Saturday, July 21, 2012

The "if it haven't been charged it's not a scam" fallacy

WASHINGTON, DC - MAY 10:  U.S. Federal Trade C...
Federal Trade Commission Deputy Director Jessica Rich . (Image credit: Getty Images via @daylife)
If a suspect scheme has been pretty thoroughly debunked, its "supporters" will often fall back to the "if it haven't been charged it's not a scam" fallacy as a defense. It usually takes the following form:
A: Acme XYZ is a scam because of ____, ____, and _____. 
B: Acme XYZ has not been charged by any government regulators! If it's illegal it would have been shut down by now/ long time ago! So it's legal!
Technically, this is a "red herring", as it neither disproves the premise "Acme XYZ is a scam", nor does it prove the counter-premise "Acme XYZ is not a scam".

The fact (assuming it is true) that Acme XYZ has not been charged / convicted as a scam does not mean anything in itself. You can be a scam, and not be charged (or convicted). It simply means the government have yet to act. It does not preclude them from acting in the future.

Friday, July 20, 2012

"You can't judge us unless you're with us" fallacy

An American judge talking to a lawyer.
An American judge talking to a lawyer. (Photo credit: Wikipedia)
One of often used deflections used by defenders of a suspicious scheme is "you can't judge us unless you're with us". It usually takes this form.
A: Acme XYZ is a scam because ____, ____, and ____. 
B: How can you judge Acme XYZ if you're not even in it? You don't know the truth!
As the answer is unrelated to the premise (it neither disprove the premise nor prove the counter-premise) it is a red herring. Though it "sounds" like a valid argument, until you look at it a bit closer.

This deflection attempts to examine A's 'qualifications', completely ignoring the facts and/or logic presented, and proposes a reason to discount A's premise without examining the premise itself, simply due to A's qualifications (or lack of).

NOTE: This argument is VERY similar in tone with its cousin, the "you're not in it" fallacy. However, this one invokes "appeal to lack of authority" (you have no right to judge us) instead of "appeal to lack of anecdotal evidence" (you don't have direct evidence to judge us).  The two are VERY close in both argument and tone.

However, even this alleged "lack of qualification" is in itself fallacious, because it can be restated as follows:

a) you have to be in a scheme to judge it
b) "B" is not in the scheme
c) "B" is not qualified to judge the scheme

Why would any one have to be IN the scheme to judge it? Are movie critics part of Hollywood movie studios? No! Are judges part of criminal underworld? No! Thus, the whole thing is a logical fallacy as well as a red herring.

Thursday, July 19, 2012

Signs that Your MLM may NOT be a good opportunity

A list of warning signs for a MLM that would be, well, NOT good for you to join. We've covered some of the signs individually, but here is an excerpt

Warning Signs about the Products

You should get out of (or never get into) a scheme when...
... the margin on the product is so low, there is no profit for you (but there is some for the company and your upline)
... the product is a "meatball sundae", i.e. a horrible combination that no one in their right mind would buy
... the product is untested and who knows what it'll do if you use it long-term (esp. anything you ingest or apply to your body)
... the product is so generic anybody can make it (and indeed, many are already in the market)
... the product is so boring, nobody cares about it, even you
... the product is bleh, it's just the compensation plan that's exciting
... you're not selling the products... you are BUYING the products and giving them away in order to get paid. (i.e. you're spending money to make money, not working for money)

To read the rest, please go to


Wednesday, July 18, 2012

Bad Argument: "What's your problem" tactic

Logical Fallacies 3
Logical Fallacies 3 (Photo credit: Mark Klotz)
When a "defender" of a suspect scheme defends the scheme, often they can't resist on speculating the other side's "motive" instead of sticking strictly to the premise and/or counter premise and the logic and/or evidence supporting "their side". And often, one of the speculations runs to "if you have a personal problem with _____."  Here's an example:

A: Acme XYZ is a scam because of ____, ____, and ____. 
B: Do you have a personal problem with _____, founder of Acme XYZ? You must have to slander his company like this. 
This is a red herring, because B did not argue either the premise (Acme XYZ is a scam) nor the counter-premise (Acme XYZ is NOT a scam).

Tuesday, July 17, 2012

Cognitive Bias: conflict of interest? What conflict of interest?

Dan Ariely speaking at TED
Dan Ariely speaking at TED (Photo credit: Wikipedia)
All of us have multiple roles in life. There's family, work, friends, net acquaintances, fellow hobbyists, fellow gamers, so on and so forth. While we find some sort of balance through life balancing these responsibilities, sometimes, one of the roles you had taken on would lead you to make a decision that is actually NOT optimum for the actual role you *should* be playing.

Daniel Ariely, a psychologist, had some major facial injuries (from a fire, I believe). His doctor wanted him to get some micro-tattoos so he gets a permanent 5 o'clock shadow (slightly unshaven look) so the two sides of face would "match". He thought about it, then decided against it. Then his doctor allegedly started to berate him about him wanting to stay ugly... unsymmetric, blah blah blah. He left.

It was only MUCH later that he found out that his doctor had written a paper about this micro-tattoo technique and needed three case studies to publish, and he would have been number three had he accepted.

The doctor had a conflict of interest, which lead him to propose something that he *thought* would be benefiting the patient, but is actually benefiting himself. No doubt he thought it was a win-win idea...  But as a doctor, he's supposed to put his patient's welfare ahead of his own.

Monday, July 16, 2012

Genre Analysis: What is the problem of marrying MLM with Daily Deals

Shopping Card Gives you Daily Deals
but can they work as income opportunities?
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. 

Seems MLM can be combined with almost ANY regular business model out there, merely by switching out regular media marketing with network marketing. While this works on some levels, in many ways you can end up with what Seth Godin called a "meatball sundae". Today, the genre "MLM + Daily Deals" goes under the microscope. Does such a business model make sense?

IMHO, there are MULTIPLE problems with the entire genre.

The problem with daily deals is itself is really a marketing tool, like multi level marketing, not a business model. Groupon's business model is convincing the businesses to outsource the marketing to them, at least periodically, while Groupon enroll the potential customers and inform them about deals from you (and your competitors). Groupon charges businesses for the priviledge of getting on Groupon, as Groupon considers itself an advertising medium, and a business is supposed to PAY advertisers. What Groupon gives back for that fee is guaranteed number of customers who will walk through the door, and probably a lot more. 

However, consider this from the business POV. The business not only have to offer their stuff at a STIFF discount (usually 50% off, so it better be some VERY high margin stuff), it has to PAY Groupon for the privilege to do so. Not only are they sacrificing profit for a few hundred, perhaps over 1000 customers, they are PAYING for the privilege to do so. If you just need some cashflow, or generate some buzz, that may make sense. You can also limit the loss by limiting the coupon to say, 500 people, but overall, this seems to be a lose-lose proposition. You advertise to increase customer base and increase profits, not increase customers and SACRIFICE profits. 

Sunday, July 15, 2012

What exactly is "due diligence"?

Due Diligence means you need to investigate.
But do you what to look for?
A lot of MLM grunts (see 6 types of MLMers) are so new to the segment that they don't even have an idea what exactly constitutes "due diligence".

The short version: "trust, but verify". Reagan said that when Gorbachev want to promote "Glasnost". Due diligence is that "verify" part, and with search engines finding info is easier than ever.

However, a lot of MLM grunts don't even know what questions to ask, so here are the four fundamental questions:

  • Is the company and its leaders/execs reputable?  
  • Does the company have a good product line that people will want to buy? AND pay a premium for? 
  • Is the comp plan rewarding to you, instead of stacked in favor of the company? 
  • Does the company support the affiliates, through training, service hotline, and so on? 
Let us explore each topic in turn.