Vemma and Conspicuous Consumption: Putting Conspicuous Consumption into Perspective

One of the problems that the FTC has identified in the Vemma case is conspicuous consumption.

Conspicuous consumption is defined as spending on goods and services to demonstrate one’s wealth[1]. In a New York Times article, Robert H. Frank explains conspicuous consumption and gives examples of a titanium toothbrush at a cost of $4,200. The article goes on to explain why the wealthy spend so much more money for no more functionality (a $2 toothbrush cleans just as well). The point of conspicuous spending is to demonstrate that “I am wealthy” [2].

This article is my opinion on conspicuous consumption. I would consider myself a middle class person now. I am not a fan of conspicuous consumption. Obviously, I don’t know what would happen if I suddenly became a millionaire. I don’t imagine that I would change how I spend. I describe my budget like water; it fills whatever space it is given. No matter what I make now, I spend that amount. At this point in my life, I don’t want a lot more things. However, conspicuous consumption is here and has been with most cultures throughout time[3].

In the Vemma case, the high pay to a few top distributors and to the CEO is criticized as a problem. The idea that most make 500 a month is presented as a problem. In my experience most people who do MLM do so for a small amount of extra money, not to get rich. In addition, most people who join an MLM do so for the additional discount for the product. I don’t see the amount paid to distributors as a problem as long as it is clearly labeled. It was not difficult for me to find out how much most people make at Vemma. The amounts are clearly listed on the webpage.

If it is the disparity in pay that is the problem, then MLM is not the worst offender in the United States. On average Fortune 500 CEOs in the United States make over 12 million a year. This is 350 times the average unskilled worker’s pay[4]. This disparity has grown dramatically since the 1950s–over 1000%[5]. If we want to talk about exorbitant salaries, let’s talk about how Walmart CEOs earn over 25 million a year, CVS CEOs earn over 32 million and Discovery Communications makes over 156 million[6]. If you want to get angry about some people making a lot of money, I am right there with you. However, let’s not pick on MLM as the poster child for outlandish earnings.

The gap between those who have and those who have not continues to widen. If you take the top 10% of the wealthy accounts for 75% of the wealth[7]. Again, I am happy to complain about the disparity. I just don’t see how conspicuous consumption can be seen as a problem only in MLM.

References

1. http://www.investopedia.com/terms/c/conspicuous-consumption.asp
2. http://www.nytimes.com/2014/11/23/upshot/conspicuous-consumption-yes-but-its-not-crazy.html?_r=0
3. Christine Page (1992) ,”A History of Conspicuous Consumption”, in SV – Meaning, Measure, and Morality of Materialism, eds. Floyd W. Rudmin and Marsha Richins, Provo, UT : Association for Consumer Research, Pages: 82-87.
4. http://www.washingtonpost.com/news/wonkblog/wp/2014/09/25/the-pay-gap-between-ceos-and-workers-is-much-worse-than-you-realize/
5. http://www.huffingtonpost.com/2013/04/30/ceo-to-worker-pay-ratio_n_3184623.html
6. http://www.huffingtonpost.com/entry/ceo-worker-pay-gap_55ddc3c7e4b0a40aa3acd1c9
7. http://inequality.org/wealth-inequality/