Friday, August 3, 2012

Self Deception: Why people believe in things that are NOT TRUE

Skeptic Michael Shermer
Skeptic Michael Shermer (Photo credit: Wikipedia)
Scams are not that hard to pull off, really.

Magic acts and illusions are basically scams done for entertainment. They rely on misdirection and distraction, to mislead you into thinking something had happened when it didn't, or vice versa: something did not happen when it did.

When your mind sees something, you are constrained by your prior thinking into "predicting" a pattern that will occur, so when you see a sign that seem to confirm your pattern, you believe that "pattern" had indeed occurred.

This is known as self-deception.

Thursday, August 2, 2012

The "it's all risky" argument

Seal of the United States Federal Deposit Insu...
Seal of the United States
Federal Deposit Insurance Corporation.
(Photo credit: Wikipedia)
Sometimes when you criticize a particular opportunity on how the unknown factors makes the whole thing extremely high risk, you get a retort "but the stock market is risky too, just look at the dot com bust!"

That's a bogus argument, because there's a huge difference between "activity risk" vs. "institutional risk". This is a "fallacy of equivocation".

When an opportunity is "high risk", the risk is institutional risk, as in there is some fundamental risk in the company itself, in the institution.

If you deposit money in a bank, you are NOT worried about the bank going under tomorrow and your money disappearing. Even if the bank do go under, in the US all bank deposits are covered by the Federal government through FDIC. Your institutional risk in a bank is zero.

Wednesday, August 1, 2012

Secrets of MLM Comp Plan they don't want you to know

Ever wonder how to decipher MLM comp plans? Here's some tips you may want to consider:

Go Simple

As an affiliate, it is to your advantage to pick a SIMPLE comp plan: do this, get that. You know exactly what to do to get paid. The more complicated the plan, the less you understand it, and the more likely the plan is tilted toward the company, not you.

What exactly do the ranks do? 

Some MLMers hate ranks, as they claim ranks are just a way for the company to discriminate against people not of a certain rank. There is SOME logic to that.

Ranks are basically a way for the company to KEEP the money instead of paying you your due in the name of "motivation", esp. if you need to make X number of sales just to get paid.

Think about it: if you made $1000 in sales, but the "rank" you need is $1500 to get paid a bonus, then you just made $1000 sales for NOTHING (except your own retail profit, if any).

And why can't the company just lower your wholesale price so you get more retail profit instead of this "sales bonus"? The profit margin is the same no matter if you sold 1 or sold 10 or sold 100.

NEWSFLASH: Keith Laggos left ZeekRewards, predicts "FTC will hit Zeek in 6 months"

End of July 2012 was interesting... Not only did Zeek (or its parent company, Rex Venture Group) launched an offensive campaign against one of its critics, namely, me, and forced my critical article offline, Zeek had a MAJOR defection in the ranks: one of their paid consultants, Keith Laggos, left the company, apparently in not-so-amicable terms.

Based on the report on Troy Dooly's MLMhelpDesk, and Oz's BehindMLM, the facts are as follows:

  • Keith B. Laggos is no longer employed at Rex Venture Group, where he consulted for compliance since February or March 2012
  • Laggos had previously highlighted ZeekRewards as "Company of the Month" for April 2012 in his "Network Marketing Business Journal"
  • Laggos is pushing a different biz called Lyoness and apparently tried to cross-recruit / poach some followers
  • Laggos claimed to have 45K downlines in Zeek Rewards and is making $40K monthly off of Zeek
  • Laggos claimed FTC had been watching the industry like a hawk and forced Zeek to credit card processors (and banks?) outside of the US due to anti-internet-gambling legislation
  • Laggos claimed FTC will hit Zeek within 12 months, probably 6, as soon as 3. 
  • Laggos claimed he's the one that moved Zeek's banking and credit card processing to foreign processors
  • Dooly verified this with the new COO of RVG, who replied "don't ask me about this ever again", suggesting that the parting is not on amicable terms
This indicates that Laggos had been benefiting from his Zeek membership for several months, and he could recruit using his "fame" as he publishes that magazine. 

Tuesday, July 31, 2012

The Danger of Autoship in MLM

Autoship is a term usually only encountered in network marketing, and it can be quite puzzling to some network marketing newbies. Here's a definition from Business Dictionary:
Method employed generally in network marketing, it is a regular shipment of a product on the basis of a standing order supported by some form of automatic payment (with a credit card, for example). It is through autoship that a network marketing representative can ensure his or her commission level by meeting qualifying sales criteria during each qualifying period (usually a quarter).
You can think of autoship as a "subscription" program, where instead of just buying some stuff once, you get some shipped to your door automatically every month, assuming you use that much. 

There is nothing wrong with a subscription program on the part of the consumer. Indeed, some of the subscription programs recently are famous for being convenient, such as the shaving club (automatically ship safety shaving razors to your door). But those are generally NOT MLM. 

When you throw in MLM, things get a lot complicated, as you have to consider what constitutes sales, and what separates MLM from a pyramid scheme (i.e. SALES). 

Monday, July 30, 2012

Genre Analysis: does MLM and travel make sense?

Approaching Runway24
Travel industry is cool, but does it
make sense to mix it with MLM?
(Photo credit: Storm Crypt)
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. 

Travel MLMs were the rage about 3-5 years ago, when multiple companies hit the market. Unfortunately, it was also plagued with scammers. 

However, we are not here to discuss the scams, but rather, the viability of the genre... Does this genre actually make sense? Is combining travel and MLM a meatball sundae, or a viable business? 

In my opinion, combining travel with MLM is mostly a meatball sundae. It only makes sense under a very specific set of circumstances that is very rarely met, and thus, makes no sense for the average Joe. 

Sunday, July 29, 2012

The "It could hurt a lot of good people" argument

One of the arguments used by defenders of a suspect scam is the "it could hurt a lot of good people" argument. It usually comes in this form:
A: Acme XYZ is a scam because ____, ____, and ____. 
B:  Shutting down Acme XYZ could hurt a lot of good people. 
This is a red herring, because it did not try to defeat the premise, nor did it try to prove the counter-premise.

Instead, this argument plays the "appeal to pity" fallacy, as well as tacitly admitting that it is a scam. Just that you shouldn't kill it, please take pity on those who's in it.

It was used by none-other than Andy Bowdoin, leader of the Ad Surf Daily auto-surf Ponzi scheme.

You can read the full indictment here (PDF file). Bowdoin plead guilty in May 2012. His Ponzi involved well over 100 millin dollars, about half was seized and returned to the victims.