Shane Parrish

This woman is crazy.

3,000 people is impossible.

And Mary Kay saw it as inevitable if they just executed this system correctly.

The numbers tell the story.

In their first three and a half months, they made a small profit of $34,000 in sales.

In fact, they barely covered expenses.

Mary Kay paid herself nothing, and Richard barely made minimum wage.

Everything was reinvested.

In their first full calendar year, however, 1964, they brought in $198,000, enough to prove that the concept worked.

But by the end of year two, that $198,000 had turned into $800,000, a fourfold increase.

And Mary Kay's impossible prediction of 3,000 consultants, they exceeded it.

At the second annual convention, she declared they'd have 11,000 beauty consultants by the end of year three.

To understand what Mary Kay built, you need to understand direct sales.

So traditional retail has multiple steps.

Manufacturer to distributor to retailer to customer.

And each step adds a markup.

So a jar of cream might cost the manufacturer $2 to make and they sell it to the distributor for $3.

And the distributor sells it for $5 to the retailer and the retailer marks it up to $15.

So the customer pays $15, but the manufacturer only sees $3.

Direct sales collapses this chain.