Saturday, November 10, 2012

How Scammers turns your overconfidence into recklessness

English: Common questions / Newbies Deutsch: A...
Do you really know your strengths? Or are you overestimating them? (Photo credit: Wikipedia)
Every one of us is overconfident about our own abilities. The problem is, the LESS we know, the MORE overconfident we are.

Psychologists have long loved the hobby of chess, as the "rating" of the player's ability is extremely accurate. Surveys have consistently shown that most players (75%!) overrate their own skills by average of 100 points. However, this statistic is more interesting when you consider the following: those on the high end of the scale are only overconfident by 50 points, whereas those who are on the low end of the scale are overconfident by 150 points.

[ Read about Illusion of Confidence ]

Studies in other areas are a bit more difficult because few have ratings such as chess that are extremely accurate, but the general trend is the same: we are ALL overconfident, and the MORE skilled we become, the less overconfident we are. Conversely, the LESS skilled we are, the MORE overconfident we are.

That's why scammers LOVE newbies who don't know anything.  Newbies are overconfident in their ability to do the right thing. Add some friends and family pleading, flash some checks, and you pretty much got them hooked.

Friday, November 9, 2012

Persuasion: Fear, Guilt, Low-Ball, High-ball, and buddy

Evil Inside
Evil Inside (Photo credit: Wikipedia)
Lifehacker posted an article for their "evil week" where they lists "3 of the easiest ways to manipulate people". (See URL at the end)  That's... Scare then relief, Foot in door, and Shame on you (they call it "make you feel guilty").

Scare then relief -- scare the victim with something bad ("Your car will explode if you don't fix it now!"), then offer them a solution (relief) which is, of course, whatever the scammer is offering

Foot in door -- scammer starts with a very simple request ("Just try this teeny weeny sample..."), get foot in the door, then work his way up into bigger requests and concessions  ("You like it, right? Here's full bottle for $$$_____.")

Shame on you -- actually called "reciprocity", the scammer does a favor to the "victim" (free shipping and 25% off!!!), then expects the victim to respond ("click on [buy this now], well, now!") through guilt and shame

Turns out there are a couple more:

Thursday, November 8, 2012

Scam is NOT hereditary, but grandpa types can be dangerous

Previously we've explored the possible link between scam and psychopathy (i.e. lack of empathy for others).

[Read Are Scammers Sociopaths or Psychopaths? ]

Is this hereditary? Apparently not. Take Andy Bowdoin for example.

Andy Bowdoin headed the ponzi scheme "Ad Surf Daily" and scammed tens of thousands of people out of hundred million dollars, by padding his resume with fake entries, exaggerating his accomplishments, and generally got people to give him money on false pretenses (fraud).

[Read Profile of Ad Surf Daily Scam ]

According to his son Scott, Andy Bowdoin even cheated his own mother (Scott's late grandmother) in a credit card scam, leaving her penniless. As reported on
“He uses religion — always,” Scott Bowdoin, 42, said flatly of his 75-year-old father, noting he had not spoken to Andy Bowdoin in about 15 years because the elder Bowdoin had ripped off his own mother, Scott’s late grandmother, in a credit-card scheme.
The elder Bowdoin left his own mother “with nothing,” Scott Bowdoin asserted. “The electricity was about to get cut off, the water was about to get cut off. He is a man with no conscience.”
Willingness to cheat one's own mother would seem to suggest a certain level of psychopathy, or lack of empathy, even for one's own family.

Wednesday, November 7, 2012

Scam Detection and... Quantum Physics?

schrodingers lolcat
schrodingers lolcat (Photo credit: Arthur H.)
News of Nobel Prize given to two scientists who was able to actually create an experiment that proves Schrodinger's Cat paradox had me thinking about the "duality" of a certain situation... namely, a "potential scam".

For those of you who don't know what Schrodinger's cat is, here's a thought experiment. Imagine that inside a box is a cat. Some sort of a random number generator is ready to throw a dice. If the dice comes up 1 to 3, poison is released, and the cat dies. If the dice comes up 4-6, the cat lives. However, you don't know until you open the box. 

So, let's say the dice is thrown, but you don't know the result. It's random. Is the cat dead, or alive? 

The proper answer, in terms of quantum physics... is... BOTH! To the outside world, it's the SAME. The cat is both alive... and dead. And you don't know which result UNTIL you open the box. The act of opening the box "forces" the outcome into one or the other actual outcomes. 

When you think about a "potential scam", it's very much the SAME WAY: it can be both a legitimate business... and a scam... at the same time.  You don't know UNTIL you peer inside the box. Outside the box, you can easily find evidence to support EITHER conclusion.

So this is a question only you can answer BEFORE the box is opened (and you can't open it... only the company owner and/or the government can)... At what point should you be worried that it's probably a scam?

Tuesday, November 6, 2012

When in Doubt... Do Something, and LEARN FROM IT

A lot of readers seem to think I am a very... "negative" person, as I seem to see the world with jaundiced eyes, that every MLM that came along is a potential scam, so on and so forth. And I seem to sow doubt in people's minds.

(Then a few pundits ask if there's a scheme I actually endorse... the answer: NO!)

These readers failed to realize the purpose of this blog, which is to

  • explain the potential (and real) problems in MLM
  • explain the scams that takes advantage of MLM gray areas to ensnare victims
  • explain the tactics of such scams, such as the lame excuses, the fallacies, and the bad arguments
  • explain why certain schemes are ILLEGAL based on current caselaws and such
and so on

I point out signs that you do NOT want to see in a scheme, in hopes of teaching you, the reader, what are red flags you should avoid.

I point out the bad arguments defenders of suspect schemes use, so that
  1. you spotting such bad arguments used to convince you when they shouldn't, and 
  2. so you don't use the the same bad arguments when you try to win someone over
The problem here is not me, but the bad arguments people make.

Monday, November 5, 2012

Lies, damn lies, and statistics

EspaƱol: DistribuciĆ³n normal o de Gauss
Gaussian Distribution
Source: Wikipedia)
People often think they have intuitive grasp of statistics, and the reality is very few of us are any good at it. We usually end up answering the wrong question because of attribute substitution: we analyzed something ELSE that's NOT what's needed.

Here's an example. Let's say there's a genetic condition that affects 1 in 10000. There is a test for it, and it's 99% accurate. Now, let's say you tested person A, and the test comes back positive. So what's the chance that person A actually has this genetic condition?

99% you say?

Ah, but you'd be wrong!  The proper answer is: it depends on how big of a population we're talking about. 

Why? Let's first assume that there are a million people.

Out of that million, there's 100 that has this condition (1 in 10000)

For those 100 people, 99 of them will test positive (correctly), and 1 will test negative even though he does have it (false negative).

For the other 999899 people, 99% of them will test negative (correctly), while 9999 of them will test positive (false positive).

So for all the people who tested positive, that's 9999 + 99, only 99 actually has the condition.

So the answer is 0.99%. That's right, LESS THAN ONE PERCENT.

Not very intuitive, but that's because you forgot to take into account false positives and false negatives and how they muck with the results.

Scammers often use this sort of "bad calculations" to lead your mind astray into thinking the "opportunity" is profitable.

Sunday, November 4, 2012

Hanlon's Razor, and the human potential

TED (conference)
TED (conference) (Photo credit: Wikipedia)
World Renowned psychologist Viktor Frankl held a talk in 1972, and it's preserved on TED

In the talk, he basically said that you need to expect more from people, so they will grow to meet the expectations. If you expect very little of people, then they will merely meet the low expectations.

This blog, MLM Skeptic, grew out of the same thought, that MLM *could* be legal and profitable, but 90-99% of the people are doing it wrong, and thus, causing misery to a lot of people, and enabling scammers to borrow its banner to disguise their scam.

However, in order to grow and improve, it is necessary to document what is proper, real, and legal, vs. what is wrong, fake, and illegal, and there are plenty of them, from the way scammers trick people, to how mislead members use fallacies to justify their scheme, and so on and so forth.

Hanlon's Razor is similar to Occam's Razor... it's a pithy saying, that you should never attribute a bad outcome to malice "first". It could be mere incompetence.

I choose to believe that most people in MLM are doing it wrong out of incompetence, not malice.

Unlike my various "opponents", who believe I am "anti-MLM", I am not. I am neutral. I am a skeptic, not a cynic.