Thursday, July 10, 2014

Anti-Scam: Rough Guide to Spotting Shady Opportunities, Part 2 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 2 of 3.

A Rough Guide To Spotting Shady Opportunities  (part 2 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.

5) Speculative Language

Speculations are not facts, so if the statement contains "weasel words" like "may", "could", "might", and so on, then it's likely to be speculation, rather than conclusion.

You can often spot this when a "lotions and potions" company presents some study that "sort of" proves their product works. But this can also apply to income claims, which is usually frowned upon.

For example, a certain MLM nutritional supplement company's entire product line is based on this speculation published in "Medical Hypotheses (2002)"
...Based on a review of the literature we propose the hypothesis that in situ mobilization of stem cells from the bone marrow and their migration to various tissues is a normal physiological process of regeneration and repair and that therapeutic benefits can be generated with less invasive regimens than the removal and re-injection of stem cells, through the stimulation of normal stem cell migration. We further propose that effort should be made to identify natural compounds characterized by their ability to augment this normal process of mobilization and re-colonization of bone marrow stem cells for the potential treatment of various degenerative diseases. 
If you can't read medical jargon, what it says is "Stem cells are cool. We think stem cells gets into the blood and travel around the body to where its needed to help healing. Maybe we can find a natural something that'll make the body produce more stem cells."

That's right, this is a HYPOTHESIS. There is no proof that having more "loose" stem cells in your body would improve your health (remember, HYPOTHESIS), much less any compound that can do so.

Doesn't stop this MLM company from making products with such claims, of course. In fact, some of the principals in this company where previously sued (under a different company name) in Texas and lost a false advertising suit... also involving stem cells. That company used blue-green algae, some of which are POISONOUS (see "microcystins")  And it seems this particular company is still using similar formulas.

The company may sound confident in stating such things on their advertising materials. Look beyond the marketing material and look at the original research their products are based on. You may be surprised.

Conversely, if a company "guarantees" something, look for caveats and fine print. 

6) Sample Size Too Small

7) Unrepresentative Samples

In studies or trials, the smaller the sample size, the worse the "confidence" of the results. 

Sample in studies or trials are supposed to be representative of the population being studied. If the sample's different, then the conclusion will unlikely to be applicable to the general population. 

For example, a highly touted study (which is indeed double-blind, randomized, and placebo controlled) by a certain MLM energy drink maker, had only 59 participants. Here's an excerpt from the study:

Excerpt from the double-blind randomized, and placebo-controlled study
of only 59 subjects between 40 and 60, all Chinese, is supposed to prove'
the efficacy of a product? 
Can a trial size of only 59 participants (30 woman, 29 men, presumably all from Beijing China and between 40 and 60 years old, with no significant health issues)  really predict that the drink will "significantly enhanced immune responses and improved the subject's self-appraisal on his or her overall health status" to the world's 8 billion humans of various races?

You have to read the study to realize that they asked almost 700 people, and vast majority (over 80%) of people turned them down (refused to participate). 

The OTHER study the company touted is even smaller... 10 men, and 10 women, between ages of 20-23 (i.e. university students of good health) in Beijing, was tested for anti-oxidant levels after drinking this company's product. Okay, so your product increases antioxidant levels after drinking. You've proven your antioxidant is indeed absorbed somewhat by the body.

So what? But plenty of other stuff does it too. What exactly did this study prove? That's like proving "water is wet". Sounds impressive, practically useless.

8) No Control Group

Most studies would rely on a "control group" that are NOT given the actual substance being studied, and the results compared with the results from people who were given the substance. Allocation should be random. If there is no control group, then the study has no 'baseline' comparison and therefore confidence of conclusion would be much lower.

This particular problem manifests itself in MLM in two ways. One way is the product was not test with a control group, as the subjects are told to self-report the results. Another way is the facts are presented with a good vibe, but with no baseline to compare against.

The most frequent misrepresentation in MLM is the income claims, where the various leaders and "top earners" parade themselves on stage "inspiring" you all to sell, sell, sell (or worse, recruit, recruit, recruit), with promises like "you can be just like me!" (driving a free car, paying off my college, helping my family...)

If you check the various MLM income disclosure statements (each is required to publish one per year) you will find that vast majority (80% or higher) earn very little, while the very top took home most of the money, and I am NOT talking about the executive team, but the distributors. For example, following is Vemma's 2013 numbers:

Vemma Income Disclosure Chart 2013, regraphed

That's right, vast majority of Vemma reps earned very little, while some earned 2.5 mil in 2013. Here's their version of the same data. Note they cut the graph in two and used different scales (exponential instead of linear) to make the graph look more "even".

When your upline tell you that "you can be just like me", what he really mean is maybe 1 in 100 can be like me, but it *could* be you. That's assuming he's making 30K (0.96% of active reps, according to the graph).  If he is making 193K, that's 1 in 770 odds.

And that's NOT counting people who had quit or is not buying enough to qualify as active.

The actual odds are probably much worse. But if you don't know the baseline, you have nothing to compare it against, and his claim thus sounds much more impressive. 

No comments:

Post a Comment