In the piece “Vitamin Flop” which aired on April 13, The Daily Show highlighted a failed business venture of Donald Trump’s. The Trump Network was a company started in 2009 by Ideal Health. The anti-Trump National Review claims that Donald Trump purchased Ideal Health in early 2009, but Trump’s lawyer states that he was not an owner and did not endorse the products. They both could be telling the truth if one of Trump’s cleverly crafted legal entities was the actual owner.
CBS News produced the story and reported it on CBS This Morning. The video is available at http://www.cbsnews.com/videos/how-donald-trump-recession-proof-supplement-venture-failed/.
The “Vitamin Flop” piece on The Daily Show is based on the CBS This Morning report and can be found at http://www.cc.com/video-clips/orcn8a/the-daily-show-with-trevor-noah-the-trump-network–donald-trump-s-failed-pyramid-scheme
The reported facts (some come from http://www.statnews.com):
1. Donald Trump pitched the company as a “recession-proof” business in a 2009 promotional video;
2. “Marketers” started by purchasing a starter kit for $497;
3. They were then encouraged to enroll others in this multi-level marketing business;
4. The Trump Network sold a urine test kit called “PrivaTest” for $139.95 and claimed to tailor supplements based on the urine test results;
5. The Trump Network recommended retesting every 9-12 months and the annual costs of tests and supplements could exceed $900;
6. For marketers, there were seminars which cost several hundred dollars to attend;
7. According to marketers, the company grew about 300% in its first year, but it couldn’t manage the growth and some marketers stopped receiving commission checks;
8. Per CBS News, “a reported 20,000 independent sales representatives bought the Trump Network products;”
The agreement between The Trump Network and Trump expired at the end of 2011 and was not renewed;
10. The company was sold to Bioceutica (www.statnews.com), perhaps after declaring bankruptcy (CBS News)
About minute 1:20 into the CBS This Morning video, or about minutes 4:00 into The Daily Show video, there’s a look at the attendees at a Trump Network seminar for marketers. The vast majority of attendees look to be of recent college graduate age. They likely entered college when housing and stock market values were increasing steadily and graduated into a changed nation. For a large percentage of recent college graduates in 2009, there were no jobs available.
I was in a similar situation after my wife & I moved to the New York City area where she attended medical school. I remember scouring the want ads and found plenty of network marketing schemes. These companies prey on the desperate, and I considered a few. I found employment as a chemist a few months later, but my first job in the area was as a car phone salesman. My first sale was to a hand surgeon for $5,000, but that included installation into his Jaguar. Times have changed.
Some people do well in multi-level marketing businesses – generally those who got in early and/or are very aggressive salespeople – but the vast majority do not. Many lose money on their businesses when all fees and product purchases are figured in. In this way, The Trump Network isn’t different than most other network marketing companies.
To call The Trump Network a failed business for Donald Trump is probably incorrect. I’m sure Trump did very well on this business venture. A quick calculation shows that 20,000 marketers times an probable average of around $2,000 generated $30 million in income, plus don’t forget the up to $900 per year for the customers who were not marketers. In 2-1/2 years, Donald Trump likely received a substantial share of the profits from a lucrative business. Trump emphatically stresses his success as a businessman and this is a case of his business prowess. The company may even have been designed to be a short-term entity because, unless it turned into an Amway or Mary Kay success, most of the profits are made early – before the foundations begin to fail (e.g., not enough new marketers).
Don’t forget the old adage that it takes money to make money.
The Trump Network is a perfect example of this. As with the majority of multi-level marketing businesses, it was designed to reap financial rewards for the owners by taking $1,000-$3,000 from tens of thousands of desperate people. That wasn’t how it was marketed, of course. Here’s what Donald Trump had to say in the promotional video:
“At no time in recent history has our economy been in the state that it is today. It’s a mess. The economic meltdown, greed, and ineptitude in the financial industry have sabotaged the dreams of millions of people. Americans need a new plan. They need a new dream.
“The Trump Network wants to give millions of people renewed hope and with an exciting plan to opt out of the recession. Let’s get out of this recession right now. With cutting edge health and wellness formulas and a system where you can develop your own financial independence, The Trump Network offers people the opportunity to achieve their American Dream.”
Donald Trump certainly seems to be living his American Dream. Of course, his American Dream seems to result in a transfer of wealth from the poor and middle class to the top 1%. Trump’s tax plan would do the same – cut taxes on the rich and raise them on the poor. I don’t think a network marketing presidency would be very good for the country.