Scam Psychology: Charlie Munger on How You Screw Up, Part 1 of 6

You may have heard of Charlie Munger. But if you haven't, you should have heard of his partner: Warren Buffet, one of the 5 richest man in the world.  In 1995, Charlie Munger gave a speech at Harvard... about how people misjudge things. Here's my personal interpretation of his lessons, as applied to network marketing. You can read the full speech.

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In the speech given at Harvard in 1995, Charlie Munger identified what he called "24 standard causes of human misjudgment." I call it "24 reasons why you screw up".  Here is 1 through 4.

1) Not understanding power of incentives

Incentives is the standard way if you want to influence someone's behavior. If you are not getting the results you want, you are probably using the wrong incentives. And if you don't understand how incentives work, you won't get the full use out of them (or understand how they're used on you)

One of the most direct ways network marketing company influences its affiliates is the compensation package, also known as the comp plan. And comp plan is the best indication how serious the network marketing company about retail is how it structures its comp plan. If the comp plan rewards self-consumption by tying commission to your downline's self-consumption, you have a pyramid scheme, as little if any product is actually being retailed. By studying how the incentives are actually applied, you can see which way the company wants the affiliates to jump. And if that doesn't match what they say they are, perhaps the business is not what it appears to be.

Another way incentives play into network marketing is not realizing the way incentive actually works, generally by overestimating one type of incentive vs. another kind. One of the most frequently used rebuttals in network marketing "So-and-so is famous and works with MLM X. So-and-so can't POSSIBLY work for a scam as it would ruin his reputation, so MLM X can't be a scam." This argument basically postulates that Incentive A: MLM X paid So-and-So 75K for a special appearance at a convention for a speech is NOT sufficient to overcome Incentive B: Negative reputation due to MLM X may be a scam. However, when you think about it, this makes absolutely no sense at all. Plenty of celebrities have pitched for scam at one time or another. Snooki had shilled for Zantrex the super-caffeinated diet pill that was called out as bunk by doctors. Bob Eubanks was once tricked into making a test show which was then used as "pilot" to scam investors into funding a show that doesn't exist.  Celebrities are people too. They can be tricked, or they simply don't care as you're more focused on his/her celebrity status rather than what s/he endorses. The negative incentive is nowhere as big as the rebuttal claimed to be.

By not understanding the power of incentives (even negative incentives), some people came to the wrong conclusion.

BREAKING NEWS: ZeekRewards receiver filed civil suit against "insiders" and net winners

According to PatrickPretty.com, Zeek Rewards receiver Ken Bell has filed lawsuit against the "net winners" of Zeek Rewards, alleging that they had long conspired to defraud others. This includes all of the major players in Zeek Rewards, including Paul "The Singing Magician" Burks, Dawn "HippieDiva" Wright-Olivares, Alex "I married Dawn" deBrantes, Dan "CIO? Me?" Olivares, and Darryle "Who? Me?" Douglas, as well as the estate of the late Roger Anthony Plyler.

This is a separate lawsuit from the charges filed by the SEC, and it is unknown if other agencies will bring criminal charges against the heads of the largest Ponzi scheme (in number of victims) in US History.

http://patrickpretty.com/2014/03/03/urgent-bulletin-moving-zeek-receiver-sues-alleged-insiders-winners-emails-skype-chats-helped-expose-fraud-weve-already-attracted-a-great-many-big-fishes-wright-olivares-exci/

More details on BehindMLM

http://behindmlm.com/companies/zeek-rewards/clawbacks-filed-against-zeek-insiders-winners

Found This Pix on Reddit: VERY appropriate

Actual Advice Mallard says:
If you have to pay anything up front before you start a job, you're a customer, no an employee. 

Isn't it surprising that so many MLMers fail to realize this, and manage to convince themselves that they are "entrepreneur" instead?

BREAKING NEWS: TelexFree under investigation in Africa

The East African newspaper out of Kenya has confirmed with Rwandan government officials that TelexFree had spread to Rwanda and is being investigated by officials of being a fraudulent scheme.

Emmanuel Bayingana, the official in charge of Competition at the Ministry of Trade and Industry, confirmed that TelexFREE was being investigated.
“We are doing an assessment of the operations of TelexFREE,” Mr Bayingana said. “The investigations will determine the way forward. The assessment will be concluded next week.”
He noted that the ministry, Rwanda Development Board (RDB) and the central bank will come up with a position, especially if the business is found to be risk-prone.
The government has been strict on pyramid schemes and multi-level marketing businesses with a number of them, including Questnet, banned from operating in Rwanda.

http://www.theeastafrican.co.ke/Rwanda/News/Rwanda-govt-probes-TelexFREE-over-Ponzi-scheme-claims-/-/1433218/2226134/-/aha5x8/-/index.html

There are several reports that TelexFree may also be under investigation in other African countries. However, those cannot be confirmed at this time.

Scam Psychology: Scam Denial for Dummies (i.e. How to be happy sheeple)

Editor's Note: After reading the article "Science Denial for Beginners" by Austin Cline, I just had to adapt it for scam denial. All credit goes to original author, and any mistakes are my own!

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Scam Denial for Dummies: How to Be Obedient Sheeple

adapted by K. Chang 

from original "Science Denial for Beginners" by Austin Cline

Denialism is growing phenomenon around the world, esp. when it comes to scams. Denial is a means by which people hold on to ideologies ("my scheme is legal!") that are threatened by reality (Scheme is likely illegal / is illegal elsewhere) and preserve a sense of control over a world they cannot directly manage. Denialists tends to use the same tactics, because denialism originate from common mental processes. There are six tactics you can utilize to deny reality about the scheme you are involved in.

1. Conspiracies Everywhere!

You can't be an effective scam denialist if you don't understand that most people with proper amount of common sense and due diligence will disagree with you. You have left your common sense behind and the best way for you to express this to the masses is also a time-honored one: it's a conspiracy!

No matter who disagrees with you and no matter what reasons and evidence they offer, you know deep in your heart that their "real" reason is they are part of a massive conspiracy against the scheme you're involved in. There is a nefarious plot afoot which is designed to suppress the "truth" (as you know it) about your scheme. This makes you a brave warrior fighting for your truth, your justice, and your people, at least in your mind.

(Actually, this just makes you sound like a loon, like Don Quixote...)

Therefore, when you meet criticism, accuse the other side of all sorts of conspiracy, the crazier the better. Start tame, like "you are just jealous", "you are just negative", then upgrade to "you're working for a competitor", then go all the way to "you're the 1% out to keep us the 99% poor".  You will sound like a hero, as least to yourself and to your fellow partners in the scheme.

(Also see Pigeon Chess)

(Also see "Why Bad Arguers Retreat to Conspiracy as Final Defense")

2. Cherry-Picking Evidence

It may become depressing to keep finding evidence that supports the other side, but if you're persistent enough you're bound to stumble across little nuggets of information which, if presented just right will appear to support your truth (as you see it). The lack of obvious evidence is proof (at least to you) that the world needs you to cherry-pick any evidence you can find, or if need be, "manufacture" some. It's for a good cause, you think.  Or you can always buy some endorsement with small disclaimers and let fellow sheeples claim it's good news!

Therefore, you should emphasize ANY sort of news that can be "spun" to your advantage. Your personal observation is 100% true and you are infallible. Your paycheck is a marketing tool, flash it on your video. Never mind FTC guidance on what's legal or illegal. FTC is a part of conspiracy! If you see some sort of minor and inconsequential court victory, proclaim it as "final proof" that your scheme's legal! Who's going to check your word? It's all base on trust!  Make up your own definition of what's a pyramid scheme or a ponzi scheme! Your own people will understand!

(Actually, nobody is infallible, not even you. That's called the Self-serving bias.

Furthermore, making false income claims can get you into trouble with both the company's compliance department, and the authorities.

And lying or exaggerating will hurt you later. )

(Also see "Eleven Bad Arguments MLM Defenders Must Stop Using")