Was Confirmation Bias The Cause For the Batmobile Debacle?

Confirmation bias is a serious problem that everybody suffers from, and it takes conscious effort to avoid it. Whether it played a part in the infamous "Batmobile Debacle", is a bit questionable. 

For those of you who have no idea what I am talking about, feel free to look up "Batmobile Debacle". But here's a summary of it, as simple as I can make it. 

Mark Racop is a Batman fan, and he has obtained official license to make replicas of the 1966 Batmobile that appeared in the classic Batman TV series. His shop, Fiberglass Freaks, is in Indiana. And his shop is making several vehicles at a time, and the process takes many MONTHS. 

Sam Anagnostou, a real estate agent who lives in Atherton, CA, wanted to buy one, in 2017. 

But the cars are "built to order", and costs $210,000. You pay a certain amount by certain milestones, much like you'd pay a contractor who is fixing up your house. 

So Sam paid $40K to start, then met several milestones. He was assigned production vehicle "29" which is a build-queue number, but it's not a vehicle. He paid $170,000 so far, with 40000 remaining. Next milestone was at "first primer" with $20000 due. 

So "first primer" stage was reached in December 2019, and Sam is nowhere to be found... over several MONTHS. So Sam got bumped to the bottom of the queue. Sam eventually got back to Racop in August 2020, inquiring about the progress, and was told progress suspended due to nonpayment. Sam wired Racop 40000 a few days later, completing all payments. 

In August 2021, Sam decided he was a victim of fraud, since he still had not received a car. So Sam reported "fraud" to his local Atherton Police. Atherton Police said this is a civil matter. 

So Sam filed a civil suit in San Mateo county court. The judge threw it out, ruled that this suit should be filed in Indiana. 

Sam then contacted the county sheriff directly, San Mateo County Sheriff Carlos Bolano. Who apparently told his "auto theft task force" commander, Michael Leishman, to look into it. Note that Sam did not go through the regular channels, i.e. call the main number. He went DIRECTLY to the sheriff. Is this inappropriate? We don't know. 

Leishman, after studying the files given to him by Sam's investigator, somehow came to the conclusion the vehicle was "finished", and the vehicle was then sold to someone else, despite the 40000 final payment. He had somehow become aware of a payment by "Danny Glasser" who also paid for a Batmobile at the time and believed Sam's car was "delivered" to Glasser. All of this was done WITHOUT contacting Mark Racop or Fiberglass Freaks to understand the actual situation. 

Leishman then coordinated with the Deputy District Attorney Marie McLaughlin to obtain the necessary paperwork, then spent the next six MONTHS getting warrants for email and financials he believed to be relevant to the case. 

In July 2022, McLaughlin filed felony complaint in San Mateo alleging "obtaining money by false pretenses" and "diversion of construction funds", and warrants are issued, which authorized Leishman to go to Indiana, arrest Racop, freeze his business, recover the vehicle, and extradite him to California to face charges. 

A few days later, Leishman, a sergeant, and 2 deputies boarded a flight for Indiana and coordinated with local law for a local warrant. They arrived at Fiberglass Freaks on July 24th. Mark Racop was NOT interviewed, and the lieutenant (at the time) Leishman will not allow Racop to speak with his own attorney. Racop was nervously trying to explain the situation. Leishman was searching for a "nearly completed car" and after searching the entire workshop concluded there was no such completed car. Despite this revelation, Racop was hauled down to the local police department ANYWAY. Only when Racop disclosed that he has a heart condition did Leishman relent and decided NOT to extradite him immediately, but told him he better go to California when the California court summons him. They returned to California the next day, and Leishman went on vacation a day later. 

The case then blew up when the media gotten hold of it, mostly because it involved "the Batmobile!" When district attorney learned of the case, and conducted more investigation, they decided to drop the charges, unfreeze the bank account, and hired an independent investigator, an ex-judge, to look into the matter. The report has just been made public. The investigator let all parties knew about the investigation and participation is voluntary. Sam did NOT respond to inquiry, and MacLaughlin declined to participate. 

Sorry for the long spiel, but it takes a bit of setup to explain the situation. 

So why confirmation bias? I don't claim to be a mind reader, but I believe Leishman suffered a bit of confirmation bias. I recommend you read the investigator's summary of the interview she did with Leishman, starting on page 20. A couple points to note:

* ..."Leishman is the Commander of the Vehicle Theft and Recovery Task Force." 

* "...Leishman believed the fraud occurred when (Sam) wired $40000 to Racop and the car built for (Sam) was sold to someone else."

* "... He (Leishman) thought he was pursuing a righteous case of fraud. "

It appears that Leishman suffered from confirmation bias. To explain it, I have to use a cliche:

"To a hammer, everything looked like a nail."

To an auto theft and recovery expert, a business dispute looked like auto fraud. 

It doesn't help that he was relying on a very one-sided narrative... the alleged victim's narrative. It was clear that everything he did was looking for evidence to support the narrative, rather than gather all the evidence and see where it leads. 

The fact that Leishman refused to talk directly with either Racop or Glasser before the trip to Indiana on the reasoning of "don't warn them" was further evidence of confirmation bias. He's thinking about police procedures. He's gathering evidence for the prosecution, NOT investigating (whether there is enough to prosecute). 

I believe that is what happened, given the evidence available. I am well aware that I could be falling into the same trap: I want it to be confirmation bias, so I am looking for signs of confirmation bias. 

Which is why I am now asking you, the readers. 

Do you think this is confirmation bias? Did he simply ASSUME there's fraud, because he was TOLD there's fraud? And once he decided it's fraud, he didn't bother looking into anything else? Let me know in the comments. 

What do you repost? Think about it a little...

Specifically... did you fact check it first?

A: "Did you fact check this before reposting it?"
B: "I don't need to. It agrees with my preconceived views and biases so it must be true!"
from thelogicofscience.com

Anti-Scam: Rough Guide to Spotting Shady Opportunities, Part 1 of 3.

This guide is an adaptation of "A Rough Guide to Spotting Bad Science" by "Compound Interest", converted for spotting "shady opportunities". For length reasons, this is presented in 3 parts. This is part 1 of 3.

A Rough Guide To Spotting Shady Opportunities  (part 1 of 3)

Shady Opportunities are out there, waiting to take your money on promises of fabulous income... if you hand over your money first. There are twelve signs. Obviously a shady opportunity may not have all the signs, but the more signs you spot, the more shady the opportunity is.

1) Sensationalized Headlines

Headlines are often click bait or link bait, such as "everyone makes money" or "How to turn $289 into $1040 guaranteed"

As Carl Sagan said, "extraordinary claim requires extraordinary evidence". Don't believe the headlines, even if they are made/repeated by people you trust. Remember, they could have been duped. If they don't bother asking for extraordinary evidence, then you cannot trust their judgement on this specific matter.

2) Misinterpreted results

Nothing beats DIRECT access to the data. If you listen to someone's pitch, you are listening to his or her version of what s/he is telling you, which may be just a sales pitch with certain amount of untruth... truth as s/he know it, or the actual truth. You don't know which one it is, or even how much of each.

Without the actual data, any interpretation is just that... an interpretation. You may look at the same data and reach a completely different conclusion.  Much like these two gents used the same data and came to opposite conclusions.

Scam Psychology: Charlie Munger on How You Screw Up: Part 3 of 6

Charlie Munger (Photo credit: Wikipedia)

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.  Please also check out the previous sections 1-4, and 5-8

----------

In the speech given at Harvard in 1995, Charlie Munger identified what he called "24 standard causes of human misjudgment." What he really meant is "24 reasons why you screw up".  Here is 9 through 12

9) Failure to Recognize Contrast Bias

Contrast bias is simple to explain... If I give you one item and ask you to rate it, you will give your honest opinion. However, if I have you rate that item, plus an HORRIBLE item, that original item will be rated higher, on the average, because there's a contrasting item.

Here's a simple experiment by Professor Cialdini. Two buckets of water, one quite cold, one quite hot (neither will actually harm). Volunteers are asked to put one hand in hot water and one hand in cold water for 5-10 seconds. Then both are removed and placed in the same bucket of water. The hand what was in hot water now feels cold, and the hand what was in cold water now feels warm/hot, but they are feeling the SAME bucket of water. It's the contrast that makes the water feel hot or cold.

And this experience shows up everywhere. It's often recommended in some pickup artistry books that you bring along an ugly friend or two to make yourself look better. This is the same idea: contrast.

A somewhat anecdotal and apocryphal real estate sales technique if you want to get rid of a not-so-good property is you show the prospects two really awful properties, have them go tsk-tsk and shake their head, then you take them to this "better" property, and they'll probably bite.

On the flip side, without a contrast or a measure against a neutral background (control group), you may not be aware of creeping changes. This can be termed "anti-contrast bias".

Then there's the "boiled frog" urban legend, where the claim is if you put a frog in a pot of water, but you cook it VERY VERY slowly, the frog will never jump out. It's not true, but it's an interesting legend and illustrates this point. You can "creep" in changes and if the movement is small enough it may escape notice.

So beware of this being used on you... Either a special contrast example is used to make a position to look better or worse than it really is... this coercing a bias, or someone tried to "creep" in some changes and rely on your momentum bias to say nothing.

Scam Psychology: Charlie Munger on How You Screw Up, Part 2 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.

----------

In the speech given at Harvard in 1995, Charlie Munger identified what he called "24 standard causes of human misjudgment." What he really meant is "24 reasons why you screw up".  Read 1 through 4 here. Here is 5 through 8.


5) Not Understanding momentum bias and its causes

You are under the influence of other people every day, much like the dogs in Pavlov's famous experiment, so you have learned to associate two completely unrelated events, like the dogs salivate at the ringing of a bell, after they've been conditioned to associate bell with food. And you will continue to recognize the unrelated events as being related when they are not, and base your decisions on factors that were never relevant, or are no longer relevant. You have momentum bias.

Momentum bias is basically... that's the way it's always done... why change? Though there are some additional factors such a s Pavlovian association and how your mind looks in your memory and tries to find correlations... even when those aren't really applicable.

My dad once fixed a transmission problem by replacing the battery in a vehicle. Apparently the bad battery is confusing the computer and causing it to shift improperly. It is a very rare circumstance. However, ever since, my dad advocates "swap the battery" for all transmission problems even when it makes no sense. He has momentum bias. 

In terms of network marketing, you are trained early on that company = success and leaders = success, even though that may not be the case, and if you took that attitude with you to the next opportunity where it no longer applies, you have a momentum bias.

Learn to detect momentum bias in yourself and others. Do things because they are the proper decision for the time based on available evidence, not because "that's the way things are around here".

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.

----------

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.

Bad Propaganda: Avon was NOT a sterling example of MLM success

 u

Avon logo  (Photo credit: Wikipedia)

When trolling for new members, the recruiters for MLM often cite Avon, Amway, and until recently, Herbalife as sterling examples of network marketing. But are they really?

Since Amway is a private company, I have no stock data to show you, and Herbalife prices are crazy because some hedge fund managers are having an ego trip by playing with HLF stock. That's not a good indicator of the confidence in the company.

But Avon, that company had been around for over 100 years. How did it do?

If you enter AVP into Google, you'd find that Avon had been in STEADY DECLINE for the last ten years... since it adopted MLM. That's right, Avon did NOT adopt multi-level marketing until 2005. And it had been FAILING every year.

Avon Products, as of 18-FEB-2014

The stock chart is clear: for the last 10 years, S&P 500 had gone up 71%, while Avon stock price had gone DOWN 52%.

And one of the MAJOR change during that decade is Avon adopting MLM in 2005.

Please recall that MLM was started in 1979 when Amway survived an FTC challenge in court.

It took 25 years for Avon to go MLM, after MLM was created, and 100+ years AFTER the company was founded.

And it had done steadily WORSE every year, ever since.

Think about that. What do the stockholders know that we don't?

(And why would MLM defenders cite Herbalife's stock price rise since Ackman's challenge as proof that MLM is thriving, while ignoring Avon's price drop?)

Scam Psychology: Why Bad Arguers Often Retreat to Conspiracies As Final Defense

Conspiracy Theory with Jesse Ventura
Making a living through selling nothing... like a lot
of scams that call themselves network marketing
(Photo credit: Wikipedia)

In studying the financial scams and its victims, as well as the common arguments the brainwashed sheeple use to 'defend' the scam they're in, one of the most common "final arguments" is accuse any 'opponents' as a part of the conspiracy against something. While most often found among the "lotion and potion" defenders, they can be found among all sorts of scams, esp. one that had gone viral across the world (and thus must be eradicated).

There seem to be 3 general types of conspiracies when it comes to network marketing, which is grouped by size: personal conspiracy (it's just some hidden reason why the "opponent" is against the scheme), industry conspiracy (some sort of nebulous attack by competitors, though sometimes it's the government), or global conspiracy (often involving some nebulous mention of Bilderbergs, etc.)

All the conspiracy boils down to is "motivation denial of evidence (of scam)". Such conspiracy accusations can take the following forms (but obviously is not limited to such)

• You must have failed at ____ to be so bitter
• You must work for our competitor
• You're just out to get hits for your blog
• You are a part of medical establishment against the "wellness industry"
• You're a part of conspiracy of the rich to keep the rest of us poor

Problem with such conspiracy accusations is conspiracies often rely on circular logic.

Q:Is there any signs of a conspiracy? 
A:No. 
Q:So why is there a conspiracy? 
A:Because conspiracy suppressed the signs! 

Or on a more personal level

Q: Why do you think I work for a competitor? 
A: Because you said we are a scam!
Q: Do you have evidence that I work for a competitor? 
A: No... but it made sense to me!
Q: Here's evidence why ____ is a scam. 
A: You are a liar and those evidence are fake.
Q: Why would I fake such? 
A: Because you work for a competitor.  
Q: But you said you have no evidence that I work for a competitor. 
A: Because you hid it really well! 

Basically, any sort of evidence can be dismissed by "it's part of a conspiracy (against us)".  You have to PRESUME the conspiracy to be true to make sense of the twisted circular logic. It's "self-sealing".

Conspiracy theories are often quite fascinating to study, as it's basically how the mind twists itself into a gordian knot. Psychologists have studied correlations of conspiracy theorists (PDF file), such as is there any correlation between beliefs of conspiracies (i.e. does believing free market make one more like to believe climate denial?)

The results are surprising, and a little troubling. And so was the reaction by the conspiratorial community.

Scam Psychology: Intelligence is NOT Rationality

Many people have asked... How can intelligent people, lawyers, doctors, people who got rich through their own efforts, and so on, end up joining a scam? Aren't they intelligent enough to avoid such things? Some even use this as a bad argument that I termed "association with authority" argument, such as "X is not dumb or stupid, therefore he could not have joined a scam. Thus, whatever he joined cannot be a scam."

Turns out psychologists knew about this problem for a while, and the explanation is very simple: intelligence is not the same as rationality.

Intelligence is usually defined as "ability to acquire and apply skill and knowledge"

Rationality, on the other hand, is  "the state of having good common sense and sound judgment".

The two definitions can overlap, butare not required to overlap. It is possible to have no sound judgment, yet have ability to acquire and apply skill and knowledge. A savant, for example, esp. an "idiot savant", has the phenomenal abilities such as mental math, perfect recall, photographic memory, and so on, yet has virtually no judgment or social skills outside of his/her expertise.

Of us the common people, we are just as guilty of what appears to be irrational decisions, caused by our various cognitive biases, and often, what we WANTED to be true. We are intelligent, but we are NOT always rational.

And scammers are very quick to convince us that being intelligent is being rational... and it's rational to join their scheme. And scammers are often amateur psychologists exploiting your cognitive biases to coerce you (without you realizing it).

Scam Psychology: The Need for Self-Delusion

English: Saul Bellow (Photo credit: Wikipedia)

MLM Skeptic has tracked various scams over several years, and it is always amazing to the MLM Skeptic how much self-delusion can the victims of a scam engage in, refusing the believe they were involved in a scam. Instead of probing for the truth and understand how they had been deceived, they instead invest their intelligence into justifying their own delusion that they could not possibly be involved in a scam.

The following quote seem to illustrate the point perfectly.

“A great deal of intelligence can be invested in ignorance when the need for illusion is deep.”
― Saul Bellow, To Jerusalem and Back

And indeed, the victims of a scam, so shocked by the news, have a deep need for illusion, or delusion, to prove to themselves that somehow, they could not have made a mistake, that everybody else must be mistaken.

Let us explore our cognitive biases, and understand how we came to behave irrationally.

MLM Absurdities: What is Herbalife Doing in Cambodia?

Back in November 2013, Herbalife announced it is entering Cambodia with its flagship products: nutritional shake, personalized protein powder, and herbal tea concentrate, having previously entered Vietnam.

The question here is... what is Herbalife doing there? Is there a need for Herbalife products in Cambodia (or Vietnam)?

According to Herbalife, Formula 1, personalized protein powder, and herbal tea concentrate are all a part of its weight management product line.

Does Cambodia and Vietnam have a population overweight problem? No. In fact, they have an UNDERweight problem.

BREAKING NEWS: SEC slaps Troy Dooly of MLMHelpDesk with fines regarding Zeek ponzi

SEC tweeted on 30-SEP-2013

This is none other than "Troy Dooly" of MLMHelpdesk.com (one of the sites listed in "resources" section of this very blog).

Mr. Dooly, self-proclaimed "MLM Advocate", claims to be advocating for the rights of the affiliates and MLM industry in general. However, in the SEC cease and desist, it was revealed that under two successive contracts between Rex Ventures Group, parent company of Zeek Rewards, and Troy Dooly, Dooly was being paid $6000 USD A MONTH to improve the company's image, counter negative press, conduct interviews, and so on and so forth.

And SEC slapped him with a fine for failure to disclose, and actively mislead the public of his involvement with the largest Ponzi scheme in the US (in terms of number of victims).

This is PROFOUNDLY disappointing, not merely to the MLM Skeptic, but to the MLM community at large. Can Mr. Dooly, claiming to advocate for the affiliates, actually be taking money from a company to hide, suppress, belittle, and obfuscate the truth regarding a fraud? According to the SEC, that's EXACTLY what he did.

Can such a trust EVER be regained?

When Scientists are Skeptics, We All Win (Yes, this is Related to MLM, sort of)

Alan Sokal is a physicist that read the journals where his papers (and tons of other papers) are published, and wondered... Does someone actually read all that stuff? So he proceed to write the WORST paper he could possibly write. It's complete bull****, filled with buzzwords ("quantum gravity..." Ooooohhhhh! Aaaaahhhhhh!" )  but completely bull****. The paper was called "Transgressing the Boundaries: Towards a Transformative Hermeneutics of Quantum Gravity", and it was submitted to a journal called "Social Text", an academic journal of postmoderncultural studies.

It got published in 1996. When Sokal revealed the whole paper is pure bull****, and he basically "trolled" that journal, the feedback was definitely mixed. Some are horrified at the "lack" of vigor the editors of the journal demonstrated. Others are angry at Sokal for ridiculing other "scientists". There's also question on what exactly is "postmodernacultural studies", and why would a physicist try to troll them, and so on. The whole thing was dubbed "Sokal Affair" and even has its own Wikipedia entry.

The point is a scientists was skeptical of something, and he built a test to test that something.

How many of you would be willing to do that, or have done that, and I mean really test it, not merely "I tried it, it works, I got paid"?

Alan Sokal just struck again, when he and some friends took apart two psychologists, Fredrickson and Losada, who attempted to apply Lorenz Equation (huh) to "positivity ratio", and how feeling too happy will lead to a happiness inversion (what?) when the positive emotion to negative emotion ratio reached the tipping point of 2.9013 (huh?)  Sokal, along with Nicholas Brown, and Harris Friedman basically destroyed that other paper for all of the various reasons, including bogus math, bad logic, and much more.

Now you say, what does *that* have to do with MLM? Ah, but you see, this "positivity ratio" was a popular topic among the various "motivational speakers" who often show up at MLM events to "inspire" the crowd, and it was simply never challenged (cited over 1000 times, according to Google Scholar).

So what exactly is this "Positivity Ratio", how motivational speakers are citing it, and why is it bull****?

Will John Peterson's Suicide Save Herbalife, or Doom it?

John Peterson, a Herbalife Millionaire who climbed his way (some say over his downlines' backs) to Herbalife "Founder's Cicle", the highest grade of salesperson rank possible, has just put a bullet in his own brain. Herbalife put out a press release calling it a tragic accident, but clearly, putting a bullet in one's brain while sitting in an old pickup is not an accident at all.

So who is John Peterson? As mentioned before, he's one of the top salesperson in Herbalife, claims to earn 3 million a year from commission, apparently brought Herbalife to Mexico (and from there backfilled into US Latino communities), and has properties in Brazil, Mexico, Colorado, and Wyoming. He's so rich, he had 3 kids, divorced his blonde trophy wife, and traded up to a Mexican bonita by the name of Fernanda.

His rise to top of Herbalife is a bit controversial, as he rose through one of this schemes called "Work from Home Inc."  Basically, it's the same model that another Founder's Circle member "Shawn Dahl" used: create a recruiting firm, that sends out these "business opportunity kits" that is basically a teaser DVD for $50 (though you'll advertise it as $10, but only if you return it in 14 days). The DVD comes with a form you can fill out and send back and someone will call you to enroll you with their support system and take your money, which is usually DOUBLE what it normally costs to join Herbalife (the extra goes into his pocket for some lame webpage and some brochures), but that's only if you're really enthusiastic. If you're a bit hesitant or did not actually mail back the form yet, your name will be sold to someone who already joined and is eager to "buy leads".

Through this sort of borderline scheme (not quite a scam, but shady as heck) Peterson and Dahl and others clawed their way up the Herbalife affiliate human ladder to the very top, over other affiliates' backs, and is raking in the money to the tunes of millions per year, while the average Herbalife affiliate earns HUNDREDS per year (not counting expenses).

One then speculates what was would cause him to take his own life, and what effect would this have on Herbalife?

The MLM Test by Rod Cook of MLMWatchDog

Is your "business" based
out of one of these?
A UPS Store?
Image via CrunchBase

Rod Cook, who runs the MLM Watchdog website, has been a long-time player in the MLM scene, and he's well known for his blunt style when it comes to suspicious schemes. His website reflects its style, in that it looks like it came from the 1990's.  None of the flashy menus or such.

He has a list of 12 questions you should use to check into any MLM company you want to join. It's a good list, but there's a few items I don't agree with. Let's take a look at his test, and see what we can learn from it.


1.  SIMPLEST MLM DETECTIVE INVESTIGATION: LOOKING FOR THE BEST? Get into the "BRAIN & PUSHBUTTON" When you are look for the Best or Good MLM or Nework Marketing Company!  A friend told you that MLM Company XXX is the very best. First Look at the MLM Company’s website.  First GOOD suspect clue would be no street or city address, worse yet, only an email address, no phone number.  Then look for the pictures and names of the owners of the company.  Not having these on a website is a quick absolute reason  NOT to join. Also A GOOD TOOL in your search for a good or the best MLM - Networking company:

A. DRIVE BY THE OFFICE  - Wise, seasoned MLM distributors doing their good Due Dilligence Investigation will use Google street view to save gas.  Go to Google street maps and do a good electronic drive by!

 B. A really good clue the Picture on Google above not the same as website = run!  Address = trailer house or home?  That is a 911 = Run!

This is a good tip, though I do have one thing to add... Search the address and make sure it's not something offered by Regus as a "virtual office". In general, if it doesn't have a suite number, it's somewhat suspicious. If it does have a suite number, make sure it's not a Fedex or UPS Store.

Also keep in mind that increasing number of these shady companies are registered overseas. Cyprus, Malta, British Virgin Islands, Belize...

Then search the owner's pictures through TinEye and/or Google Image Search and/or Bing Image Search to make sure it's not some random photo stolen by scammers to look legitimate. Once I found some scammer who used picture of Pepsi's CEO as some random "testimonial" picture.


2.  RUN FROM A COMPANY TAKING ONLY BANK WIRES, MONEY ORDERS OR CHECKS: Use your MLM Detective Investigative "BRAIN." Only use a Good credit card that will accept charge backs.  Returns? Good honest companies allow refunds within 60-90 days (8 states require a year)!  It is NOT GOOD to allow deductions from your bank account unless the company passes every test on this page for a Good or the Best MLM - Network Marketing Company!

A. Money by Fedex - UPS only?  Yikes! Best Scam Time not any good MLM!  A good trained MLM Dectective will tell you the scam artists do this to avoid USPS Postal Fraud charges!   Many good MLM - Network Marketing have found that U.S. Postal mail is the best way to ship products! 

B. A PMB (private mail box) address (in a mail box store) is a good indicator of dodging USPS Postal Fraud Investigators = 911 run a SCAM!  Never for a good-best MLM Company.

Just one thing to add... Watch out for people who insist on getting paid through odd payment processors such as Liberty Reserve, Payza, Solid Trust Pay, or some payment processors you never heard of... or worse... Western Union money transfer.

Also, anything that insists "no refund" is automatically suspect.

3.  GOOD EASY MLM INVESTIGATION TRICKS: Next in your search for the Best - Good Company MLM Detectives will go to the Internet and enter the following into one or two of the major search engines:

   A. The MLM Company's name (owners too) and the word "scam". Go through two pages!  Look for  forum message comments for legitimate complaints (see D below).  A good hint is that some sites have phoney information on them.

It's standard SEO tactic now for someone to register a domain name, and also the "sucks", "scam", "fraud" related domain names just to make sure nobody else does. I've even seen a few scams that even created their own "verified authentic" websites, "review" websites, and of course, the "___scam" websites that insist it's not a scam. So you'll have to go through 5 to 10 pages of results just to make sure the comments you should be reading wasn't buried under those "white noise" SEO techniques.

    B. Then do the same for "complaints, lawsuits, and news articles archived on search engines.  In this day and age of lawsuits good MLM Companies will have a lawsuit or two.  If they have a lot of MLM lawsuits this may NOT be the best MLM - Network Marketing Company to join. Another good trick is to use the GOOGLE searchengine on this website (NOTE: mlmwatchdog.com, not this blog) for a good search of MLM lawsuits!  What is good about it is that it is fast and we have a good collection of lawsuits.

  C. Another good trick check who registered the website domain of any new company claiming:  amazing, incredible, proprietary, never seen before in the universe, revolutionary, products, services or technologies! Check Whois.net for the domain lookup (WEBSITE NAME). MLM Companies with good offerings would register a name 6 months to a year ahead of time (shows good planning).  

The date is a good point. However, earlier or later date does not add any credibility.

A lot of these shady deals use "private registration" where the domain is registered through a proxy so the WHOIS records show nothing useful.

   D. A warning on MLM due diligence for MLM Researchers for good MLM's!  There are sad sites and forums that are unfairly negative toward all MLM - Network Marketing companies.  Ignore these "Anti -MLM Zealots" and only look for appropriate information.  A good MLM Detective will ignore 99% of their B.s. in their search for A Good or "The Best" MLM Company.

There are people out there who believe ALL MLM are illegal. They are just as ideologically dumb as the people who believe ALL MLM are legal. There are legal ones, and there are illegal ones. That's why we're giving you the tools, such as what really separates pyramid schemes from Multi-level marketing, so you can make up your own mind.

4.  GOOD SECRET DUE DILIGENCE TOOLS:  Compete.com and Alexa.com are good Internet  tools because it can show you how much traffic a Best or Good MLM Network Markeing company is getting,  by individual hits.  The person you talked to may be ignorant themselves.  This trick for finding the Best or a Good MLM only 1 out of 10,000 know about.  If the traffic is headed down?  A GOOD indication? Under 2000 hits on a decreasing curve and this is supposed to be a Good or Best MLM Company?  Tell the person bye!  Go to Compete.com or Alexa.com to see their traffic
CLICK  HERE: TO JOIN GOOD MLM COMPANY 

I do not agree with Rod Cook on this one. Both are easily manipulated through botnets and viral buzz marketing. This is best used as a negative signal (i.e. low traffic? forget about it!)  It should not be used to justify the legitimacy of anything. Many scams, including TVI Express, have tried to use Alexa ratings as "proof" they are going strong.

Bad Argument: Imply There's a Conspiracy, Even If There Isn't One

Yawning Baby
(Photo credit: Wikipedia)

One of the most persistent arguments presented by defenders of a suspect scheme is the "conspiracy" argument, in that there is some sort of a conspiracy acting against them (the defenders), the company, or the entire industry (whether the company's really in it or not). Previously, we've discussed conspiracy arguments in [Conspiracy of Persecution] and [What I Accuse You Of Doesn't Apply to Myself]. We've also noted before the similarity between scam defense and pseudo-science (so much so, I called financial scam defense "pseudo-economics")

Now we have to document a new "bad argument"... Imply there is a conspiracy, when there wasn't one.

Australian newspaper Daily Telegraph just published a heart-breaking article about parents who lost their newborn child to whooping cough, and had been cyber-bullied ever since.

Because the baby's death is in direct contravention of what anti-vaccine folks preach, the anti-vaccine crowd in Australia, in the form of the deceptively named Australian Vaccine Network (which was ordered to change its name or be closed) decided to go after them by casting doubts on their daughter's death, cyber-bullying, accusing them of being stooges of big pharma, and so on and so forth.

Baby Dana's death is an "inconvenient death" to the anti-vaxxers. And they sought to discredit the parents through whatever ways they can, because the grieving parents chose to bring light upon a problem... that vaccinable diseases still kill in the modern world... when it does NOT have to.

Perception of Savings is More Important Than Real Savings

JCPenney in Frisco, TX (Photo credit: Wikipedia)

Human psychology is often counterintuitive. Perception of savings is often more important than real savings, as J.C. Penney found out to its chagrin.

In  NY Times article (link at the end) J.C. Penny had for several months rolled out a campaign that promised "everyday low prices" and cut its sales events. Instead of often holding sales, it will keep the prices permanently low, promising savings every day, instead of only at sales events. It tried to adopt more of a Walmart-like pricing policy. 

Shoppers, instead of enjoying the easier time to shop (i.e. Don't have to wait for sales), actually stopped coming. Sales dropped 25% from last year, and 5 days ago its CEO Ron Johnson was shown the door, and Penney is going back to the old model: lots of sales events, with normal prices on the high side. 

What's the difference between a shirt that's priced at $5 vs. a shirt that's $10 with 50% off tag? 

The answer has everything to do with psychology, not logic. 

The Idiocy of Trying to Profit from a Scam Without Violating Any Laws

In a lot of these pyramid schemes and suspicious HYIPs, those who get in early makes money (and those who start such things, of course) and those who got in late lose money.

Thus, it stands to reason that there's a certain... Clique of such people who then starts to index such operations, trying to "time" it, i.e. Make a killing then take the money out before it goes kaput.

Then there's the websites that advertise to those people, and makes a public index of such programs to attract more traffic and more ads.

Why would ANY ONE put their money in these non-sensical products?

Bad Argument: "They are all liars!"

All Marketers Are Liars (Photo credit: Wikipedia)

One of the ways the suspicious scheme perpetrators use to keep the minions in line and discredit the critics and victims is a very simple denial: "they are all liars!"

No logic needs to be presented. They are liars. Ignore them.

Clearly, this only works for "victims" who refuse to admit that they are victims, and thus are emotionally involved and thus not letting logic work through the problem, such as

• "Where's the proof that they are liars?"
• "Why would they lie?"

And so on and so forth.

Frankly, any one whose reaction to a customer complaint is "the customer is a lying SOB" (without even a "wow, I have to look into it") does not deserve your money.

10 Dumb Things Apparently Brilliant MLM People Do

Português do Brasil: Representação gráfica do marketing multinível (Photo credit: Wikipedia)

Brilliant people do a lot of things, but that doesn't mean you should emulate all of them. David DiSalvo compiled a list of 10 such things you should NOT emulate, and those are quite interesting, as many of them are used by MLM folks.


1. Speak with the “official style” to sound like an expert.

A lot of MLM and marketing message is "fake it till you make it". You can't sell? Sell! Once you sell enough, you'll be better at it. And one of the easiest ways to sound authoritative is to lace your speech with jargons and fancy scientific sounding terms, and that's just bull****.  You may impress the unscientific folks with pseudoscience... and alienate the more... discerning people.


2. Find the irony in everything and point it out to everyone.

Hmmm. This one is not used much in MLM. Forget this one.


3. Presume that ideas are more important than people.

This one is heavily pushed by MLM, about easy money, any one can do this, blah blah blah. People doesn't matter, just follow the system and you will succeed, etc. etc.


4. Presume that those with degrees from non-exemplary institutions are going nowhere and treat them accordingly.

MLM is very guilty of this, as they go by name recognition. This company was headed by this guy from another company. That company has a deal with certain big name. This product is certified by something or another. This guy hired a big name attorney to check their company. While not specific "institutional", it's the same idea: endorsement by association, and that's a fallacy.