What One MLM Critic Wants You To Know

A bit of delay on posting this as I was on my way to Phoenix (and early warning that comments submitted over the next week could be delayed as well), but the following comment was submitted Wednesday in response to my post debunking the 99.9% myth. While I could have easily discarded it based on the personal attacks the author makes toward me, I ultimately decided that the bulk of the post does address the very issues we have been discussing here. While the author and I obviously disagree on many points, being exposed to various viewpoints is an important part of being informed. My stance remains that given the facts, consumers are intelligent beings who can come to their own rational conclusions. As a result, I am more than happy to post dissenting opinions.

I chose to post this as a new entry because there are certainly many opportunities for discussion here, and I don’t think being buried in the comments of an old post would give site viewers enough opportunity to review and react to it. As such, it is posted in its entirety below. I will look forward to the reactions of others.

Just one final note before we get to the post itself. Thus far the visitors to this site have conducted themselves with respect to the opinions of others. The intent of this blog is to discuss the issues, and personal attacks have no place here. However, I am posting this message in its entirety because I hesitate to do ANY editing to posts – one would then always need to wonder if something had been left out. Since the bulk of the post does address relevant issues, I did not want to lose that input – no matter how far afield it may be from my viewpoint or that of DSA. That being said, in the future I will not post any comments from this author or any other that make personal attacks on people or their opinions, or simply restate the same information regardless of the topic at hand.

Message from Jon Taylor posted 10:28 pm ET 6/4/2008:

Amy – Is this the same Amy Robinson that used the web version of identity theft to register pyramidschemealert.com to divert honest people seeking the truth from finding the pyramidschemealert.org web site they were seeking? And the same DSA that blatantly lied in our Utah legislative committee hearings to get MLM exempted from prosecution as pyramid schemes? The same DSA that used blatant influence peddling to get MLM exempted from a Business Opportunity Rule that would have given consumers some protection from the worst business opportunity scams?


I don’t expect that you would dare post my response (below) to some of the above comments on your blog. It would only be honest and ethical to do so, since the statistics you challenge are my statistics. But I would be surprised if you were that open to honest feedback. Here are a few points for readers to consider:


1. The 89%, 84%, and 91% satisfaction rates for direct selling you cited above on “Happy Mothers Day” (and which have been cited in legislative hearings, etc.) are themselves extremely misleading, since they combine legitimate direct selling with pyramid or chain selling. MLM is not considered as a separate category, but is treated as core direct selling activity.


2. I worked my way through college selling World Book Encyclopedia while you were still in diapers. World Book, Fuller Brush, Tupperware, etc. were not endless chain selling operations, but legitimate direct sellers at that time. I have watched MLMs gradually take over the agenda of the DSA, which initially represented legitimate direct sellers. Now the DSA spends its resources twisting the truth to match the deceptions used to recruit hapless victims into the revolving door of recruits needed to fuel the insatiable appetites of TOPPs (top of the pyramid promoters), officers, and founders of MLMs that are its most profitable members.


3. Back to your statistics, only “active” participants in MLM are included in statistical population, not the 90% that are gone within 5 years in many of the programs we’ve studied. If you included only MLM and ALL who were enrolled in a 5-year period, you would get strikingly different statistical results. This is only fair, since some of the “successes” included in the studies have been with the company for ten or more years.


4. As far as the “99% myth,” you should read Bob Fitzpatrick’s “The Myth of ‘Income Opportunity’ in Multi-level Marketing.” (See www.falseprofits.com) He comes up with a loss rate of closer to 99% using the numbers published by the MLM companies themselves – assuming you subtract minimal expenses. My 99.9% figure comes from a more strict accounting and statistical standard – subtracting “pay to play” expenses (purchases required to qualify for commissions and advancement) and minimal operating expenses – which I established be carefully tracking expenses in a one-year test. It also includes ALL recruits within a reasonable time period – not just “active distributors,” etc. And since the vast majority of MLM recruits soon become EX-participants, they deserve to be represented.


5. Now to the tax studies. If you read my tax survey carefully, you would know that I acknowledged the problems of doing the survey from the outset. If anyone were to do a simple survey of tax professionals on the profitability of MLM participants using a standard survey questionniare, they would be unable to get the desired data – period. You should know that. This is confidential information. What happened to me was that accountants aware of my research were asking me why no one doing MLM was reporting any profits. So they gave me the opening for talking with others. I would simply ask “…  Shoot, I’m not going to write out pages to repeat the process that is reported on my site. Go to www.mlm-thetruth.com and click on the research link, and you will find it. My approach was the best I could do under the circumstances. And I stand by my 99.9% loss rate for the companies I have studied – not based on the tax survey, but on careful analysis of actual company data.


6. You should know that Bruce Craig, while working in the AG office in Wisconsin in the 70’s and 80’s, was able in a state action to obtain the tax returns of the top 1% of Amway distributors. Their average income was minus $900. So there was a precedent.


This feedback is surely too honest and straightforward for you to post, so I don’t expect anyone but you to see it. But I feel better having written it.


Amy Robinson, how can you sleep nights, knowing (as you must) the great harm the DSA and its member firms are doing world wide?

Jon M. Taylor, MBA, Ph.D., President, Consumer Awareness Institute and Advisor, Pyramid Scheme Alert

Amy’s response:

The author says he has the same goal as DSA – and that’s to make sure pyramid schemes are not able to operate in the marketplace. The problem is we don’t agree on the definition of a pyramid scheme. However, I find value in the exercise of finding common ground from which to start a discussion. Undoubtedly there is somewhere in the middle where we have some agreement, and both sides could probably benefit from an open and honest discussion of each other’s opinions. Certainly there are areas where we would have to agree to disagree, but I’m not sure the author would ever be able to accept that his views might be wrong.

Now, since I chose to proceed with posting the personal attacks, I will respond to them briefly. The online identity theft assertion has been used frequently by the author – and is absurd. Why the author has made this an issue personal to me, I’m not sure – it is only my name on the registration because one has to be there. But that detail aside, DSA does in fact own a domain similar to one used by the author and at one point we did have information posted there relevant to anti-pyramid scheme legislation being considered by Congress. However, at no point did we conceal our identity or masquerade as anyone else.


Assertions about DSA’s testimony with regard to anti-pyramid scheme legislation in Utah are equally as absurd – and in reality represent no more than a difference of opinion. Just because our view is different than the author’s doesn’t take away from the truth of what we are saying – we simply view the facts differently. This is further evidence that the author is unwilling or unable to entertain different points of view.


With regard to the Business Opportunity Rule, the FTC reviewed our feedback on the issue just as they reviewed the feedback from the author and others and decided the merits were on our side. If we had the influence the author suggests, wouldn’t we have used it to prevent the Rule from being proposed in the first place? We are confident in our position because we know we have the facts on our side and verifiable data to back it up.


Now to the specific, and more substantive, assertions made by the author:


Regarding the author’s specific comments on my previous posts, the numbers I quoted with regard to satisfaction are from our 2002 National Salesforce Survey, during which more than 1,800 direct sellers involved in both MLM and non-MLM compensation systems were polled by an independent research firm. While the interviewees were current direct sellers when selected at random from the salesforce, that group ultimately represents people who were just starting, well-established or in the process of quitting – for a variety of reasons. I don’t understand the suggestion to limit the pool of respondents to only companies using a multilevel marketing compensation plan – while most direct selling companies use MLM, some don’t and they should be represented proportionately. And why would we want to limit the time period to exclude those who have been active for a long period of time? Are the experiences of those people less relevant than newcomers, people who had only a short-term goal or decided direct selling was not for them? You can’t pick and choose your respondents to get the results you want, nor is it credible to conduct your own research and analysis, as the author did, when you have a clear and stated bias.


Interestingly enough, the author goes on to state in another part of his post that when looking at income stats, then we should consider ALL distributors – not just those who are active. So which way is it? Do we pick and choose or do we include ALL participants?


The credibility of DSA’s numbers is backed up by the outside research firms that conduct the studies. A respectable research firm won’t risk their reputation by cooking the numbers – regardless of who pays for the study.


That said, I’ve made no claims on this blog that there are not issues to address. On the contrary, one of the reasons we’ve started this Web site and this blog is to have an open exchange of ideas about the industry regardless of one’s position. Our goal is to improve the direct selling experience for everyone – if that means changing policies or educating companies about what today’s consumer’s want, then everyone would win.


Further, this site encourages people to do their homework regarding direct selling in general and the companies they are considering in particular before signing up – and to begin with realistic expectations regarding the time involved and the income potential. In case I have not been clear, direct selling is not an easy way to get rich quick.

In addition, the site promotes the DSA Code of Ethics – which acts to both prevent issues and solve them. Compliance with the provisions of the Code sets a framework for ethical behavior, but if a seller or consumer encounters a problem, it also provides a structure for relief.

Regarding the studies the author cites, it’s not surprising that one would choose to cite the research of others they agree with – particularly when they already work closely with those individuals, closely enough in fact that they are all advisors for each others’ organizations. The studies the author cites contain limited data. For example, his own study group was admittedly a sample of just 33 tax preparers from three counties in Utah who were asked what they recalled about returns they had completed. Further, they were asked to divulge confidential information and then coaxed further by being told what others had already said. That is simply not an objective way to collect data. The data may have been difficult to collect, but that doesn’t mean you can introduce a bias to extract information or randomly fill in missing information. At best, the data is anecdotal, at worst it’s just outright wrong.


Lastly, Mr. Taylor asked how I can sleep nights. Well, with a full-time job, a husband, and two small children, I don’t sleep as much as I’d like to. However, I do sleep well because I know that direct selling can be a rewarding opportunity for men and women, whether they’re looking to begin a new career or just earn some extra money to pay bills or take a trip. And I also know that those of us at the DSA are working to make the industry even better.


Mr. Taylor is certainly welcome to be part of the conversation and I do hope that we’ll be able to have a useful back and forth free from personal attacks that focuses on the issues at hand. It’s fine if we reasonably disagree on the basis of facts and data. It is not acceptable to degrade the other party.

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