Your Risk Assessment is NOT reliable; i.e. you are gullible

Why do people fall for scams?

Because they did not assess their risk properly (caveat emptor), or the risk factors were misrepresented (fraud / con / scam)

Freakonomics (Photo credit: Wikipedia)

But what if the risk assessment problem is a CULTURAL problem? Does your CULTURE, your PROFESSION, and other personal background factors affect your risk assessment? 

Or put in another way... When a doctor, a lawyer, and other highly paid professionals fall for a scam, do you wonder how someone so smart (if they weren't they couldn't have gotten so high) could have fallen for such a scam? 

If so, you have a cultural belief that smart people can't / shouldn't fall for scams. 

And that is wrong. Because those people believe it too. And they are victims of scams. They blinded themselves to the possibility that they may be gullible in areas that are NOT in their expertise. 

It's such an interesting topic, Freaknomics covered it. 

So go read the transcript or listen to their podcast. 

Ever wondered why do Nigerian Scammers write those spam?

Ever got this in the e-mail?

This guy who's in some Godforsaken place (often Africa, though Iraq, Afghanistan, China seem to be appearing ) and found this hidden fund allegedly from (insert random dictator / rich victim) stashed in some unheard of source (often a bank, agency, whatever) and needs YOUR help to get it out of the country. If you can help pay some fees (export duty, paperwork, bribe the officials, whatever) he'll split the millions in fortune with you. 

Most such advertise the country of Nigeria, that the whole thing is now called the Nigerian scam. It is also known as the 419 scam after the Nigerian Law that prohibits such. 

Most of this spam was written so poorly it's often laughable, replete with spelling errors, improbably facts, and obviously wants your money. That most of us don't give it a second glance. Indeed, the spam filters are very good in catching them that they rarely make it through. 

So why were they written that way? One Microsoft researcher has the answer. 

Scam Study: Ad Surf Daily

EDITOR'S NOTE: Scam Study is a quick summary of the various proven Ponzi or pyramid schemes. It is meant to be a summary, with relevant scam factor analysis.

Introduction

Ad Surf Daily is a convicted Ponzi scheme that ran in the US that started in 2006, and was shut down in 2008. It is also known as "ASD Cash Generator", "Golden Panda", and "La Fuente Dinero" ("Money Generator/ Spring" in Spanish)  Its principal owner is Thomas Anderson Bowdoin Jr., a.k.a. "Andy Bowdoin". When it was shut down in 2008, government seized large amounts of assets belonging to ASD and Andy Bowdoin. Of those assets, $79 million have been forfeited by Federal Judge's order and returned to victims mostly by 2011. Some additional assets are still tied up in litigation.  

Andy Bowdoin plead guilty to wire fraud in 2012. 

Most of the following information will be summarized from the Federal Indictment documents. 

The Beginning of Ad Surf Daily (ASD)

Andy Bowdoin was a member of 12DailyPro founded by Charis Johnson, which is the first "auto-surf" Ponzi scheme. It's called 12 daily as it promised 12% return for 12 days, if the members surfed other member's websites. It was shut down by the Securities and Exchange Commission (SEC) in February 2006. SEC determined that the old investors are paid by money from the new investors, making it a Ponzi scheme.

Roughly six months after the demise of 12DailyPro (late August / early September), And Bowdoin started up Ad Surf Daily (ASD). This is how ASD is advertised to work:

OP-ED: Are MLMs really based on sales? Or recruitment of self-consumers?

EDITOR'S NOTE: OP-ED is an opinion on the state of the MLM / network marketing industry, and while may be based on fact, is an opinion, and often, a question that needs to be answered. 

There are many MLM companies, or network marketing companies, in the US. In fact, the best known MLM in the world, Amway, was founded in the US. However, recently some incidents have raised questions... how real is the MLM business and industry?

But wait, you say... The industry is huge! Billions of dollars in sales!

Sales to who? Affiliates? (i.e. "self-consumption")  or real customers?  To the company, it's the SAME THING. Both are sales.

But the US case laws (FTC vs. Koscot  and Weber vs. Omnitrition) are clear... sales must be to real customers, usually interpreted as OUTSIDE NON-AFFILIATE.

Even a recent case, Burnlounge, judge ruled that sales to OUTSIDE customers is a the true measure of demand. Burnlounge accounting shows that only 3% of its revenue came from outside customers, indicating that most revenue came from recruiting new "moguls" (i.e. affiliates).

So what are the stats for the big companies, like Amway, Herbalife, and so on? Do they know how many customers they have vs. affiliates?

They don't know.

Why do people deny the truth? Because they hate it.

Ever ran into truth deniers? That they refuse to believe in something even though it's true? Ever wonder why?

If you watched the Simpsons, you may have came across this scene:

In episode 3f07 "Marge be Not Proud", when Bart really really wants that Bonestorm game, Marge started lecturing Bart, and Bart whipped out a bucket (or is that a lampshade?), put it over his head, and started beating on it with something (his slipper?) so he can't hear Marge's lecture.

While Marge is lecturing Bart about the truth, Bart is not interesting in hearing it.

Sounds a lot like many people I've seen, out to defend various suspicious schemes.

Genre Analysis: What is wrong with the MLM + Penny Auction Niche?

Can you really get things for one penny?
(Photo credit: Wikipedia)

EDITOR'S NOTE: Genre Analysis is my personal opinion on a particular genre of network marketing, like MLM + penny auction, or MLM + daily deals, and so on. 

Following is a comment I left on MLMHelpDesk, outlining what I consider to be wrong with this entire niche of MLM + Penny Auction, where the company allegedly rewards affiliates for spending affiliate's own money to buy bids and give them away to promote the auction.

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[Dear Troy Dooly,]

I am *guessing* Al’s point is… a penny auction (I’ll just say PA from now on) needs bidders, not affiliates. If a PA got more affiliates than bidders, then it’s clearly attracting the wrong type of people.

It’s a lot like the dilemma of self-consumption in a regular MLM. The “self-consumers” don’t sell retail to the public. All they do is sit there and buy a little every month. They are technically affiliates, but they’re not recruiting other salespeople… OR new customers.

I had asked Mr. Kevin Thompson what he thought about the situation, and he talked about his solution to this problem, so it’s clear we all thought about it.

And now, we’re here with ZeekRewards, on what exactly is the business model of Zeekler and ZeekRewards.

Promotion is supposed to come out of Zeekler’s budget, is it not?