VIDEO: Cult Expert Steven Hassan discuss cult and MLM with Robert Fitzpatrick and Doug M. Brooks Esq.

This video is rather long. It's 40+ minutes where Robert Fitzpatrick, a pretty famous (or infamous) opponent of MLM, and Doug M. Brooks, a lawyer who sued several MLM companies on behalf of affiliates, have a talk with cult expert Steven Hassan, on how MLM is cult-like.

Keep in mind that Fitzpatrick, while well-researched, has a bias. He is quite convinced that MLM is simply disguised pyramid scheme. I don't believe he's completely correct, but he is well researched, and you should listen to what he had to say even with his bias.

Bad Argument: abusing crowd-sourced filtering

One of the powers of the Internet is the ability to poll the crowd to know what's good and what's not. This is known as crowd-sourced filtering. The best known version is Web of Trust, i.e. WOT. You can leave ratings and comments on any URL you go to.  http://www.mywot.com/

The hope is that people will use it responsibly, put real honest ratings, and thus, the "accurate" opinions will outweigh the inaccurate ones. However, this may not happen immediately, and sometimes, when ratings of a suspect scheme drops below a threshold for it to be consider "scam", a bunch of supporters will then flood the ratings with positive reviews to hopefully push it back into "neutral", or even "good".

Here's an example... ZeekRewards.com, one of the biggest Ponzi scheme to his the US in recent years, has a low WOT rating.

However, look at their comment statistics:

Yep, almost 400 people left positive comments, whereas only 14 people left negative comments. All of the positive comments say the same thing: great way to make money. In fact, this attempt to influence the vote was caught by WOT admins:  http://www.mywot.com/en/forum/15486-scorecard-manipulation-attempt-going-on   Seems most of the comments hit WOT right about August 2011, when Zeek changed the comp plan to require "giving away bids" to earn that RPP.

Bad Argument: Reverse Psychology Spam Domains

With domain registration under $10 for a year, and free hosting for blogs and such available, a lot of scammers have started making domains that claims to post information about a potential scam, but instead, actually recruits you into the scam.

I've previously seen plenty of examples for TVI Express, but here's an example involving Zeek Rewards.

Note the domain and title, but most of the info is actually for recruiters, assuring Zeek is NOT a scam. It even reprints articles from the official Zeek Rewards "news" website. (this is one of them)  

Cognitive Bias: the Barnum Effect

Ever run into an ad that reads something like this (real current website of a real company, name blurred)

Generic statements that promise things like "people from all walks of life... enjoy the benefits of the ... opportunity", and "you don't need any special skills or experience" reads just like any ad, right?

"It's a natural process to become a successful [redacted] distributor. Anyone can succeed in this business." Wow, guess that means you!

You've been subject to the "Barnum effect", in that you attribute a bit more "oomph" to the generic statement (you can do it!) than you should. People trying to persuade you to do something knows this intimately.

Psychology of Ponzi Schemes and Schemers: part 1, the schemer

People have wondered ever since Charles Ponzi's name was attached to a financial fraud... how can people be so stupid, and the schemer be so evil?

In this multi- part series, I'll try to explain what psychologists learned about white collar criminals and how they tick, and how the criminals rationalize hurting other people financially and reaping the benefits, by taking advantage of many of our preexisting biases.


Part 1: The Mindset of a Ponzi Schemer


Origin of a Ponzi Schemer

Many Ponzi schemers start on this road by accident.

Charles Ponzi originally tried to actually do arbitrage of International Reply Coupons, but the success of his venture, with people actually throwing money at him, basically made him lazy and not do any real investing. He's too busy to bask in the limelight and enjoy the lifestyle (and try to fleece a whole bank) to actually make the money he's supposed to.

Many smaller Ponzi schemes did not start as Ponzi schemes, but genuine investments, but later evolved into a Ponzi scheme, as it's just so much easier to fake it than to do real investing. A very similar motive is to cover up losses. Sean Mueller, a Ponzi schemer caught in Denver Colorado, gained national infamy by snaring none other than famed NFL Quarterback John Elway in his schemes. He got a sentence of 40 years. In an interview, Mueller claimed that he had to cover up the losses in order to make back what he lost due to his incompetence. Except he never did, and the hole only got deeper.

Yet other Ponzi schemers knew exactly what they were doing, because they were exposed to a Ponzi scheme, and decided to improve upon it. Andy Bowdoin, head of Ad Surf Daily Ponzi, improved upon 12DailyPro, of which Bowdoin was personally a member.

Bad Argument: Communal Reinforcement

Daniel Kahneman (Photo credit: Wikipedia)

When you "hang out" with a group, you conform with the group. You become more like the group. This is normal, as you seek out people who are like you. Humans are social, so group conformation is also normal.

However, this can often be exploited by scammers, esp. if he is "leading" the group, through a phenomenon known as "communal reinforcement".

Daniel Kahneman described it best in his book Thinking, Fast and Slow : "We know that people can maintain an unshakable faith in any proposition, however absurd, when they are sustained by a community of like-minded believers" (p. 217).

This is very apparently when it comes to pyramid schemes and Ponzi schemes, where the "community" aspects of the scam made them heavily reliant on communal reinforcement. And with modern communications you don't even need to be in physical proximity to maintain a community of like-minded believers.

PERSUASION: Former Zeek PR man confirmed Zeek Head Paul Burks skilled in deception

The people who believe in Zeek Rewards / Rex Venture Group may have place their trust in a man who is very skilled at deception and sleight of hand, as newly revealed details prove.

Paul Burks was a country singer and a magician. In fact, he's known as the "singing magician" in the 1980's and 1990's. This was revealed by Clifton Jolley, current of MLM.com, and for less than a month, hired by Burks to deal with some communications problem. Only weeks after being hired, SEC shut down Zeek.

In the following video, Clifton Jolley interviews another lawyer who explains what exactly did SEC do to Zeek and why. At about the 11 minute mark, Clifton Jolley mentioned that he knew Paul Burks was a magician and a singer, and Burks even performed several tricks for him right on the spot.