4246_VPS_Pilzer_6 1/17/05 3:53 PM Page 60 PAUL ZANE PILZER IF YOU’RE IN THE DIRECT SELLING BUSINESS, TODAY’S TECHNOLOGY PHOTOGRAPHY BY MARK MAZIARZ/MAZIARZ.COM AND TRENDS ARE YOUR FRIENDS. BE POSITIONED TO PROFIT FROM THE DISTRIBUTION REVOLUTION. 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 because our business environment is business today is similar to a doctor’s changing faster and faster. knowledge of medicine at the beginning of the 19th century. In the early 1800s, THE END OF SCARCITY doctors administered medicines and The most important message for direct observed which ones cured which dis- sellers is this: If you want to become eases. But when a medicine worked, doc- wealthy in the next five years, technolo- tors didn’t know why. Bacterial infections gy—using new and improved ways to get hadn’t yet been discovered—let alone the things done—is your best friend. antibiotics and immunizations we now Many economists and writers on eco- use to treat them. nomics today don’t understand how Once these secrets were discovered, wealth is created. The study of traditional doctors learned more about how the economics is defined as the study of scarci- human body works, and they were able to ty—how to distribute a limited supply of cure many of the diseases—such as small- critical resources such as farmland, miner- pox, typhoid and polio—that had been the als, food, fresh water. Communism, social- scourge of mankind for millennia. ism, capitalism, and so on, are all theories To create wealth and succeed in busi- of how economies should function. ness today and tomorrow, you must I believe that there is no real scarcity. understand how economics work—why What matters is the technology you’re people behave as they do, and why busi- using. Throughout history, every time soci- nesses succeed and fail. Without under- ety was about to run out of a supposedly standing economics, many people fail scarce recourse—like coal—people invent- because they are trying to capitalize on an ed new resources—like oil—to replace it. opportunity that has come and gone … or Today we use technology more effectively they are simply too slow to react to new than ever to get more out of “scarce” trends. This is truer today than ever before resources or replace them with better ones. 60 SUCCESS FROM HOME March 2005 4246_VPS_Pilzer_6 1/17/05 3:53 PM Page 61 PAUL ZANE PILZER WATCH THE SIGNS! WHAT DO THE ISSUES YOU FIRST TALKED ABOUT IN THE ORIGINAL EDITION OF UNLIMITED WEALTH IN 1990 HAVE TO DO WITH WHERE WE ARE TODAY? In 1974, when the U.S. faced its first five years—one-tenth the amount of time We are in the same period of opportunity critical shortage of gasoline, cars averaged it took for most of America’s farmers to and growth that we were at that time. 10 miles per gallon. By 1981, the U.S. become redundant. Then, as now, many people didn’t realize it. solved most of its oil shortage by replacing In 1985, when the digital audio CD In 1989, the most popular book in the U.S. mechanical carburetors in cars with elec- came out, about 100,000 people in the was The Great Depression of 1990 and tronic fuel injectors, raising average auto- U.S. worked making vinyl records. By most experts were predicting a decade mobile gas mileage to 20 miles per gallon 1990, there wasn’t a vinyl record plant left ahead of economic gloom. or more. This had the same effect as dou- in the U.S. and these 100,000 people YOU THOUGHT DIFFERENTLY. DID YOU bling our supply of oil. where thrown out of work. GET ANY SIGNS THAT YOU WERE ON In my book, Unlimited Wealth, I write Similarly, it took 20 years, from 1976- THE RIGHT TRACK? that it isn’t physical resources that make 1996, to go from zero to 135 million VCRs For one thing, shortly after Unlimited you wealthy; it is technology that makes in U.S. households, but only two years, Wealth was released, I received a phone you wealthy. Otherwise, Japan, which in the 2003-2004, for the DVD to decimate the call from Sam Walton, the founder of Wal- 1980s had the lowest per capita level of VCR industry and eliminate the jobs of Mart and then the richest man in the world. physical resources such as land, fresh water almost 100,000 people working with VCRs Sam told me, “Professor Pilzer, my sons and oil in the developed world, should have and VHS tapes. and I don’t usually have much time for you had the lowest amount of wealth per capi- Because technology is now changing economist types. But your book, Unlimited ta—but it had the highest. The former faster than ever before, in every industry, Wealth, and your theory of economic alche- Soviet Union, a nation with the largest per the person who attains the most wealth is my, explains why many things we’ve tried capita amount of physical resources, would the one who manages or has the most tech- in the past didn’t work out, and why many have had the highest level of wealth. But it nology versus the most physical resources. things did. But more importantly, it has had the lowest—so low, that by 1991, the given us a new way of thinking about the USSR ceased to exist as a single nation. THE WEALTH OPPORTUNITY future for making decisions tomorrow.” TODAY IS IN DISTRIBUTION WHAT DO YOU SEE HAPPENING TODAY? TECHNOLOGY: Back in the 1960s, when you went into Although our economy turned around in WHAT IS HOT TODAY WILL a department store and bought something, 2004, and the Dow Jones fully recovered BE OBSOLETE TOMORROW about 50 percent of the retail price repre- before 2005, many people have not yet emo- Look at the sheer speed of technological sented distribution costs and 50 percent tionally recovered from the 2001 economic change in our time. In 1930, there were 30 represented manufacturing costs. Over the hiccup caused by 9/11. And, sadly, most of million farmers in the U.S. barely produc- next two decades, many people became these people will not only miss out on the ing enough food for 100 million people. By millionaires by finding cheaper ways of next opportunity, they will probably also lose 1980, there were only 3 million farmers making things, often by shipping produc- their jobs by not being able to react in time. left producing one and a half times the tion overseas and using new materials like FOR PEOPLE WHO WANT TO CREATE food required for 300 million people. Is plastics. These 1960s entrepreneurs low- WEALTH, HOW IMPORTANT IS IT TO this because they acquired more farm- ered the cost of manufacturing so much WATCH TRENDS? land? No, it was because farmers got more that soon, the price of a typical retail item The prosperity I’m predicting over the technology and increased their productiv- represented only 20 percent manufactur- next five years is going to be even more ity per farmer 45 times and their produc- ing costs and 80 percent distribution costs. selective than it has been in the last 15 tivity per farm 100 times. Then, beginning in the late 1970s, inno- years. What do I mean by Selective In 1980, approximately 300,000 people vative entrepreneurs found ways to drive Prosperity? It’s the people who are on the worked in the U.S. making and repairing down that 80 percent distribution cost. right part of the technology and distribution $300 mechanical carburetors when the Three entrepreneurs whose companies took curve: The people making DVDs versus VHS automakers embraced $25 electronic fuel off during that period, making them among tapes; the people intellectually distributing injectors—which doubled fuel economy the richest men in the world, included Sam wellness and prevention versus sympto- and almost halved pollution. By 1985, Walton, whose Wal-Mart stores pioneered matic sickness care; the people learning when the last U.S. carburetor plant closed, the use of technology to control inventory how to best use the Internet to their advan- these 300,000 people were out of work. and lower costs; Fred Smith, whose Federal tage. These are the people who will profit The destruction of that industry took only Express company linked the country and as others fall by the wayside. March 2005 SUCCESS FROM HOME 61 4246_VPS_Pilzer_6 1/17/05 3:54 PM Page 62 PAUL ZANE PILZER … IT ISN’T PHYSICAL RESOURCES THAT MAKE YOU WEALTHY; IT’S TECHNOLOGY THAT MAKES YOU WEALTHY. much of the world with rapid, guaranteed merchants has created new opportuni- delivery service; and Ross Perot, founder of ties—particularly for those individuals Electronic Data Systems (EDS), a pioneer in seeking a part-time or full-time home- the computer storage of business and gov- based business—that could exceed the ernment records, which is to say, the distri- opportunity seized by the distribution bil- bution of information. lionaires of the last three decades. You might think this suggests that the Ironically, this opportunity was created by big money in distribution has already been the very success of the mass merchants made.