MBA with two years of coursework in statistics, accounting, economics, finance, and analysis of business enterprisesprior to his research training in his PhD program and his experience evaluating the research of others in administrative positions at two universities and in his consulting work. However, these analyses and calculations have been validated by independent experts in fields requiring much sophistication in statistics, finance, and accounting.
Validated by CPA & Certified Fraud Examiner170
The methodology used by Dr. Taylor to calculate profit and loss rates in multi-level marketing companies is sound. Sadly, calculations like this require estimates because MLMs refuse to release the data necessary to calculate these items. Dr. Taylor’s estimates and assumptions are reasonable, and his calculations are conservative, likely underestimating the true failure rates of distributors.
– Tracy Coenen, CPA, CFE
Validated by statistician171
As a point of introduction, my name is Paul McKee and I have over 20 years of experience as an Applied Statistician and Manager as well as a degree in Statistics from Brigham Young University. I became aware of Dr. Taylors work as a result of my wife being invited to a “Business Opportunity” meeting by a friend of hers. I looked into the name of the company that my wife was being introduced to and determined that it was a Multi Level Marketing (MLM) company. I had always been suspicions of their claims but had never done an in-depth analysis of any
170 “Calculating loss and failure rates in multi-0level marketing schemes,” article by by Tracy Coenen, posted on May 11, 2012 in “The Fraud Files” at – http://www.sequenceinc.com/fraudfiles/2011/05/12/calculat ing-loss-and-failure-rates-in-multi-level-marketing- schemes/
171 Letter from Paul McKee to FTC dated January 13, 2011. Subject: “Validity of data represented in Chapter 7 of the text “A Case (for and) Against Multi- level Marketing”
MLM. While I was researching this MLM, I became aware of Dr. Taylors research and started reading information on his website. I have read, studied most of his text and analyzed in detail the cases presented in chapter 7 in the text “A Case (for and) Against Multi-level Marketing” by Jon M. Taylor. The primary case in this chapter details data noted in what is referred to [Exhibit 2]172 in this chapter “[Exhibit 2]:
Average earnings statistics for Nu Skin Enterprises, Inc. – Extracted from Nu Skin’s ‘2008 Distributor Compensation Summary’”. After a detailed analysis I have found that the data that he has presented is statistically accurate, given the assumption that his base data is accurate from the source. He has made a number of assumptions that generally are favorable to the MLM but do describe what I would consider unreasonable odds of success. I base the reference of “Unreasonable Odds of Success” on the comparison of what was presented to my wife and also the independent research I completed on the internet from MLM company websites. In my over 20 years of experience working in the largest and smallest corporations in America I have never seen a sales opportunity that was represented with such emotional and perceived potential but actually resulted in such abysmal results. In fact, Dr. Taylor demonstrates that recruits of MLM companies experience personal financial loss occurring in over 99% of the cases .
– Paul McKee, Statistician
Validated by actuary173
I was introduced to MLM as a youth, as my parents were distributers with Amway. Though my parents failed to profit from this, I did not personally suffer from their
172 It was Exhibit 1 in early edition. Exhibits re- numbered in later editions
173 Letter from John Ashby to FTC, dated January 18, 2011. Subject: “Multi-level Marketing (MLM)” Actuaries are highly qualified statisticians who calculate insurance risks and premiums for insurance companies. John Ashby is an actuary for an insurance company
misfortune. However, their experience left a distinct impression on me and ever since I have paid close attention to individuals who involve themselves in MLM. It has been over 25 years since my first exposure to MLM, but I have yet to know someone who has successfully built and sustained a profitable business in MLM. One could justify that as poor peer group selection on my part, but I find it statistically difficult to concluded that MLM is a viable industry, as a very few, if any, actually profit.
Given my interest with MLM, I have found the research of Jon M. Taylor to be astounding. I have a background in statistics with a BS degree in mathematics from Utah State University and a fifteen year career as an actuary. I find Mr. Taylor’s work to be supportable and credible. Mr. Taylor’s work on MLM is extensive, but I base my conclusions on my personal review of Chapter 7 in Mr. Taylor’s e-book “A Case (for and) Against Multi-level Marketing.” While I have not reviewed the basis for the assumptions made by Dr. Taylor (which seem to fairly represent the MLM) or the source data from his case study of NuSkin, I have examined the calculations in [Exhibits 3 and 4]174 of
Chapter 7 – MLM’s Abysmal Numbers. His calcu-lations are materially correct and support his argument that over 99% of recruits to MLM companies will fail – compelling evidence, indeed.
– John Ashby, Actuary
Validated by Certified Financial Planner175
Please share these comments with any and all who may benefit.
I have spent the last 30 years actively involved in the insurance, investment, and general financial services industry. I have been involved as a supervisor, securities principal, and compliance officer. As such I have and still do find it amazing that having lived in such a compliance, and consumer protected industry, that the MLM industry has little or no regulations.
174 Exhibits re-numbered in later editions
175 Letter from Calvin D. Welling, CLU, ChFC, CFP, to FTC dated January 12, 2011. Subject: “MLM marketing practices”
If we were to try and market any of the MLM programs I am aware of to our clients we would immediately be fined and censured. In fact our Broker dealer forbids any registered representative from participating in any MLM activities.
I would strongly urge all of you to take a serious look at this industry and try and not be swayed by the hype, but look at the facts.
Dr. Taylor has done a suburb job of balanced research and reporting. If he had time I would encourage a comparison of the dollars lost in the MLM industry to the Fraud we experience in the financial services world. My guess is that there would be found many multiples more lost in the MLM world than in our highly regulated financial services industry. It just does not get the press coverage.