Someone who works with our radio show, Bianca Giaever, went to this presentation at Columbia University a while back where two people onstage puzzled over this thing they had found online called Wake Up Now. And I say "thing they found online," because the whole point of their presentation was it was hard to tell exactly what it was. Why do some people live their lives in black and white while others seem to live in vibrant color? Well, part of it is knowing a secret, a secret that changes how people see the world. This video is your invitation to WakeUpNow. This is a video that was on WakeUpNow's website, which just looked like a kind of generic corporate-y website. And WakeUpNow seemed to be a company. But it was hard to tell exactly what the company did. This site talked about joining, about becoming a member, about living a better life. So was it a club? Was it an organization? And then, when you googled WakeUpNow, there were tons of videos. Bianca saw some at the presentation at Columbia. And then, after the presentation, she started Googling on her own. And then, she sucked one of our producers, Brian Reed, into the vortex with her. Here is one of the videos they found. Hey, we're here in Cancun with the greatest team in the world, WakeUpNow. You should have been here. All the leaders are here. We're having fun. Beautiful island. This is a video of a bunch of young people hanging out on the beach. You can see jet skis and the ocean. In the video, they refer to this as a leadership summit. And there was a whole genre of videos just like this, people in exotic locations, riding around in nice looking cars or, in this one, spelunking in a cave in Mexico, chanting. That is, of course, WakeUpNow with "La Bamba." And then, there were a lot of videos with the word "scam" in the title, like "WakeUpNow is a scam, for real exposed truth." And so, these two producers on our staff were like, oh, so this is some kind of internet scam. But then, when they watched the videos, it seemed very different. Like, take this one for example titled, "WakeUpNow Warning, Don't Join Until You See This." WakeUpNow is one of the most legitimate companies out there. The reason why is because-- So "WakeUpNow Warning, Don't Join Till You See This" is actually not a warning at all but entirely about how great WakeUpNow is. And in fact, there were so many videos like this, a video called "Five Reasons Not to Join WakeUpNow" offered not a single reason why not to join WakeUpNow, but instead went on to describe what a super awesome company it is. So I'm joined in the studio right now by the two producers who were watching all these videos, Brian and Bianca. Hi, guys. Hi. Hey. So at that point, as best as you could tell, what was WakeUpNow? We honestly didn't know. Like, we couldn't figure it out. We eventually put some research in. We learned that, later, this move, the scam thing-- You mean labeling videos "Such and Such is a Scam"? Yeah, exactly that. And then, having it not actually talk about it being a scam. So that's a move, I guess, that some people who are involved with certain companies or selling certain products will do. Like, that's a thing, I guess. But I'd never seen a video like that before. And it was really confusing. I mean, in so many of these WakeUpNow videos, we could tell people we're pitching something. But as far as we could tell, it wasn't a product. (SINGING) Build a bank, ah! I say, I say, I say, you need to build a bank, ah! So what is this? This is a video of a guy who calls himself Panama. And it's titled "WakeUpNow Scam, Lend a Hand, Build a Man, Woman." What are you doing? Eating carrots? Tomatoes? [SPEAKING SPANISH] So yeah, it wasn't really clear what WakeUpNow was. But still, there were hundreds of these videos. It was like this whole subculture with all these people, about thousands of people. OK, so then, I know what happened next is that you found out that WakeUpNow had a conference coming up, right? Yeah, and we went to try and figure out what this was. Yeah, and what we eventually found out is that it's something called "network marketing." It's a network marketing company. But also what we found out is that that is a very bland term for something completely mind-blowing, way beyond anything we could have imagined. So today on our radio program, Wake Up Now. If nothing else, I have to say, that is a completely genius name for a company. It promises so much so efficiently. That you'll open your eyes. You're life will be totally different, totally better. And so, today, as New Year's approaches, as lots of people take stock of who they've been and make resolutions about who they want to be, we have stories of people in very different contexts who try to wake up and wake up others. Stay with us. Act 1, Something's Happening Here and You Don't Know What It Is. So Brian and Bianca headed to WakeUpNow's conference in New York City at a hotel in Times Square to try to figure out what this was. Here they are, Brian and Bianca. I'm a little embarrassed to admit this. But even after being at this conference for several hours, if you put a gun to my head and asked me what WakeUpNow is, what it does, I still don't think I could have told you. We talked to dozens of participants. And what we learned is that people were incredibly excited about something they weren't terribly good at explaining. Why do WakeUpNow? This is a new beginning for the new generation. What is it? I don't even know what it is. Oh, it's a software company. It's a software company, you said? I think. People had come from all over, East Coast, Minnesota, California. They're mostly young and mostly people of color. They called WakeUpNow a lifestyle. They talked about WUN life, W-U-N, for WakeUpNow. For the longest time, I couldn't even figure out what to call the hundreds of people at this conference. Were they customers of WakeUpNow? Employees? Card-carrying members? Whatever they were, some of them could list specific WakeUpNow products. And the product is? Awaken Thunder. What's Wake and Thunder? Awaken Thunder. It's-- What is that? --an energy drink. An energy drink. Oh, so you're selling an energy drink. We're not selling it. You can buy it. OK. I'm just try-- so are you guys going to work for the company? Or you're buying the product? Well, we don't have to buy the product. So what you do is you just go around and spread the word about it. But are you selling an energy drink, though? I'm confused. No, we don't have to sell it. The company offers it. Yeah. The company offers it for you. It's exclusive only for the people that are in WakeUpNow. So there are products. And these people encouraged other people to buy them. But when we tried to use the word "selling," we were corrected. Yeah, I mean, I don't like saying "selling." I like using "providing." I provide people with it. Do they pay you money in exchange? No, not really. I got a commission from it. That's about it. Awaken Thunder energy drink was not the only thing WakeUpNow was not selling, but providing. People seemed to be listing a totally random assortment of products. Lots of things people said WakeUpNow offered were just discounts, off their AT&T phone bills, purchases at Office Depot, on groceries. We have the Trivanis. What are those? They're like lotion, skin products. And then, we have the coffee. We have cyber-protection. Have you ever wanted to learn another language? well we have a program that has 80 languages, similar to Rosetta Stone. There's a vacation club. For example, I'm going to Florida. Hotel's usually $1,100. I'm going to pay $290 for the whole week, a condo. There's tax software. Most people can increase their tax deduction by $3,000 to $6,000 per year, just by the tax part alone. But in this sea of hard-to-understand information and unrelated products, one thing everyone seemed to agree on, WakeUpNow had a mission. WakeUpNow actually is a financial wellness company, showing people how to save, manage, and make money. In fact, so many people recited this mission so precisely, it was actually a bit weird. We'll save money, manage money, and make money. Save money, make money, and manage your money. Save, manage, and make money. Save money, manage money, and make more money. Save, manage, and make money at the same time. It took us all day and, honestly, quite a bit more research afterwards, including signing up ourselves-- which was really complicated-- to piece together how WakeUpNow works. Like I said earlier, they're a network marketing company. And if you haven't heard that term, you've probably heard of Amway or Herbalife or New-Skin, companies where you sell things to people you know. That's network marketing. When you join WakeUpNow, you get access to a place on their website called The Hub, which is where you can purchase many of the products and services we heard about. You can join for free. But you're encouraged to sign up on a plan where you pay between $80 and $150 a month. You pay more money, you get more stuff, like the financial management and tax software. So that's the saving money and managing money part of WakeUpNow. As for the making money part, you can make money by recruiting other people to join WakeUpNow. They buy stuff, you can earn commission. They recruit people, you make money off that too. A chain forms below you. That's the network in network marketing. You get three people to join, you get $100. If each of them gets three people to join, that's when the real money kicks in, about $600 a month. There are other ways to earn that money. But that's the one we saw them push. I know, this may sound like a pyramid scheme. Whether it is one, though, would have to be decided by the courts. We called the Federal Trade Commission. And a spokesman said figuring out if a network marketing company is a pyramid scheme is very difficult and takes a long investigation. The FTC's website says a good tip off that a network marketing company might be a pyramid scheme is that members earn more money for recruiting new members than for selling products to the public. WakeUpNow's chief marketing officer told us that 100% of the company's profits come from product sales. But when you pay a monthly fee to join, they consider that a product. He said WakeUpNow is absolutely not a pyramid scheme. For now though, WakeUpNow members are charging forth, recruiting more and more people into the company and, apparently, getting paid a boatload to do it. Boom, boom, boom. Just watch, probably 500K a month walked by you. This guy's pointing at a group of otherwise ordinary looking people. He's talking about all their salaries added together. 500K a month? 500K a month just walked by you, under 25-years-old. This company is making history actually. This company is creating the largest amount of under 30-year-old 6-figure-earner that I've ever seen. Look, 6-figure-earner, 6-figure-earner. People loved pointing out all the 6-figure-earner magnates among us. In our first few minutes of the conference, I saw this big bearded man. Someone else called him, quote, "a freaking duck hunter guy," which seemed like an apt description. People lined up to take pictures with him. Someone nearby told me why. My boy right here is making $114,000 a month right now, $114,000. $114,000? $114,000 a month. His name? See More Green. That's S-E-E M-O-R-E Green. See More is the top earner in WakeUpNow. He's been doing it a year. He's 25. Everybody knew who he was and how much he allegedly made. Later in the day, WakeUpNow gave See More Green an award for being number one. (CHANTING) See More! See More Green! See More! See More! See More! See More! See More! See More! Wow! A woman near me says, he's a regular dude. He's wearing a t-shirt. You would never know. You would never know. You'd never know, right? Another thing we encountered at the conference was a repulsion to something so unsavory, so unseemly, that WakeUpNow's emcee for the day couldn't even bear to speak the word aloud. So he spelled it out instead. There are so many people in a J-O-B that are bored. There's no reason they just another one of them. J-O-B. Quick warning, I'm going to say the word right now, job. When you go into a store and you run into an employee with a J-O-B, and you can see it in their face. There is no energy, because they're not invested in what they're doing. It's not their business. I'm looking at a room full of people who care, because it's their business. It is their future. That is why I love this industry. This dissatisfaction with 9-to-5s ran deep through the crowd. Take this paralegal. How does she describe her job? It's a soul-sucking, like, life-destroying, "sit at a desk all day and get fat" waste of life. She told me that as soon as her income from WakeUpNow inches above her current salary, she's outta there. It could be, like, $1 more than I'm making now. I'm quitting. Like, literally, $1. OK, I quit. I'm not coming in ever. Of course, lots of jobs do suck. A surprising number of attendees at the conference told us they were planning on quitting to pursue WakeUpNow. These appear to be people with steady full-time E-M-P-L-O-Y-M-E-N-T, a compliance manager at a big bank, a human resources person at Coca-Cola. And we also met people who had actually done it. One person quit a restaurant. Another quit his sales job at Samsung. Plus, there was this guy. Antonio "Unemployable" Johnson. He quit his job two years ago. Now, he has a motto. Friends don't let friends get jobs. It's clear why lots of people would want to leave their current lousy jobs. What's not so clear is why they'd choose to leave them for WakeUpNow. When you look at the WakeUpNow compensation plan, which we did later, it actually says in there how many members are making a small profit, 4%. That's it. And those 4% are not making a living, just an average of about $600 a month. The number of people making anything close to resembling a living is about 1%. Those are the company's numbers. If they're accurate, presumably 95% of the people chanting in this conference room weren't making any profit whatsoever. (CHANTING) WakeUpNow! WakeUpNow! WakeUpNow! WakeUpNow! WakeUpNow! WakeUpNow! WakeUpNow! This is the beginning of the main event, what was billed as a business presentation that stretched on for nearly five hours with more than a dozen speakers. A lot of it was about how to recruit people into WakeUpNow. I should say, officially, the company doesn't use the word "recruit." But there's no other way to describe what we saw. It was about recruiting. Like this advice from a guy named Rob McFadden. He said that, on the day you launch your WakeUpNow business-- You set up a conference call at 10:00 AM. You invite everybody you know to be on that call. On that call, all you tell them is, I'm launching. We're going nuts. I can't even tell you what we're doing. I have a call scheduled at noon. Who's going to be on it? The next step was to get each person on the 10:00 AM call to bring 10 more people with them to the noon call and, then, to do the exact same thing over again for a 2 o'clock call, all with no mention of what the business actually is. After all-- People care more about how you say something that anything you ever say. The fact that they called this event a business presentation was strange, because there was so little actual business discussed. So much of it was just motivational speeches. And you being here today, I got to give you props. Because you get it. You get it. You're changing lives. You're starting a movement. You don't got a dream, you don't have a roadmap. You don't have a roadmap, you ain't taking a trip. See, what is it that drives you? Is it feeding starving kids? Is it making a difference in this world? I saw a vision to help people. I saw a vision to change the world. You have the ability to speak life or death into people. WakeUpNow is speaking life. This was the aspect of the conference that we really struggled to make sense of, the contrast between this vision of WakeUpNow changing the world, speaking life into people, and the reality of what it seemed like WakeUpNow is actually doing, which is selling energy drinks and giving people discounts on random stuff. Now, product announcements, guys. It wouldn't be-- This crystallized during the single most confusing moment of the conference, the big announcement they made in between inspirational speeches. The company's marketing director, Jordan Harris, took the stage. Nobody else outside this room knows anything about what we're about to talk about. And what he went on to talk about was coupons. WakeUpNow members have access to coupons that they can print out and use to get money off at local businesses. How many of you guys have smartphones? OK, pull out your smartphones real quick. How cool would it be if, instead of having to print the coupon, you just showed your smartphone. Right? This is awesome. So guys, we're excited. Today, we're announcing our new iPhone and Android app that's going to let you do just that. The big announcement was that you no longer had to print the coupons out. You could now just use a smartphone app. Let's talk about when it's going to launch. OK, it's going to be available-- two weeks. What do you think? I think we can do better. Let's just do it today. That's right. You can go in the iPhone store and Android store and download this today! After this, Brian and I had to check with each other. We honestly weren't sure if we had missed something. This excitement was over coupons? The emcee couldn't even move on with the presentation after this, because everyone was so overwhelmed. Wow, that is-- I'm-- I'm beside myself. I know, you're all looking. It's OK, take your time. Wow. All right, we're all catching our breath. It's OK. Yeah, day might as well be over for some of you. We left the conference not sure what to think of what we'd witnessed. But the fact that people were talking about quitting their jobs to do WakeUpNow, when the chances of making any kind of living were so low, that seemed alarming. And to our surprise, when we interviewed WakeUpNow's Chief Marketing Officer Jordan Harris, the guy who made the coupon announcement, he said that isn't meant to be the company's message. They don't want everyone quitting their jobs. There's an element of any live event, like we have, where sometimes people get up there and they get excited. And there's things that you'd rather have them not say. Our standard advice for people, you should be replacing your income for at least three to four months consistently through WakeUpNow before you consider it. So on WakeUpNow's Income Disclosure Statement, it says that 4% of members make a profit. Do you think most people who are doing WakeUpNow as a business know that number? I think, no question. That is so widely disseminated. You can go pull income disclosure statements from-- You guys-- like, I don't think you mentioned it aloud at the conference. Yeah, we don't mention it aloud. But it's like, it is-- Why not? --on our website, on every-- eh? In a conference, when you're out there talking to them, it didn't come up. We're at a conference. We're trying to have high energy. We're there to have a lot of fun. That's not something that is pitched from stage. But we make sure that everybody is aware of it. I don't know if you saw to stage left. There was an income disclosure statement on the wall. It was in the booklet that everybody got. So everybody left with that income disclosure statement in their hand. We don't want people joining with the idea that, hey, you promised me, if I joined, I would make this amount. That's not what we care about. We care about changing your financial situation from the products. And if you'd like to supplement it by making money, you have an opportunity. We told Jordan this wasn't the measured message we left the conference with. Instead, in a room where less than 1% was making any real money from WakeUpNow, we heard speakers spinning a fantasy of enormous wealth, infinity pools, trips to Cancun. One speaker had the crowd shout out their favorite fancy cars, Maseratis and Porsches. Jordan understood why we got this impression. But he says that's not WakeUpNow is really about. He says their company was built around the idea of helping people make an extra $500 or $600 a month and that they chose that number deliberately. Because we look at the statistics and the majority of bankruptcies could avoid it if they had $500 more per month. And so, really, if we can get a ton of people that are earning $500 to $600 a month, then for us, that's our sweet spot. We're not encouraging people to just walk away from their own personal income. We're just trying to be something in the middle that helps it be easier every single month. Right, but from being at the conference, it just does seem like the messages are not that. They're not, we want to help you live a easier life every month with supplemental income and financial management. The message is much more like, your life is unsatisfactory. You are slave to some job. You don't have your own freedom. And this is the answer to that. The reality of the message I think people are getting is not what you just said. And does that concern you? Yeah. We want to unify the message from corporate. Like I said, I think you guys caught us right in the spike of our growth where there were so many people that were involved in WakeUpNow that we didn't necessarily have as good as communication from corporate as we could have. But we're a different company than we were eight months ago. The conference we went to was in April. Jordan says the company had grown 4,000% over the previous year. And they were scrambling to deal with that expansion. WakeUpNow, by the way, was only founded in 2009. Since April, Jordan says they're running a tighter ship. They recently replaced their CEO. They're rewriting some of their introductory literature, downplaying the recruiting side of things. And they've changed what they say at their events. He says, WakeUpNow has never been intentionally vague. But he thinks we were not unique in our confusion. And that's one of the things they're trying to fix. A couple weeks ago, we talked to a guy who studies companies like WakeUpNow, Amway and Herbalife and other network marketing companies. And he said, when reporters talk about them, they usually focus on the money people spend on them, but rarely discuss the part he considers more troubling and more destructive-- what it does to members' personal relationships. This guy's name is Robert L. Fitzpatrick. And he used a word to describe WakeUpNow that may sound hyperbolic. The word was "cult," except not a religious cult. It's an economic cult. That's the distinction that I think you may be grasping for when you say, what is this thing? Robert Fitzpatrick says it's not an accident that it took us so long to figure out what WakeUpNow is, that the videos all seem so vague and the website was so confusing about pricing and products when we signed up as a member. He says, vagueness is part of a strategy companies use. Robert became interested in network marketing after he and some friends got caught up years ago in the frenzy of recruiting people into a gifting scheme. And he says the most disturbing thing about it was how it manipulated their thinking, made them suspend critical judgment. So he spent years researching how network marketing companies work. A regular business, Robert says, doesn't try to tell people how to treat their friends and family, which we saw at WakeUpNow. The intention to isolate you from other people who are not in the scheme-- you are told to shun doubters, critics, even if they're in your family. And then, when you go around your friends and they get uncomfortable, like, you buggin'! Guess what? You know who to walk away from. You know who to walk away from, because they can't understand your language. They won't be able to understand your language. Dream big. Dream big. So isolation-- and the other is a certain requirement of blind faith and obedience. You're not supposed to question. Critical thinking is for losers. You will see it when you believe it. This industry-- wrong. This busi-- no. This profession-- this profession rewards one thing. It rewards belief. How many of you believe you are Global sitting in that chair right now? Global is the highest earning level in the company, the level See More Green is. That guy literally just dropped the mic, by the way. We asked WakeUpNow's Chief Marketing Officer Jordan Harris if the company is a cult. And no surprise here. He says that's an unfair characterization. He says, he interprets those moments from the conference differently than Robert Fitzpatrick does. WakeUpNow is not trying to isolate members from their family, he says. But if someone's being negative about your work, he thinks it is good advice not to hang around them. And what's wrong with believing in what you do? Look, if you're going to do anything, you better believe that you can do before you start. I think that that is a universal truth. But to portray it as, the only way to be successful is to believe hard enough-- I would much rather have them preface that with, it is not enough to succeed. You've got to have the hard work. And you've got to have the talent to be successful. At the conference, everyone was so amped up. It was hard to get a sense of what it was really like to do WakeUpNow day in and day out. So we found someone who'd gone all in on WakeUpNow, who'd quit his job to dedicate himself to it, a guy with a wife and three young kids who recently stopped working in the kitchen of a really nice restaurant to do WakeUpNow. His name is Damien Lacks. He's 29 years old. We went to visit him at his apartment in Gettysburg, Pennsylvania. Damien grew up in a rough part of Baltimore. He was a charismatic kid, a good athlete who did well in school. But he got into drugs, dropped out, did some time in jail. By the time he was 24, he was living in a halfway house in Gettysburg, where he moved to get away from the city, and working at a McDonald's. I didn't know what I wanted to do with life. At the same time though-- and this might sound strange to some people-- even back then, even since I was 10 years old, I've known that I was supposed to do something great. Now, I ain't saying it to boast. I just am giving praise to God. Because that's who he made me. I haven't always lived up to it. I've been terrible at living up to it. After McDonald's, Damien worked in kitchens at a couple of pubs in town, then landed at a TGI Fridays. But Damien was bored there. The district manager would walk in. He wouldn't speak to the little guys on the line. I hated that feeling, feeling like I'm a little guy. And that the big guys, who are already making $100,000 a year, when you come around, you don't even have the decency to say, hey, how are you guys doing in here? You know, we hot. We sweating. We busting our ass. Excuse me. You don't really care about nothing but how the restaurant is running and how much money we're making. You don't care about the people at all. It makes you feel low. No, I hated that. I hated it. In other words, it was a J-O-B. So he applied to one of the best restaurants in the area, a place called Restaurant Sydney, founded by a chef he admired. Damien was taking online culinary classes. He had dreams of becoming a sous chef, of one day opening his own restaurant. So when Sidney hired him, he was thrilled. What were your expectations going in there? The highest level of chefness-- I don't know a better word. [LAUGH] And it wasn't all the way like that. When it came down to it, working in the kitchen at Restaurant Sidney was still just working in a kitchen. His co-workers grumbled, told offensive jokes to pass the time. They didn't seem inspired. And Damien was only making $10 an hour. After babysitters and gas-- Sidney is 25 minutes from his house-- Damien says his pay was basically a wash. He kept asking for a raise, but wasn't getting one. And that's when an Instagram friend sent Damien some of the YouTube videos about WakeUpNow. Just like us, he says he'd never seen anything like them before. Unlike us, though, his reaction was-- The video she sent me was so inspiring. I went from being the lowest-paid person in my family to, now, the highest residual income-earner in my family. We asked Damien what about the video spoke to him. And what it came down to was the positivity. It was a bunch of young people and, in particular, young black people succeeding as entrepreneurs. They were working for themselves, in total control of their own destiny. What are you doing in your job? To me, it was nostalgic. It took me back to that place, when I was a kid. You dream about where you want to be in your life. And it was like, that's right. That's right. That's what I wanted my life to be. That's right. I'm going after it. Thank you for reminding me. This is my calling right here. Damien began reading WakeUpNow's literature obsessively. He went on a vacation with his family. And he says, the whole time, he couldn't tear himself away. He compares it to reading scripture. The company's Quick Start Guide includes a whole section called "Your Thoughts can Change the Future." Damien loved that. It talks about feeding yourself positive ideas and filtering out the negative, not hanging around negative people. After that, every dirty joke his co-workers made felt like it was poisoning his mind. Then, after weeks of asking for a raise, his boss told him he wouldn't be getting one. Not long after, Damien quit Restaurant Sidney and devoted himself to WakeUpNow. When we visited Damien, he'd been doing WakeUpNow for four months. Here's what a typical work day looks like for him. He wakes up and helps get his two boys off to school. And once they're off, he usually dials into a 10:00 AM motivational group call. But most of the day, he watches his baby daughter. While she's napping, he spends a few hours poking around on the computer, watching YouTube videos about how to present WakeUpNow to people and, then, just kind of being on Facebook. If he starts to feel down, he'll watch an uplifting video. Early on, he tried calling every contact in his phone to tell them about WakeUpNow. That yielded exactly one WakeUpNow recruit. My mom. His mom. After four months, she's still the only recruit he has, which means he's not making any income. And in fact, he's paying $100 a month to be part of WakeUpNow. What are you going to do if another four months go by and you still haven't gotten anyone and aren't making any money? And you're spending money to be in it? Um-- that's a hard question. Because I honestly know that it's going to work. We spent a lot of time debating with Damien about this. It was nearly impossible to get him to even entertain the hypothetical of WakeUpNow not working. If the year goes by and you haven't made any money with WakeUpNow or network marketing, would you be disappointed? No, I would just keep going. Think about that. A year has gone by with no success. You wouldn't feel any kind of way about that? A year gone by-- and network marketing is successful. Think about doctors and lawyers. They go to school for four years, eight years, before they actually reach the time when they can get paid for what they've been training for. Damien knows the stats, that just 1% of WakeUpNow members make a living. He actually pointed the numbers out to us on his own. But it's almost as if those dismal statistics made Damien even more optimistic about his prospects. I have the persistence to become in the 1%, in the less than 1%. Because it says, the results are not typical. Well, I say, I'm not typical. And the thing about it is, more people could be successful. But more people don't have desire. They're not going to put in the work. And if you tell yourself it's too hard, it's going to be too hard. But what if it's not the fact that you're telling yourself that something is really hard, but that it just is really hard? Like, that is the reality, the chances of making money are low. And so, when someone's telling themself that it's hard, they're right. It's only hard if you believe it's hard. We thought that one person who might be silently freaking out about this was Damien's wife, Candice. Candace has a full-time job managing a store at the nearby outlet mall and is now the sole breadwinner in their family of five. They have two kids, a baby and an eight-year-old, and just became the legal guardians of a third child, a 12-year-old who neither is related to, the son of one of Damien's ex-girlfriends. So we took Candice aside, out of Damian's earshot, to ask how she was dealing with the pressure of providing for three kids while Damien didn't have a job and wasn't bringing in any money with WakeUpNow. I'm not as stressed out. I have a lot more help around the house. So my days off, I actually can enjoy instead of having mounds of laundry to do. [LAUGHS] So like, it's really helped us as a family unit. This is not the answer we were expecting. But Candice likes her job. And she says that her income is enough to support the family without Damien earning money. She says they're not in financial trouble at all. When Damien had restaurant gigs where he worked long erratic hours, she and the kids would sometimes go days without seeing him. Now that Damien has left the restaurant industry for WakeUpNow, Candice says her kids get to be raised by their father. And it's great. Because, with us adding on another child, getting that child in a routine and working on his homework-- because he is behind, so he needs a lot more help and attention with schoolwork and stuff. It's beneficial right now with the dynamics of our family. And Damien's been able to do that with him? Absolutely. He cooks. He does homework. He cleans. So I'm very thankful for that. Yo! Hi. Hi. It's 3:30 in the afternoon on a Thursday. And Damien's greeting his boys, Damian Jr. and Leonte, as they get off the school bus. He asked them about their day, explains who these weird radio reporters are in their apartment. And then, they get to homework. You have to work on your project. Oh right. Yeah, right. And I got to read. By the way, it's due tomorrow. Leonte has to present a biography of Bruce Lee. I thought he was Chinese. I thought so too, Pooch. Maybe I don't know what's going on. Let's find out. He's Chinese and half-German. Oh, Chinese and half-German. Oh, now, you said American and German first. Oh. Yeah, that's a big difference. OK, so just remember that tomorrow. Both Damien and Candice say without hesitation that if Damien never makes a dime from WakeUpNow, it still will have been the best move he could have made for their family. Bianca Giaever and Brian Reed. A few weeks after the visit, Damien-- he decided to put WakeUpNow on pause. He is no longer a member. He says he's not paying money every month. He wanted to make some money for the holidays, went back to work at TGI Fridays where he's now a waiter, which says he likes a lot more than working in the kitchen. Coming up, a rich guy tries to wake up other rich guys about the issue of how rich certain rich guys are getting. That's in a minute from Chicago Public Radio when our program continues. It's This American Life. I'm Ira Glass. Each week on our program, of course, we choose a theme. Today, with people making resolutions for how this new year will be different from the previous one, our show is "Wake Up Now." I hope you notice how classy we're keeping it here on the show by not inserting alarm clock sounds every time I say those words. Wake Up Now-- stories of people trying to wake themselves up or wake up others. We've arrived at Act 2 of our program, Act 2, Board Games. So there's this thing that comes up in the news pretty regularly, CEO pay. When it comes up, rarely is it good for the CEOs. Usually, the point is that CEOs are overpaid, something needs to be done. If you figure that most people work 40 or 50 years in their work lives, it would take a typical worker four or five lifetimes to earn what the CEOs of large companies earn in a single year. So you hear statistics like that in these stories. But what you almost never hear is anybody actually trying to cut the pay of a CEO. Well, David Kestenbaum and Jacob Goldstein of NPR'S "Planet Money" found a guy who tried to wake people up to the fact of the CEO of one small company seemed to be making way too much money. It takes an unusual person to wage a war against a CEO and his pay. The odds of success are just so low. And Tim Stabosz was definitely an outsider. He lived in a small town, Laporte, Indiana, in a small house. We went to visit. In the dining room, there's a broken Dungeons and Dragons pinball machine. Tim tried to fix it. Here it is. Yeah, it's sad. I made a boo-boo when I fried out the display. It was just a disaster. When Tim got out of college, he got a government job and tried his hand at the stock market on the side. He used a computer to pick out stocks he thought were undervalued. He still has that computer. And just so you have the right image in your head, this is the kind of computer you'd find sitting out on the sidewalk. It's got a floppy disk drive. And when you turn it on, it just goes beep. That's the dot matrix printer. Over the years, Tim did well in the stock market, really well, well enough that he was never going to have to work a regular job again. Sometime in the mid '90s, Tim came across this one company. He'd end up investing hundreds of thousands of dollars in its stock. It was a small company based on Long Island called P&F Industries. It made pneumatic tools. You can actually buy them at Home Depot. Have you ever used one of the tools? I don't believe so, no. Tim just like the company's numbers. It was a small company where you could understand everything about it. P&F seemed like a good deal. But over the years, something began to gnaw at him, the salary of the CEO, Richard Horowitz. Roughly $1 and 1/2 million a year, total compensation. Is that a lot? $1 and 1/2 million is outrageous and outlandish. Tim looked around at similar companies, some in the same industry, some in the same geographic area. And he couldn't find any where the CEO was paid even half of what Horowitz made. Now, if you just own a few shares of a company's stock and you think the CEO is overpaid, there isn't much you can do. But if you own more, well, that's different. And by the fall of 2009, Tim owned 180,000 shares. I came to own 5%. 5% of the whole company? 5% of the entire company. His stake was worth more than half a million dollars. And it turned out, Tim had an ally in this fight, a guy with a little more experience, a guy who ran a hedge fund. I'm Andrew Shapiro. I'm president and portfolio manager of Lawndale Capital Management. Andrew also owned a big chunk of the company, about 8%. He and Tim didn't work together directly. They had very different styles. Andrew was a by-the-book investor, fond of semi-obscure military allusions. With what we do, we deploy what I call the Powell Doctrine of investments. And I try to take on targets where I can mount overwhelming force. For years, Andrew had been arguing that the CEO was grossly overpaid. Over one 10-year period, he says, Richard Horowitz took home $13.5 million dollars. That's more than twice what the entire company made in profits over that time. Sometimes, when people complain about CEO pay, they talk about it as if the money's coming out of the pockets of ordinary workers. That is not how Tim and Andrew see it. Every dollar the CEO gets is $1 less profit, $1 less for Tim and Andrew and all the other stockholders. The overpaid CEO's taking money out of the shareowner's pocket. You're not in it because, hey, wouldn't it feel great if CEOs weren't paid so much more than everyone else? I am doing this to make a return on our capital. This is why, if you think CEOs are overpaid rich guys, your best hope for changing things may be other rich guys, rich guys with enough money to buy up a bunch of stock and take on the company to try and cut the CEO's pay, in hopes of becoming even richer themselves. We, of course, wanted to know what the CEO Richard Horowitz had to say about this. We tried to get him. We had a bunch of talks with the company's lawyer. In the end, Horowitz declined to be interviewed. But because this is a public company, there are plenty of recordings of him. Public companies have what are called "quarterly earnings calls" for investors, really anyone who wants to listen. Good day, everyone. Thank you for holding. Today's conference will begin with a presentation and, then, a question and-- The operator starts the call. And then, here is the man himself, Richard Horowitz. Firstly, I'm pleased to report that the company's revenue from continuing operations was $14,164,000. I've listened to a lot of earnings calls like this over the years. Usually, they are incredibly dull. Analysts from big banks asking super specific things about the company's balance sheet. But remember, P&F is a small company. And on some of these calls, there are only two people phoning in with questions, two people who feel the CEO is grossly overpaid, Andrew and Tim. They get to ask the CEO whatever they want. Here's one exchange. Thank you. Our next question is from Timothy Stabosz. Your line is-- Tim is asking about this key thing that's used to determine a CEO's salary. It's called a compensation study. It looks at what CEOs at comparable companies are earning. P&F Industries had hired an external firm to do one of these reports. And Tim wanted details. --a little shocked. That's the best I can tell you. So we're still waiting on a report from that outside firm, right? I can't tell you. I don't know what the comp committee-- I mean, I don't-- I can't answer that question. I don't have the knowledge to answer that question. OK, um-- I'm not being evasive. I just don't know the answer, Tim. I'm sorry. OK. Well, you know that there's a firm that's-- we've certainly announced that there's a firm that's doing an analysis, right? I can't-- I don't know. Does anyone in that room know? It's not the purview of-- Does the attorney for the company know? Tim, I can't comment any further. And this is a Q2 conference call. Q2 means second quarter. We're talking about the results of Q2. Well-- So please, please, please, Tim, and Andrew and anybody else, please, let's keep the comments to the Q2 numbers. Thank you. Well, that's fine. But executive salaries are relevant to the future profitability and whatnot. I can't comment any further, Tim. Any other questions about the Q2? Well, it would have been helpful if you would have simply said, we're not going to talk about executive compensation, period. Because that's what you're essentially saying, right? Any other questions about Q2, Tim? I'll get back in queue. I'm frustrated right now, Richard. OK, you'll handle it. Thank you. Our next question is from Andrew Shapiro. Your line is open. There are a lot of calls like this. A CEO's salary is set by a company's board of directors. And Shapiro suspected Richard Horowitz had packed the board with his cronies, people who paid him more than he deserved. So Andrew hired a private detective and did some digging himself. He discovered that, in fact, several board members played golf at the same country club as the CEO. The Glen Oaks Country Club of Westbury, New York. Glen Oaks Country Club of Old Westbury, New York. Nothing illegal or maybe even surprising about these guys blowing into the same country club. But still, what would General Colin Powell do? He'd get them off the board. Andrew suggested several potential new board members. And Tim, Tim nominated himself. Getting new people on a board is tough. There is a vote. But in most cases, the existing board members get to decide who's on the ballot. It's as if members of Congress were the ones who decided who got to run for Congress. So Tim and Andrew went to the company's annual meeting to try to convince the board to put their candidates on the ballot. It was the first time Andrew Shapiro and Richard Horowitz, the CEO, had met in person. It actually was quite crowded. Every seat at the table was full. And there was the paid-for advisers standing around the periphery of the table, in the room, but along the wall. Where was the CEO? Oh, he's sitting directly across the table from me. Oh, it must be awkward. What's it like? Oh, it's not awkward or not. I go into these rooms with the distinct view that I am an owner of this business and you members of the board of directors are my agents. And you work for me. You don't work for Mr. Horowitz. You don't work for management. Management works for you, the board. And the board, you work for me and all of the other shareholders. The board did not seem immediately swayed by this argument. And it's easy to imagine how this whole thing might feel on the other side if you're, say, Richard Horowitz, the CEO; if you've got two guys who have never even worked in the tool business telling you how they think the business that your father built up should be run and how much you should be paid and who should be on your board. For Tim Stabosz, what had started out as a rational investment, something just based on numbers, had become emotional, had become something hard to let go of. At some point in this whole fight, Tim's letters to the company took on a different tone. He got rid of the lawyer who'd been vetting them. Some of the letters start to have words in all caps. Some start to feel weirdly intimate. One is addressed just to Richard and uses phrases like, "I was at the end of my rope," and, "goodness knows, I tried a different course." And then, in the summer of 2010, more than a decade after Tim first bought stock in P&F Industries, something finally went his way. There was a change on the board. The two guys who played golf at the same country club as the CEO stepped down from the committee that set the CEO's pay. Also, one of the people Andrew had recommended for the board got put on the ballot and elected. And a year and a half later-- if you haven't noticed, this is an incredibly long process-- it finally happened, the thing that almost never happens. The board of P&F did what Andrew and Tim wanted. They cut Richard Horowitz's base salary by a lot, from $975,000 to $650,000, a cut of over $300,000. It actually made the news, at least a little corner of the news, an article in a publication called "Institutional Investor." An expert in that article said it was the first time he'd ever seen shareholders get a board to cut the pay of a sitting CEO. Tim Stabosz, of course, was elated about the pay cut. Well, it felt fantastic. It felt great. It felt like I had served to effect this change, that I was an agent of change. That feeling did not last. It turns out, that new contract also made it easier for Richard Horowitz to get a bigger bonus. And in 2012, even though Horowitz's base pay had been cut, he actually ended up making more money than he had the previous year. And then, earlier this year, Richard Horowitz got a raise. The board boosted his base pay by $50,000. And they also raised the bonus percentages, so he would be able to earn even more on the bonus. The company only let us talk to one person on its side of things. But it was someone we definitely wanted to hear from, the board member that Andrew Shapiro had recommended. We met him one afternoon at a business club at the top of a tall building in Philadelphia. His name is Howard Brownstein. And he told us he thinks Richard Horowitz's pay is reasonable. Yeah, I would say to you that, based on the work that the comp committee did, as they reported it to us and as we listened to it, that the compensation is within the realm of reasonableness for our company and how it's doing and the money we make for the shareholders. We asked Brownstein about that compensation study that Tim asked about on the conference call, the study that compares Richard Horowitz's pay to the CEOs of other companies. And we read Brownstein this letter Tim wrote, asking the board to release details from the report. "Asked" is probably the wrong word. Tim writes, I demand, in all caps. And then, at the end, also in caps, I have waited long enough. I am done waiting. Well, Mr. Stabosz obviously hasn't been able to find the Caps Lock key on his typewriter. Look, generally in my world, when somebody demands something, it's because they have a legal right to it. He may say he demands it, but the fact is, he doesn't have a right to it. So what he really meant when he said, I demand it, is I really, really want it. I get it. It's OK. You can't have it. Next. He's one of the owners of the company, right? Sure he is. But the owners of the company only have the rights that they have, the rights the law gives them. It doesn't give them more than that. Since P&F wouldn't release that study, we asked a company that analyzes CEO compensation to take a look. The company is called Equilar. They do a lot of work for companies who are trying to figure out how much to pay their CEOs. Here is what Equilar found. Among roughly 200 companies of similar size, Richard Horowitz's pay ranked near the very top, in the top 7%, more than twice the average. Equilar also looked at a smaller group of companies that, like P&F, are in what's called the "industrial goods" sector. There were 13 companies in that group. The top paid CEO was Richard Horowitz. In other words, according to the study, Richard Horowitz is one of the highest paid or the highest paid CEO for what he does. Tim Stabosz lost. But he had owned shares in P&F for most of his adult life. And when you've been in something that long, it can be hard to know when to walk away. What happens next? Are you going to keep at this? That's a good question. I hadn't thought about that. Um, yeah, yeah. I want the company to know that I'm not going anywhere. Do you ever think about giving up? Um, no. Really? Well, I mean, I'm trying to think about what giving up means. I can tell you what giving up looks like. After we talked to Tim this summer, he had a momentary cash crunch. He had to sell all his shares. The company bought them from him. And as part of the deal, Tim promised not to buy any shares of P&F Industries for three years. It turns out it's really hard to cut a CEO's pay, even if you own 5% of the company. Now, he has even less power to do anything about it. Now, Tim Stabosz is just like everybody else. Jacob Goldstein and David Kestenbaum from the NPR podcast "Planet Money," the very entertaining podcast about economics. Get it for free at npr.org/money or whenever you get your podcasts. Act 3, Sleep No More. OK, so to end today's program about waking up, let's leave the world of metaphor completely. So we're not talking about waking up to a new way of seeing the world or waking up to the things you need to do to change your life or waking up other people to the issue of overpaid CEOs, or whatever issue. I'm talking about just waking up, just waking up, pure and simple. That shouldn't be hard, right? You do it every day. Springfield, Oregon, Monday morning during finals week, 7:30. Morgan Peach, a grad student hears the alarm that's supposed to wake him up. And he shuts it off. This happens again at 7:35. And again at 7:40. Once more at 7:45. You get the idea, 8:15, 8:25. Finally, 9 o'clock, his girlfriend, Angela Evancie, who made this recording, steps in. [DEEP INHALE] It's time. It's time. It's time. Right. He doesn't get up. Besides an exam, he has two research papers to turn in and 55 exams and papers to grade. Angela sees him struggle everyday with waking up. But she thought, this week-- this week-- for once, he would do it when the alarm sounds, because he has so much to do. Tuesday, it goes off first at 7:30, then seven more times. 7:40, 7:45, 8 o'clock, 8:05, 8:10, 8:15, 8:20. Wednesday, pretty much the same deal. At some point, Angela says to her sleeping boyfriend-- You set the alarm for 9 o'clock? Yes, I did. Can you afford to sleep in that late? Certainly can. I'm wealthy in time, not in money. People can be surprisingly articulate when they're barely awake sometimes. Wednesday night, Morgan tells Angela that the next morning, Thursday, he actually is going to have to get up. The geography paper's due at noon. Yeah, could you set the alarm for 7:30 tomorrow? I'd like to get up at 7:30 and work on my research papers and finish them. So next morning. (WHISPERING) And now it's 8:00. The alarm went off. And he reset it for 8:30. I really thought he was going to do it this morning. Sometime near 10:00 AM, they finally have this conversation. It's time to get up. [YAWN] That's what you always say. And then, still lying in bed. He explains the whole thing perfectly. It would be impossible to say this better. (SLEEPILY) It's almost as if the sleeping is that much sweeter when you have to get up or you think you have to get up, and then you don't. Our program was produced today by Jonathan Menjivar, with Sean Cole, Stephanie Foo, Chana Joffe-Walt, Sarah Koenig, Miki Meek, Brian Reed, Robyn Semien, Alissa Shipp, and Nancy Updike. Our senior producer is Julie Snyder. Production help from JP Dukes. Seth Lind is our operations director. Emily Condon's our production manager. Elise Bergerson's our office manager. Adrianne Mathiowetz runs our website. Editing help today from Joel Lovell. Research help from Christopher Swetala and Benjamin Anastas. Music help from Damen Graef. Our website, thisamericanlife.org, our spin-off program, Serial, serialpodcast.org. This American Life is delivered to public radio stations by PRX, the Public Radio Exchange. Thanks, as always, to our program's co-founder, Mr. Torey Malatia. This is what he said to the crowd immediately after Peter Sagal dropped by the WBEZ Christmas party for five minutes. Wow. All right.