I have often taught that we don’t know what we don’t know. But sometimes, we don’t know what we think we know. And this second condition can lead to erroneous conclusions and frustrated efforts.
When I was a child in elementary school, one of my teachers had the nerve to teach me something I didn’t want to learn. She shared with us how the colorful objects we see really aren’t that color, but rather, the range of light waves of the color spectrum that are reflected by the surface of the item make it appear to be that color.
And then my Dad taught me about the “birds and the bees.”
Here I was, cruising along on my BMX bike, wearing tube socks and thinking I had the whole world figured out. And then in an instant I discover that the way I thought everything worked was entirely wrong – twice!
Unfortunately, this condition isn’t confined to childhood. As adults, we are susceptible to the same “knowledge bias.” We think we know how something works when we actually don’t. And usually, we are very cock-sure in our incorrectness. It’s a condition I like to refer to as passionate ignorance. We are wrong, but we are certain we are right.
At Life Leadership, we are in the business of setting people free. For the vast majority of people who are in debt and struggle with their finances, we offer debt freedom through our Financial Fitness product suite. For committed, hard-working high-achievers, we provide a compensation program that authorizes people to sell our products and build teams of people who do the same thing. This is a shot at financial freedom. And, perhaps most importantly, for the few who are disenfranchised, disabled, or victims of disaster, we offer functional freedom through our Life on Life Initiative. We developed this terminology about “setting people free” and the three categories of freedom to explain our fundamental mission and how we strive to offer something for the whole spectrum of people and their particular situations.
But there is more to the story.
Most of us, without even realizing it, think of the world like the old “bell curve” we remember being graded upon in high school. We automatically think people and their performance fall into a normal distribution, or what is officially known as a “Gaussian” curve of distribution. I am sure you are familiar with what it looks like, but here it is nonetheless.
And in the case of the population of people in the markets in which Life Leadership operates, as described above, this bell curve of normal distribution describes very well what we see. A few at the high-end choose to take advantage of our pay plan and actually build the business. Most people are in the middle, merely using our Financial Fitness products to whittle down their debt (these people may or may not be “signed up” in our business). And a few are at the “bottom” of the curve in dire need of our help, because they truly can’t help themselves.
But when it comes to describing the actual performance (read: results) of those who attempt to achieve high-level success, those who embrace our pay plan and determine that they want to use it to make money, things don’t follow the Gaussian bell curve, or normal distribution at all. For this case, we must dig into the reality of how success actually “works.” You see, when it comes to success, and especially high-level success, what we think we know just isn’t so.
To demonstrate what I mean, let’s consider an endeavor totally outside of Life Leadership, such as being a professional actor/actress instead. The stage, the screen, the lights, the money, and the fame all have a strong appeal on those with such talents. We hear of high paychecks and we see outlandish lifestyles. We see the glitz and the glitter and the glossy gossip magazines. But we all know that only a few are fortunate enough to make it to this high level, and, thinking the bell or Gaussian curve describes the situation, we assume there must be a lot of people, in fact, most actors and actresses, who are somewhere in the middle, with a few terrible ones down at the lower tail of the curve. We all know this intrinsically, and yet we have it wrong!
According to leader of Google’s “People Operations”, Laszlo Bock, in his book Work Rules!, Screen Actors Guild data published in 2008 show that the financial results of actors does not follow a Gaussian curve at all, but rather what is called a “Power Curve” (or perhaps also a decaying exponential).
According to Bock, “Very roughly, the bottom third of active SAG members made no money from acting in 2007, and the next third earned less than $1,000. The next group, between the 68th and 95th percentiles, were paid between $1,000 and $100,000. The 95th to the 99th percentile actors earned between $100,000 and $250,000. And the top 1 percent earned over $250,000. The top 1 percent of the top 1 percent earned even more: Will Smith was the highest-paid actor, with over $80 million in earnings, followed by Johnny Depp ($72 million), Eddie Murphy and Mike Myers ($55 million each), and Leonardo DiCaprio ($45 million).” [italics added]
So for professional actors/actresses, the curve of distribution, roughly plotted, looks like the following:
Notice that it is not the normal Gaussian bell curve at all, as we all would assume it would be, but rather a power curve. Notice also that the super high achievers at the extreme top end pull the average income way above the median. This means that most people are not average, but actually – wait for it – most people are below average! Stop and think about that for a minute. Most people are below average! (Oh! They’re not going to want to hear that!) Notice that fully 1/3 of the actors/actresses made no money! And the next third only $1,000! That’s two thirds of all the actors and actresses making next-to-nothing!
All of this goes against what we think we know. But if you really study this and understand it, you’ll quickly see that this curve for actors and actresses is exactly how success works in all categories where a government or artificial imposition is not placed upon results. Plot the financial results of people in professional sports, country singers, those who launch tech company start-ups, and even authors of books, and the results are similar – following a power curve and not a Gaussian bell curve.
Enter Life Leadership. In November of 2011 we proudly launched our company with world-class personal, professional, and financial development information and service products. We authorized distributors to sell those products for an immediate sales margin of 25% (a higher margin than many professional salespeople are paid), and then added a compensation plan on top of that sales margin to reward them for also building teams of people who did the same thing (merchandise our products and build teams to do the same). We worked really hard to minimize costs to run the enterprise and formulated a pay plan that paid very generously to the people making the sales.
Next, people joined, worked hard, sold our products, and built teams. Some people prospered and made enough money to live on, making the building of our business their professional career. A handful achieved really high levels of income, while many others only made a little. Many signed up and never did anything, riding off into the night after buying our starter kit never to be heard from again.
Each year, we publish a comprehensive “Income Disclosure Statement” designed to show the exact results of everyone who joins, whether they ever worked the business hard or not, or just signed up and rode into the night. And inevitably, someone looks at this data and says something like, “Only the people at the top make any significant money,” or, “most of those people aren’t making any money.” This criticism didn’t make any sense to us, from our angle, because we simply put a compensation plan out there that pays extremely well, and fairly at various levels all the way along the path of progress. It doesn’t discriminate in any way based upon race, creed, color, age, gender, or anything you can name. It is strictly pay-for-performance. So we have tried to explain it in different ways. But still, there will always be someone out there who says, “only a small percentage make the money.”
In a way, we can see their point. Why shouldn’t more people make more money? Why shouldn’t there be a bunch of people making a medium amount, for instance? How come there isn’t a larger percentage of people “in the middle” making the money our pay plan delivers for those levels? We’ve got a pay scale that rewards effort along the entire journey! And the 25% sales bonus is paid to everyone at every level no matter how long they’ve been with the company or how big their business is. What gives?
What gives is that our population of Life Members is not properly described by the Gaussian bell curve we all carry around in our heads, but rather by the Power Curve that depicts the results of all true performance-only systems (such as professional acting described above). Leave people free to achieve and perform in any endeavor, and you’ll get a power curve. Life Leadership and its compensation plan are no different.
This is very important to understand, and it applies to all areas of life, not just participation in Life Leadership’s compensation plan. High achievers are way ahead of the rest of the pack, and their results skew the scale and pull the average way above the median. What this means is not that one should avoid undertaking a performance-based endeavor, but rather that one should not falsely impose an erroneous bell curve in order to “analyze” the “odds of success.” With power curve situations averages are misleading because they are pulled upward by the lofty achievement of the top performers. And in true performance-only situations, there is no comfortable middle where a large percentage of the participants can hang out and do “pretty good.” Ultimately, one either makes it within the upper 1 or 2 or 5th percentile, or one doesn’t see much reward (at least financially speaking). As we said before, just apply this reality to professional sports, the arts, business start-ups, direct sales, and the like, and you will see that it is true again and again. Our false application of the bell curve simply won’t properly describe these “free to perform” situations. Such a map, in essence, doesn’t match the territory.
This is simply how the world works. In fact, the only alternative is to create a system wherein outside forces eliminate the upper possibilities based upon performance so that everybody instead gets a decent result but nothing big is available for high achievement. This, in fact, is exactly what most jobs provide. In such scenarios you will never hit it big (it’s not even available), but you can count on a steady flow of at least something for the fat middle of the pack. Some will get a little bit more, others will hang out at the bottom, but most people will be kept clumped together in the comfortable middle.
And this brings us full circle to the exact reason we launched our company in the first place. We wanted a legitimate alternative to a closed system of enforced mediocrity. We wanted to provide a legitimate shot upwards, without restriction, that would be available to anyone who chose to work that hard, learn that much, and stay at it that long. As cofounder Orrin Woodward often states, “We don’t promise easy. We just promise worth it.”
So ultimately, we have two choices in life. Find a closed system with outside forces that artificially impose a safe and “comfortable” bell curve, a situation with no chance of high highs but very little worry about low lows. Or, conversely, enter into a power curve situation where there is not much reward unless you perform mightily. It is one or the other.
It is ultimately up to each individual to choose which is right for him/her, and what God has designed and called him/her to accomplish. Just don’t apply bell curve analysis to a power curve situation and call it “unfair,” or a “scheme” or a “pyramid.” And then likewise, those who live in the power curves of life shouldn’t denigrate bell curve situations for being stifling and without upward mobility. Each is for whom it’s for.
Just make sure you choose wisely. Bell curve people are miserable in power curves, and power curve people are miserable in bell curves.
Pick your curve and live it with verve!
The information presented on this blog and in any of its videos is for general educational purposes only, and provides information the authors believe to be accurate on the subject matter covered. It is presented here with the understanding that neither the authors nor the publisher are providing advice for any particular portfolio or for any individual’s particular situation, or rendering investment advice or other professional services such as legal or accounting advice. If expert advice in areas that include investment, legal, and accounting are needed, please seek a competent professional’s services.
This publication may make reference to performance data collected over various periods of time. Remember that past results do not guarantee future performance. Performance data, as well as laws and regulations, change over time, which could affect the applicability of the information presented on this blog and its videos. Any data presented herein is used merely to illustrate the underlying principles.
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