out!" says Shermer. "And no one ever asks, well, how about the counter examples? What about the people who tried it and their lives didn't work out? Or, what about the people who didn't try any of that, and their lives turned out great? And, of course, that would be the scientific way of thinking. And, of course, that doesn't come natural."
Is ViSalus Legal?
No matter how many ways the ViSalus folks try to spin it, pyramid schemes, multilevel marketing and network marketing companies have some serious public relations issues to conquer if they're going to hit the mainstream. There are high-profile failures like the downfall of Equinox, a MLM deemed a pyramid scheme in 2000, which made nationwide news after an enigmatic Bill Gould was liquidated of more than $40 million in illegally appropriated funds.
That case spurred changes in the law regarding MLMs. Dr. Kallis sums up the current law like this: "If [the MLM in question] says you have to buy products, then they're in violation."
But trying to determine the letter of the law is difficult. The relevant statute, California Penal Codes Section 327, says this:
Every person who contrives, prepares, sets up, proposes, or operates any endless chain is guilty of a public offense, and is punishable by imprisonment in the county jail not exceeding one year or in state prison for 16 months, two, or three years. As used in this section, an "endless chain" means any scheme for the disposal or distribution of property whereby a participant pays a valuable consideration for the chance to receive compensation for introducing one or more additional persons into participation in the scheme or for the chance to receive compensation when a person introduced by the participant introduces a new participant. Compensation, as used in this section, does not mean or include payment based upon sales made to persons who are not participants in the scheme and who are not purchasing in order to participate in the scheme.
What exactly constitutes "a valuable consideration for the chance to receive compensation?" In the ViSalus compensation plan obtained by Metro, it is stated that to enroll in the company—and, more specifically, with the Future Vision Alliance, ViSalus' training program—one can either pay $39 for basic enrollment ("Associate") or $499 for the "Executive Success System," which includes advertising on PathConnect, marketing materials, and more.
I question several ViSalus representatives directly about whether there is a financial requirement involved in joining ViSalus.
"To try our product is really the first way to get involved," says ViSalus rep Jaun Laun. "And our least expensive products are in the $20 to $30 range, and our energy drink is going to be $39 for a box. So there are definitely some financial entry points."
"If you actually want to start selling, what's required then?" I ask.
"If you want to enroll in the company as a distributor, then you can fill out an application and the deal is that the upfront cost would be $39 for your business guide. For the company, there's no high up front kit charges if you want to be a distributor for commissions and bonuses."
"OK, so if you pay the $39, then you can go to someone else and say, 'okay, you can buy this product, you can sell it like crazy, and they can buy it from you, and they can be involved in your multilevel marketing.'"
"Correct," says Laun.
Damien Canerot says "the real requirements to success is work ethic, coachability and sheer desire," but that "from a company standpoint, there's either an entry of $40 or an entry of $500."
But Blair differentiates between an investment in the company and "a straight fee."
"There is no investment to be made," he says. "It's a $500 entry fee that's 100 percent refundable, and you're getting $250 in product to go out and give samples, you're given web systems, web sites, marketing materials. But the reason I make the distinction is because there are companies out there that say, hey, go out there and invest $100,000 to get started, and that's what gave network marketing a bad name."
After lunch at Santana Row, Ordaz invites me up to his apartment. When we get there, he shows me his ViSalus BMW, which he received through a promotion where distributors are rewarded with a BMW lease if they reach regional director status, before taking me upstairs to his undecorated, plain-white-walled Santana Row apartment that overlooks the Winchester Mystery House. He offers me ViSalus promotional materials and water. We stand on his balcony looking at the San Jose tourist trap that was worked on continuously—mysteriously—for more than 38 years.
"I wonder what was going on in Sarah Winchester's mind?" I ask. "Why her demons needed constant construction."
"Ha, I don't know," Elias says. "She had strange dreams, I bet."
"That's probably fair to say."
"You gotta follow your dreams, right?"
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