How to be a cranky troll: Guide to IGNORE all useful feedback

June 26, 2016, 11:45 am

≫ Next: MLM, Religion, and Feminism: synergy, or triple threat?

≪ Previous: Commentary: How "Ultimate Guide to Network Marketing" illustrates what's wrong with Network Marketing

$

0

0

(Author's note: This is written as a contrarian piece... The advice is BAD for you, and you are meant to do exactly opposite of all this. Got that? Okay, enjoy.)

Do you have absolute belief in yourself, that you can do no wrong, therefore, everybody else must be wrong? Are you surrounded by people who intend to change your mind even though you know YOU are right and they are wrong, despite all evidence pointing to the contrary?

Here are six tips to help you silence the world and live only within your head where you are always right:


1. Reinterpret specific advice to be personal attack on you, your business, your "family"

Any and all advice that you don't like is obviously an attack on you, your "family", your business, and your way of life, no matter where it came from, including your dear mama. They obviously... "don't understand" about how you work, how you think, how you live and therefore they have no business giving you advice!  In fact, anything other than "great job" is an attack on your beliefs!


2. Ignore advice until they are no longer relevant, then rant about how the advice is useless

Ignore all advice until it becomes "overtaken by events"... i.e. completely useless, then claim the advice is useless. Go ahead and insult the advice giver as useless and worthless, never mind you never took the advice any way. That's merely some inconvenient truth to be swept under the carpet.






3. Recast advice about goals as "impossible!" and/or "impractical". Do NOT be pinned down. 

People giving you feedback will insist on you having specific and clearly defined goals. DO NOT agree to ANY of them. They just want to pin you down and see you fail. Do not give them the satisfaction. Do not agree to any specific goal than the minimal to continue the status quo.


4. Claim actionable feedback is unreasonable burden

Remember, people giving you feedback want you to DO something against your will. So, don't. Claim it's not feasible, not reasonable, not practical, and so on. You know what's best for you, you don't need advice from any one else.


5. Claim any feedback that does not praise you as negativity to be avoided

You know you are right, and thus any feedback to the contrary must be from negative people who do not want you to be right.  In fact, any feedback that say you can be better is obviously telling you that you're not completely right and thus should be ignored as well.


6. Ignore the feedback, status quo is perfectly fine. Any changes can be blamed on something and someone.

Change? The status quo is perfectly fine. The way it is will continue forever because you believe it. Why change? Change is evil, therefore people advocating for change must be evil as well. People telling you that you're wrong, the scheme is a scam? They are evil. They don't want you to succeed. They don't want you to earn $$$. They are there to drag you down. Even the government and law. They are only there to stop you from achieving infamy.

Congratulations... If you can use all six tips, you are the ULTIMATE cranky troll who will listen to nobody!

----------

In all seriousness, do the exact opposite of these six tips if you value feedback that would help you improve yourself. In fact, read http://lifehacker.com/the-six-qualities-of-good-feedback-1776302054

---

MLM, Religion, and Feminism: synergy, or triple threat?

June 29, 2016, 8:04 am

≫ Next: How to spot shady opportunities V2.0: a 10 item checklist

≪ Previous: How to be a cranky troll: Guide to IGNORE all useful feedback

$

0

0

I was reading this article on Vox about multilevel marketing by Kate Shellnutt when I had an epiphany: MLM's rise to prominence matches rise of feminism to mainstream, and it is connected to religion.

Consider this... What do Christianity and Islam say about women working? Their view is that women should stay home and mind the house.

All three texts—the Old Testament, the New Testament, and the Qur’an—invariably stipulate women’s religious duty of submission to men. In this view, women are deemed subordinate to men, with their legitimate roles invariably exhausted inside the home.  (huffingtonpost 11/07/2014)

Consider this... Did you know that Mormons are into generosity and sharing? Did you know that Utah, home of the Mormons, is home to many of the largest MLM companies in the world? NuSkin, doTerra, USANA, and dozens / hundreds of smaller companies...In fact, five of the top 50 MLMs in the world are based in Utah.

This is no accident. According to Dr. Jon M. Taylor, a Mormon, and a former MLM participant, now MLM investigator, MLM is designed to emulate / co-opt the Mormon style of sharing / proselytizing.

When you combine all these points, the conclusion is simple: MLM is designed to

1) appeal to women who wish to earn income (and thus be less subservient to men)

2) allow women to stay home and do their more traditional homemaker roles (so men can't object to it too much, as it's "only part time")

3) appeal to women who wishes to socialize and share (which is why there's gajillion "party plan" MLMs selling everything from plastic containers to sex toys)

4) appeal to Mormon's style of "sharing" their faith and co-opt it

5) appeal to people of faith, who are more inclined to believe in something before effects can be demonstrated

Indeed, MLMs nowadays seem to be specifically designed for suburban moms who want a 2nd income, and they have faith (backed by desire, and religion) to dump all their effort, despite losses, into doing something they believe they love.

And they are out proselytising the virtues of MLM... based on these exact points.




Just the other day Regan Long, writing on Huffington Post, wrote the following in an article "The Brutal Truth About Those Pyramid Schemes"

Well here’s the short and simple truth that I have found not only from research and personal experience, but simply living it: this actually works. These so called “schemes” are actually creating opportunities for millions to begin their own businesses from home.

But consider the illogic of this statement... How can she say that it works (for everybody, as it's the "brutal truth"), when at best, she can only say it works "for her"?

Yet Ms. Long seems to be the EXACT demographic MLM is appealing to: working mom who found something she enjoyed doing.

To which I say... GOOD FOR HER!

But her conclusion is just a confused mess:

So the next time you’re scrolling through and considering the legitimacy of these posts that appear too good to be true, you may want to think twice. Their is no comparison to the hustle and work ethic of a mother trying to provide for her family. If it happens to be something that peeks (sic) your interest in something you’re already paying for from a chain or retail store, you just may want to give that small business owner a chance to prove you wrong.

TL;DR -- have faith in that the next MLM ad you run into is run by moms looking for a little extra $$$ instead of a scam.

To which I say... HUH?!  I have no problem with her genuinely trying to sell whatever she was trying to sell, but the posts online generally is NOT about selling the product (i.e. "Ask me how you can get your hands on this amazing product") but instead, about making money (i.e. "Ask me how to make $1000 a week within a month")

She may be an honest MLM seller, but that doesn't mean OTHER MLM sellers are as genuine as she is... or the company itself may be as honest as she is. Remember, there are THOUSANDS of MLMs out there, IN ADDITION to pyramid schemes (and product-based pyramid schemes) calling themselves MLMs. Some of them are stopped by FTC. Others collapsed under their own weight (any one remember "Wake Up Now"? No? Well, it's dead. ) or died via state action (YTB, any one?)

AND it gets really wacky when it started pulling in some OTHER vulnerable populations...

Such as minorities  (TelexFree scam concentrated on Brazilian Americans)

Students (Vemma concentrated on college kids, and for a while, high school kids)

And this "mind-over-matter" optimism... isn't that just another name for "faith"?

But instead of proselytizing for religion... Ms. Long is now proselytizing for capitalism and MLM... not with statistics and facts, but a pure "appeal to emotion".

That is NOT a good thing.

You may also want to read:

http://talkingpointsmemo.com/theslice/mormon-utah-valley-multilevel-marketing-thrive-doterra

How to spot shady opportunities V2.0: a 10 item checklist

July 19, 2016, 1:50 am

≫ Next: OPINION: With HLF consenting to reforms, and Burks of ZeekRewards Guilty, justice prevailed, but work is never done

≪ Previous: MLM, Religion, and Feminism: synergy, or triple threat?

$

0

0

NOTE: This was a rewritten version of the guide back in 2014.

World is full of Shady Opportunities that want you to put in money with promises of payback. Here are ten signs of shady schemes. Obviously a scheme probably would not have all ten, but the more signs you spot, the more likely it will be a scam.

1. Clickbait-y Slogan
2. Misinterpreted results
3. Conflict of interest(s)
4. Correlation vs. Causation
5. Weasel words
6. Bad Samples
7. (Lack of) Control Group
8. Unverifiable testimonial and Improper disclosure
9. Cherrypicked and unreplicable results
10. Paid or fake media coverage and reviews

Clickbait-y Slogan

EVERYBODY hates clickbaits... They are headlines written with intentional hyperbole and tease to get you to tease. Shady opportunities are the same. Does the scheme make incredulous claims such as "On our team everyone makes money"? Or they somehow "Pay One time $289 and get a minimum of $1040 back Guaranteed!" perhaps?  Before you say "nobody is stupid enough to make this sort of stupid claims"... think again:

Screen cap of Google Search results, yes, someone promised and guaranteed that $289 will magically grow to $1040 and more. It's obviously clickbait.

As Carl Sagan said before, "extraordinary claim requires extraordinary evidence".  If they made such extraordinary claim, then they should supply the extraordinary evidence to support their claim. And since there are so many ILLEGAL ways of making money... Making money in itself is no proof. 

It doesn't matter if the claims are repeated by the people you trust. They could have been duped and/or brainwashed. If they didn't ask for extraordinary evidence and is convinced of such, then you should not trust their judgement, esp. when they are in no position to evaluate such. 

Misinterpreted Results

We are all affected by confirmation bias to one extent or another. If we hear some evidence, we are going to interpret them based on your experiences, while someone else may see the same data and interpret them very separately. Here's another example:

Monty comic / Is it going to be McCain or Obama?  (old joke on confirmation bias)

The sales pitch is designed to say "just enough" so you think it applies to you, and NOT tell you that parts that "this may not apply to you"... so you can misinterpret the results to be relevant.

Your mindset affects how you interpret the results, and willful blindness, Dunning-Kruger effect, and self-serving bias will lead you down the wrong path. 

Conflict(s) of interest

Most MLM companies in the "lotions and potions business" (nutritional supplements and cosmetics) employ scientists to carry out and publish research... But remember, those scientists may have conflict of interest, and if they did not disclose so, that is a huge ethical violation, as research can be misrepresented for personal or financial gain.

The worst example of which is (former doctor) Darryl M. See, who previously was a researcher at UC Irvine. He wrote a paper touting a Mannatech (MLM) product that he claimed has proven results in his study, and got it published in pretty famous American medical journal on nutrition. However, he never disclosed that 1) he had resigned from UC Irvine months before publication to pursue a career endorsing Mannatech (and was paid thousand per day for speaking gigs), 2) his wife had been a Mannatech rep for years, and 3) he made dozens of audio tapes sold at Mannatech conventions and seminars touting Mannatech products  4) His father was a personal friend of the journal's publisher.

When the news broke, UC Irvine had NO RECORD of any such study had occurred, but Mannatech's president already announced such to its legion of reps. In the end, Mannatech sued See, who jumped to a different company, before eventually forced to give up his medical license due to multiple medical ethics violations.

If someone suggests MLM as a way to solve your financial needs, you need to consider... Are they really doing it because they think it's the right thing for you to make some money... or is it because THEY, by recruiting you, will make some money off of you joining?

Stay skeptical of any and all claims, esp. when it is done with the ultimate aim to recruit you. 

Correlation vs. Causation

When two things happen together, it does NOT mean one caused the other, despite how much you feel one *must* have caused the other.

XKCD... Did cell phone cause cancer... or did cancer cause cell phones?

Don't get the joke? Following is a 100% true graph...

Is there relation between Autism and Organic Food? They correlate to the third decimal point!?!?!

Yep, that's right, Organic food sales correlate with autism over 10 year period. Real data. But of course there's no causation... Yet that's the point: just because two things happen together doesn't mean one caused the other. It likely to be a mere coincidence.

Yet many MLMers want you to believe that their nutritional supplement made them healthier, their magic rub took away their pain, their magic juice / tea / coffee took away their diabetes, and so on, because those effects "only" appeared when they started using those stuff.

For those of you who watch Stephen Colbert, this is related to the difference between the truth... and truthiness. Or as Colbert himself puts it:

Truthiness is 'What I say is right, and [nothing] anyone else says could possibly be true.' It's not only that I feel it to be true, but that I feel it to be true. There's not only an emotional quality, but there's a selfish quality.

If you BELIEVE it's causation, you'll never accept it's merely correlation. If you believe your nutritional supplements made you feel better, or that special widget increased your car's mileage by 15%, you'll never believe accept that the supplement's merely placebo effect, and the widget is relying on your lighter foot as you FEEL less need to speed and get better mileage. You believe truthiness (There is an effect and I caused it!) instead of the truth (It's just correlation and coincidence).

Correlation is NOT causation (until proven otherwise). 

Weasel Words

Weasel words such as 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, let me translate that for you...

Stem cells are cool. We think stem cells gets into the blood and travel around the body to where it's 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 were previously sued (heading an earlier company) 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. 

Bad Samples

In studies or trials, the smaller the sample size, the worse the "confidence" of the results. If the drink is mean to be consumed by millions, and the study is of less than a hundred people, it's not much of a study, is it? 

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, if you are marketing the drinks in North America, but you did your study in China with a completely different diet... or if you are marketing drinks to young folks, but ran the tests on seniors... 

You may say that no company is stupid enough to do that. But I assure you, it's done all the time. They simply neglect to mention the aspects that sound bad. Like neglect to mention study size, location, age group, and so on. 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 all from a single city in China.

Excerpt from the study... 59 Chinese subjects between 40-60 is supposed to prove that the product is good for everybody on Earth... really?

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, and was tested for anti-oxidant levels after half (5M, 5F) drank this company's product. What's really hilarious is their own study proved that their product did NOT enhance anti-oxidant value.

Even if it did, that just proves that anti-oxidant works... That's like proving "water is wet". Sounds impressive, practically useless.

(Lack of) Control

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 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. And that's not counting cost, like hours spent on the road, living in hotels, making speeches multiple times a week, or even a day, partying and schmoozing prospects at night if you are successful...

And let's not forget that Vemma was shut down by FTC in 2015 for running a pyramid scheme... 

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. 

Unverifiable Testimonials / Improper disclosure

Real testimonials were unsolicited from users who have no personal interest in the success of the product.

The problem is "personal interest" spans a huge range, and often in areas that you may not expect.

Dan Ariely speaking at TED (Photo credit: Wikipedia)

A person who paid a tidy sum for this 'wonder pill' will have a vested interest to learn that s/he did not spent the $$$ on worthless junk, thus they will be EXPECTING a positive result.

Behavioral economist Dan Ariely of Duke University have previously done a study that showed that more expensive placebo works better.  How do you know if the product you paid a like $40 for monthly supply really works better than fancy sugar pills? How do you know if the product really works unless you took it for a whole month, and actually have a proper objective measurement instead of "how do you feel" i.e. subjective mood? How do you know the person making the testimonials (that you are listening, watching, reading) are not affected thus?

Testimonials often came from promoters... who are out to recruit you. They have a FINANCIAL interest in making sure the product works, more than merely effectiveness interest.  And when they don't even identify themselves as promoters, they are running afoul of Federal Trade Commission guidelines on online advertising.  Yes, commercial speech IS regulated. 

Testimonials in generally CANNOT be relied upon. You need large scale scientific studies to verify efficacy. If they rely on testimonials instead of science, they are shady and should not be trusted.

Cherry-picked and/or unreplicable results

If they only mention the good studies they probably have something to hide.

Mannatech, in attempt to prove themselves, have indeed sponsored many clinical trials for their "glyconutrients", and many were indeed done by large reputable research labs. Two of the tests was done by Dr. Best in Australia's Flinders University.

Back in 2005, Dr. Best did a research on Ambrotose, Mannatech's flagship product. The conclusion was:

There were no statistically significant effects of the treatments on the performance on any of the outcome measures.  (link to study)

Yet in the 2010 study by the same Dr. Best claimed noticeable performance increase.

Significant beneficial effects of saccharide supplementation were found for memory performance and indicators of well-being (link to study)

But of course, it was the 2010 study that was heavily highlighted and distributed to all Mannatech members, and was even mentioned by Mannatech’s “forward looking statement” to investors. Not a single WORD about the 2005 study contradicting the 2010 study. That's cherry-picking, folks. 

Extraordinary claims require extraordinary evidence... VERIFIABLE evidence. Unreplicable and contradictory studies are NOT supporting evidence, much less "extraordinary" evidence.

Paid or Fake Media Coverage and Reviews

Who wrote about this opportunity? If nobody covered it, or only covered as "press releases", then the company is not nearly as big as it claimed to be.

PR Newswire logo (Photo credit: Wikipedia)

Public Relations Firms are known to issue press releases, which are sometimes posted on major news outlets. Those that appear on major news outlets obviously cost extra, but you can easily BUY such coverage.  Sites like PRNewswire will guarantee posting on WSJ or NYT or similar outlets if you pay them enough.

And sometimes, some website will simply FAKE press releases, by claiming their announcement had been seen on various legitimate outlets but it's hosted on their own website. This happened so often, FTC sued ten of these fraudulent PR companies to stop them from making up fake news.

If you got more money, you can pay magazines to cover you, in special branding supplements, i.e. special advertising section.

Remember, scammers are perfectly willing to lie, and you accept the lie.

And you will do so if you are ignorant of the facts, and are just NOT skeptical enough to question "proof" provided, then you should not complain about why could people trick you, when you ALLOW yourself to be defrauded.

Conclusion

How did your "opportunity" do? If your little opportunity scored more than 5 out of 10, it may indeed be shady and you may want to look deeper before you join.

Related articles

• Scam Psychology: How does a scam encourage people to adopt a lost cause?
• Bad Argument: I Know What I Am Doing! (No you don't)
• Scam Tactics: The Galileo Gambit
• Bad Argument: claiming the 3 stages of truth is on your side

OPINION: With HLF consenting to reforms, and Burks of ZeekRewards Guilty, justice prevailed, but work is never done

July 23, 2016, 11:30 am

≫ Next: SEC Halts Traffic Monsoon Ponzi Scheme, Reasserts that "Autosurf Ponzis" are illegal

≪ Previous: How to spot shady opportunities V2.0: a 10 item checklist

$

0

0

July 2016 has been a busy month.

On July 15, 2016, news was released that Herbalife has reached a settlement with the Federal Trade Commission where HLF agreed to a LONG list of reforms and pay a $200 million fine / reimbursement to the victims.

Then on July 22, 2016 Federal Court in North Carolina passed down the verdict... a Federal jury has convicted Paul Burks of ZeekRewards of all four counts of fraud and conspiracy to commit fraud.

MLMSkeptic has long criticized both schemes, both here on the blog, and on BehindMLM.com.

MLMSkeptic had analyzed the various comments, retorts, criticisms, and cheers of Ackman's epic short of Herbalife at end of 2012 and the subsequent PR war, and pointed out problems with such arguments.  Most of the critics of Ackman then believed that HLF was "too big to fail", or perhaps "not egregious enough to die, maybe fined".

So it is with much amusement and facepalming when "journalists" loudly proclaimed "FTC says Herbalife not a pyramid", when FTC said no such thing.

How did CNNMoney got it so wrong? FTC never said HLF is not a pyramid scheme...

You are welcome to search the actual FTC complaint and stipulation agreed to by HLF."Pyramid scheme" was nowhere in the documents. Furthermore, when questioned by the press at the news conference, FTC Chairwoman Edith Ramirez was asked at least FOUR SEPARATE TIMES whether HLF is a pyramid scheme, and Ramirez repeatedly dodged the question (probably as a part of the settlement).

Q: I know that you’re not going to put any labels on this, but it seems to me if we look at the BurnLounge case, that while this complaint does not use the words “pyramid scheme”, would you agree that a prima facie case of a pyramid scheme is alleged with the allegations within the complaint?

A:  Again, I will leave it up to you to draw that conclusion. Our focus in this complaint was in addressing the core issues

When asked outright about HLF's own announcement... That FTC have determined HLF to be NOT a pyramid scheme...

Q: Did you review the language in their (Herbalife’s) press-release that sort of affirmatively said that they were not declared to be a pyramid scheme? Because they’re sort of having that as an outright headline.

A: I do not agree with that statement. The word “pyramid” does not appear in our complaint that is true, but um again the core facts that we’ve alleged, that we consider to be problematic with their compensation structure, are set forth in detail in our complaint. And again, I will leave it to readers to draw their own conclusions. But that they were determined to not be a pyramid… that would be inaccurate.

And indeed, checking the HLF website no longer shows any sort of language that claimed "FTC determined HLF not pyramid scheme"...

So you know which way the CNNMoney article was written... They were written from HLF's press release, not the FTC press release. It is... biased.  Shame, CNN. Shame on you for lazy reporting.

I am not listing all the changes that FTC managed to squeeze out of HLF. You can read the documents linked above yourself. It is a LONG list of reforms, and it will likely become a new standard much as Amway's settlement with FTC created the modern MLM back in 1979.  And that pretty much tells you the fact: HLF was a scam that required reforms so it is no longer operating as a scam. Any one who argues otherwise is simply denying reality.

I may do my own analysis later on these changes, but HLF is no longer the same company. They believe they can continue to thrive (or else they would not agreed to these changes), but we shall see.

Then we come to Zeek Rewards, and Paul Burks.




Paul Burks, head of Zeek Rewards, was convicted of four counts of fraud and conspiracy to commit fraud.  Feds did NOT charge him with securities fraud... They did not have to. EACH of these counts carries up to 20 years in prison (and generally, minimum of 5 years).

While the actual verdict itself was not available online yet, the press release from DOJ has been linked earlier, and the actual pre-trial briefs from both sides were available on the ASDupdates.com (ASDupdates is a website dedicated to ponzi schemes, originally "Ad Surf Daily" ponzi, but since expanded to various other ponzi and pyramid schemes).

Government basically got Burks on four counts: Conspiracy (to commit fraud), Mail Fraud, Wire Fraud, and Tax Fraud Conspiracy.

• Conspiracy -- Burks conspired with Dawn and Daniel and others to perpetuate the scheme, there is NO argument with that. And Burks even took 11 mil for himself and family. Burks was aware of ASD and apparently actively marketed Zeek to former ASD members. 
• Mail fraud -- Burks ordered the bogus 1099's sent out with phantom income, reporting 93+ million paid out to members when less than 13 million were actually paid, and the 1099s were used by members to further recruit additional victims. 
• Wire fraud -- same thing: there are too many emails, websites, phone calls, and such to count. 
• Tax Fraud Conspiracy -- by willingly submit bogus 1099, to be filed with IRS and to victims, tax fraud has been committed.  

So what did Burks' attorneys offer as defense? 

• Burks (tried) to pay out what was promised  (1) and more than 50% was indeed paid out
• Bid sales are final (2) and not shares in profits
• Burks made the decisions based on advice from experts (3)
• The company got away from Burks (explosive growth) (4)
• Tax forms was issued based on advice from experts (5)

(1) was quickly demolished in court when DOJ showed that in order to pay out the half a billion of the almost 1 billion dollars taken in, Zeek had accumulated over THREE BILLION in obligations. It's clearly a ponzi scheme rather than a legitimate business. The fact that it actually had some cash reserve meant nothing... it simply delayed payouts long enough to accumulate that much cash. 

(2) was also demolished as purchase of bids also accumulated VIP points, which are the share in profits, not bids in themselves. 

The rest of the arguments were just "not my fault / I did the best I could" restarted in various ways. 

But perhaps the stake in the heart is from fellow conspirator Dan Olivares, who already plead out (like his mom, Dawn Wright-Olivares) with a guilty plea and turned prosecution witness. In a forensic analysis by Price Waterhouse Cooper (PWC), with assistance from Dan Olivares, it has been confirmed that there is NO MECHANISM in the entire Zeek system to actually calculate "retail profit pool" daily percentage.  (look for document 89-2 pg-13)

There are no calculations or functions embedded in the web code that generates the daily RPP percentage. Instead, the administrator form requests the RPP percentage be simply input from a Zeek Rewards administrator. The HTML provides the administrator with an input text box which allows the user to manually enter a decimal percentage. The web code requests the entered variable and uses it for the current day’s RPP process.

Perhaps that is why Burks, in the weeks leading up to the trial, suddenly claimed to possess a notebook which he claimed contains enough data to calculate the daily percentages. But that's pretty hilarious, isn't it? 

So what can we conclude about two victories for the good guys? 

A) Feds are getting serious about prosecuting scams

B) HLF's capitulation means MLM industry will change, and those who cannot change course will die. 

C) Ponzi schemes are much easier to prosecute as simple fraud, rather as ponzi scheme. And it seems both state and Feds are stepping up. 

All in all, this shows promise.

Related articles

• MLM History: DSA Killed a Bill in 2010 That Would Have Saved MLM(amlmskeptic.blogspot.com)

  ---

• MLM Dictionary: Pyramid scheme(amlmskeptic.blogspot.com)

  ---

• Bad Argument: MLM Strawman Arguments Labelled as Mythbusting(amlmskeptic.blogspot.com)

  ---

• Bad Argument: Blame game and god-complex(amlmskeptic.blogspot.com)

  ---

SEC Halts Traffic Monsoon Ponzi Scheme, Reasserts that "Autosurf Ponzis" are illegal

July 29, 2016, 12:16 pm

≫ Next: Cognitive Bias: Status Quo Bias

≪ Previous: OPINION: With HLF consenting to reforms, and Burks of ZeekRewards Guilty, justice prevailed, but work is never done

$

0

0

The internet buzz on July 28th 2016 was the press release that SEC has halted the $207 Million Ponzi scheme called Traffic Monsoon.

Traffic Monsoon was operated by Charles Scoville, as a combination "internet traffic exchange and pay-per-click program" that solicited money from all over the world. It accepted money from at least 162000 investors primarily in US, India, and Russia by claiming to be a "highly successful advertising company", when in reality, more than 99% of the revenue was paid into the system by new investors, making it a classic Ponzi scheme.  Traffic Monsoon LLC is a Utah company. Scoville is believed to be in Dubai. SEC's motion to have an temporary freeze and receiver to take over the company has been granted.

Traffic Monsoon's primary product (which accounted for 99.6% of all revenue) is the "Adpack". At $50 each, purchaser is supposed to get 20 clicks on the banner (either they provide, or they can use one provided by Traffic Monsoon) and 1000 visitors from the traffic exchange, as well as "share in Traffic Monsoon's profit". In reality, TM was never able to fulfill the visitor promise. By its own counter, it can only provide about 1/10th of the visitors. In reality, TM operated as a $50 in, $55 out HYIP.

Those that track scams, such as the MLMSkeptic, would notice that this is structurally IDENTICAL to 12DailyPro (2005-2006) or Ad Surf Daily (2006-2008), both were also prosecuted as autosurf ponzi schemes.

What's more interesting is Charles Scoville himself has been observed operating several predecessors to Traffic Monsoon. There's TVIBUX, and there's AdHitsProfits, both are slight variations on the same ideas. Neither, however, made it big to hundreds of millions of dollars.

But first, let's explain what an autosurf is, and what an investment autosurf.

What is an autosurf? 

Autosurf is a type of Internet website traffic exchagne that automatically rotate advertised websites in the web browser.  Imagine leaving a browser window open to constantly display banners from all the other websites, which changes periodically. Each "view" earns you a "credit" which allows your site's banner some display time in other people's browser window.

Autosurf can operate as a "ponzi scheme" even if no money changes hands, if overall credits earned is in excess of total pageviews delivered, thus ensuring that there will always be credits left over.

Autosurf that involve money are known as Investment autosurfs.

What is an Investment Autosurf? 

An investment autosurf are de facto Ponzi schemes. They are usually advertised as "buy X dollar worth of ad credits, watch banners, get X+Y dollars back". The first one to make it big in the US is called "12DailyPro", which promised up to 12% daily for 12 days, and took in millions of dollars in 2005. It received a cease and desist notice in 2006 from the SEC, accusing it of being a ponzi scheme, as 95% of the program's funds came from new members. Paying off old members with new members is a hallmark of Ponzi schemes.

Charis Johnson accepted a settlement and the scheme was quickly closed in March 2006. Charis Johnson was defended by Noell Tin, who would later defend another big-time Ponzi operator, Paul Burks of Zeek Rewards.

Investment Autosurf Ponzi Example: Ad Surf Daily

Among the members who joined 12DailyPro was a guy called "Thomas Anderson Bowdoin Jr." better known as "Andy Bowdoin". Six months after 12DailyPro closed, Andy Bowdoin launched his own version, called "Ad Surf Daily".

In ASD, you buy "ad package" from ASD for $1, which supposedly makes your website viewable to toher members of ASD on their custom "rotator". You get get "rebate up to 150%" by viewing other member's website(s) for a few minutes per day. ASD supposedly takes 60% of that day's "sales" and divides it up to all the ad units purchased and distributes them as "rebates", though members are encouraged to leave the rebates in their account so they can buy MORE adpacks with them and generate more rebates. And if a member has no website to advertise, Andy has two websites that can be advertised (and the member would still earn a rebate).

Other than small variations in numbers, structurally this is the same as Traffic Monsoon.

So basically, Traffic Monsoon is the latest variation of a scam that has been around for more than a decade.

Related articles

• Scam Absurdities: Stupid Meme passed on by MAPS idiots(amlmskeptic.blogspot.com)

  ---

• Scam Psychology: How does a scam encourage people to adopt a lost cause?(amlmskeptic.blogspot.com)

  ---

• Do You Know Where Your Money Went If You Invested in a Suspect Scheme?(amlmskeptic.blogspot.com)

  ---

Cognitive Bias: Status Quo Bias

August 5, 2016, 9:56 am

≫ Next: Eric Worre is wrong about Dave Ramsey: or, why MLM advocates only knows truthiness, not truth

≪ Previous: SEC Halts Traffic Monsoon Ponzi Scheme, Reasserts that "Autosurf Ponzis" are illegal

$

0

0

Status quo bias goes by many names, but to put it simply, "if it works why change anything"  Any change form the current situation is judged to be unacceptable.

Scam victims often suffer from status quo bias, esp. after they learned the scheme they've latched onto or recruited into isn't on as firm legal and financial footing as they were lead to believe. Even when presented with all the evidence that they are in a scam, they will keep saying "I don't know if XXX is a scam. Time will tell." They don't want anything to change, even when more viable alternative such as attempt to withdraw from the scheme, report fraud to the police, and so on seem to be more reliable method of dealing with the fraud.

Status quo bias is often mixed up with other biases, such as loss aversion, sunk cost fallacy, longevity (appeal to age fallacy), endowment effect, regret avoidance, and more.

Why Do We Have Status Quo Bias

Behavioral Economists Kahneman and Tversky published a paper back in 1982 that found people feel greater regret for bad outcomes that result from new actions taken, than for bad consequences that are the consequences of inaction. In other words, if doing something is bad, and not doing anything is also bad, people tend to do nothing. One possible explanation is people can then blame circumstances (I didn't change anything, circumstances changed) rather than take responsibility for their own choices. This is a fallacy, of course, since choice to do nothing is still a choice.

How Status Quo Bias interacts with other biases

Endowment effect is also known as "divestiture aversion" in behavioral economics. Basically, people ascribe more value to things merely because they own them. It's also related to "mere ownership effect" in social psychology.  It can be described simply as "once you have it, you will want to keep it than give it up".

Sunk Cost fallacy is related, in that "once you started on a course of action, you justify your continual involvement by claiming you already spent effort and resources (sunk costs) and you cannot let it go to waste when it seems more prudent to cut the losses and change course."

As an example of endowment effect, people will often pay more to retain something they own, than to obtain something they do not own, even when there is no reason for attachment, and even when the object was obtained merely minutes ago.

Dan Ariely and Ziv Carmon did a test on hypothetical selling price (willingness to accept) NCAA Final Four tournament tickets. They found that the ratio of WTA (willingness to accept) vs WTP (willingness to pay) is 14 to 1. In other words, those who have the ticket want 14 times higher the price those that don't have the tickets are willing to pay.





An example of sunk cost fallacy is another experiment by Kahnemann and Tversky involving theater tickets. Let's say, there are two groups. Group A) you are going to watch a movie, having already bought the ticket. Upon arrival, you realized you've lost the ticket. Will you pull out $10 and buy another one? Group B) you are going to watch a movie, but you haven't bought the ticket yet. Upon arriving at the theater, you realized that the $10 bill you were going to buy the ticket with is gone. Will you pull out another $10 and buy the ticket any way?

The scenario is the same: Will you pay $10 to watch the movie?  The surprise is in group B (lost cash) 88% of people said they will buy the ticket any way, but only 46% of group A (lost ticket) is willing to buy another ticket. In their mind, they are paying $20 for a ticket, not $10. That is sunk cost fallacy.

In scams, once victims have "bought in", they are often paid back with a small amount to make them feel the scam is working, and now the endowment effect kicks in (they already own it) along with sunk cost fallacy (they already put in the money), and fear of missing out (FOMO) (they may miss the big payoff).

How Scammers Use Status Quo Bias

Scammers are intimately aware of status quo bias, once they have gotten your money by basically lying to you about the risks and rewards (maximize reward, minimize risk).  They know that it will take a lot of bad news to change your mind and take your money back out, and they obviously are trying to prevent people from taking their money back out of the scam and leave. They will release various explanations and such to cast doubt on facts detrimental to their propaganda efforts. This is commonly known as "spin".

For example, if a certain central bank of a major nation severed ties with a certain bogus cybercurrency, and certain members of such scam selling such cybercurrency was arrested for fraud, the scam can say "We have receive no reports and charges of such. Our cybercurrency is not on that nation's banned list." What they didn't tell you is there is no such banned list. That nation banned ALL cybercurrency several years ago.  But their spin sounds much more harmless, doesn't it? The minions who read the "news" released by the scam will tend to want to leave the way things are, i.e. let status quo take over, and not attempt to cash out of the scam. (The fact that they may not be able to is a different problem altogether)

By presenting information you can accept (even though you can't verify them), they have somewhat neutralized the bad news, hopefully pushing your desire to withdraw below the threshold to take action, and status quo bias (and endowment effect, and FOMO) will do the rest.

Ponzi and Pyramid Scheme Victims

Ponzi and pyramid scheme victims are esp. vulnerable to Status Quo Bias, as they have been pre-emptively taught by the scammers to ignore "criticism" of the scheme ("it's just haterz", "they're just jealous of our success" and so on) and no matter how many facts you throw at them they are unlikely to change their position. Cognitive dissonance cause them to postpone taking any decision, and the result is Status Quo takes over, and they decide that "wait and see" is the best approach despite there may be a chance to execute an exit strategy.

How to Counter Status Quo Bias

Recognizing the onset of Status Quo Bias is the first step in counteracting it, but that requires a neutral mind. Someone already affected by such are often unwilling and/or unable to see such bias in oneself. A neutral third party trusted by the victim is needed to show that the victim is not making sound decisions, but not with a direct attack, but rather, point out potential mistakes in the decision process, and show how factors have been overlooked / ignored, and hopefully trigger the victim's self-preservation instincts.

Related articles

• MLM Basics: Is there such thing as "good MLM"?
• Why Zeek Rewards Was Such a Successful Scam
• (Humor) Classifying the Different Types of Network Marketing Douchebags
• Bad Propaganda: Perpetuating Myths and Misunderstandings to Deflect Criticism

Eric Worre is wrong about Dave Ramsey: or, why MLM advocates only knows truthiness, not truth

August 18, 2016, 12:37 pm

≫ Next: Where do these MLMers get their "facts"? Certainly not from this reality.

≪ Previous: Cognitive Bias: Status Quo Bias

$

0

0

If you are in the US, you probably heard of Dave Ramsey, who had been giving financial advice for decades as a radio call-in show (i.e. he goes live on air and lets normal people call him and he gives answers immediately) since 1992. He does not fully endorse multilevel marketing, but instead, advocates caution and realistic outlook, something that is inherently anti-faith, but based on evidence and reality. 

On August 10th, 2016, at about the 7:48 point, a "Sarah from Cincinnati Ohio" called in and asked about joining "It Works!" MLM. Ramsey urged caution and be absolutely aware what she wants to do going in. His message was "... You will be in the recruiting business. There is nothing really inherently bad or evil about it, Your real job is training salespeople, in a high turnover environment, because most of them don't make it... I have friends that makes 7 figures in that business... But for every one of those, I know a thousand (chuckles) that didn't last 90 days, with six boxes of makeup in the garage they are still paying off on credit card... Is this really your calling if you had lost everything and starting from scratch? ... You ought to really thinking about what you're getting into. But if you want to give it a run, I will support you on it... " 

The MLM sphere went nuts as they reacted with venom. So-called MLM 'leaders' started posting videos 'Dave Ramsey is Wrong'. Here's a typical reaction from Eric Worre of networkmarketingpro.com:

Dave (Ramsey) went on to pour cold water all over the hopes and dreams of this young woman, and pigeon holed the Network Marketing profession into his very limited understanding of what it is all about.

So what exactly is Eric Worre mad about? He claims that Ramsey made multiple mistakes. 

• Risk is minimal in MLM, w/ the buyback policies in place
• It's not recruiting, it''s expanding your network
• Failure? So what? 90% of traditional businesses fail
• Bothering friends? They''re doing it wrong

Mr. Worre's final message is: basically "why don''t you just be honest and admit you hate network marketing? Innuendo doesn't suit you". 

Go look in a mirror, Mr. Worre. Innuendo does not suit you either. 

Let's examine the factors at play... who''s really wrong or right? But with a skeptical attitude and fact-checking. 

Just how risky is MLM?

Eric Worre claims that Dave Ramsey exaggerated the risk involved in MLM, and most people don''t have "6 boxes of makeup sitting in the garage getting paid off on credit card".  He claims that with the 90% buyback policy in place in most major MLMs (esp. DSA members), financial exposure is minimal.

The problem with Mr. Worre's statement is there are NO stats available from the MLMs that such policies have been utilized. Yes, DSA members do have at least a 90% buyback policy for at least six months, i.e. if you want to return all the stuff you haven''t sold within 6 months, you get 90% back. Some even go as far as a year. However, there are various caveats not discussed. 

Is there any stats available on how often such policies had been invoked? How many hoops do people have to jump through to get such returns processed? 

Nope. Nada. Zero. Zilch. Nothing. 

In fact, it's been documented in Mary Kay that any attempts to quit an return inventory would trigger an "intervention" from your upline and other people in your group (because she would be notified as any returns means her commission from your purchases will be clawed back) who will want to meet with you then shame and guilt you into staying in past the refund deadline, or to delay you in order to ensure you will get as minimal refund as possible. 

Mary Kay sales directors and recruiters are notorious for using misinformation or unethical tactics to stop consultants from returning inventory. This includes lying about the program or otherwise delaying the consultant’s return so that less product can be returned under the “last 12 months” rule. -- PinkTruth.com

It's hard to imagine the same does not happen in other MLMs as well. 

There are other tricks that can be done as well, like refresh products at less than 12 month cycles. That way when you try to return product it had already been phased out and thus cannot be returned. 

Sure there's a policy on the books, but a policy that's never used / enforced is no policy at all. 

Mr. Worre's hypothetical "white elephant" MLM only exists in his imagination. 

It is "recruiting" or "expanding your network"? 

Eric Worre claimed that just as Dave Ramsey pick up additional financial advisors and radio stations for his programs and his referral network, MLM does the same. 

Recruiting expands the network, but the network by itself pays no one.  The only way people get paid in network marketing is when product moves to a consumer. -- Eric Worre (ibid)

Unfortunately, Mr. Worre is again, talking about the hypothetical ideal MLM. In the ideal MLM, the distributor keeps ZERO inventory, everything they buy from the company is immediately resold at a profit to consumers. This is clearly not true in reality. 

Herbalife claimed for YEARS that a MAJORITY (73%) of its distributors are NOT distributors, but consumers. Following is a slide from their presentation trying to rebut Ackman's claim that Herbalife is a pyramid scheme several years back. 

Herbalife claimed that 73% of its distributors did NOT intend to make money.

When you first join MLM, you are the consumer. You are making your upline money. It's not until you move your inventory to other consumers that you making your own money. Some never managed to sell significant amount of stuff and indeed, as Ramsey said, ended up with garage-ful of boxes still being paid off on credit card. And if Herbalife, one of the largest MLMs in the world, is like this, do you really think it's any different in other MLMs? 

And indeed, this is where the analogy between Ramsey expanding his radio and advisor network with MLMer expanding their own network falls apart completely. 

Advisors join Ramsey's network so if they do get a referral they forward Ramsey a small referral fee. Because they know if they will make a profit on whatever services they provide to the consumer. 

Radio Stations join Ramsey's network by paying the syndicated show fee as any other radio show. They can make money off playing their local ads over the Dave Ramsey show. 

But MLMers join a MLM they can do so both as a consumer... or a distributor. And more often than not, as shown above with Herbalife example, they joined as one, but ended up as the other. MLMers can make money if they were successfully moving products to consumers... But not if they are the consumer. And MAJORITY of MLMers *are* consumers, if Herbalife, one of the largest MLMs, is any example to go by. 

Mr. Worre then begged for a "fair" review of MLM:

So rather than painting network marketing as this particular exception where only a few people succeed, why not compare that with the rest of the world where there are winners and there are losers -- Eric Worre (ibid)

So you want to compare stats? How about this... 

• Average household income in the US is 51939 (as of Census Data 2014)  (see Wikipedia)
• Average MLM retail revenue in US per person is 1789  (as per DSA 2015) *

It's pretty obvious that MLM is NOT where the winners are. 

* -- 36.1 billion retail divided by 20.2 million participants = 1789 

90% of traditional businesses fail in 5 years, right? WRONG!

Worre repeated the mantra "90% of those (startups) fail over the course of five years"...   Not once, but twice. It's yet ANOTHER factoid that's not fact. It's often repeated by MLM supporters trying to prop up MLM by slandering "traditional" businesses. 

The reality is 50% of businesses remained open after 5 years, according to real stats gathered by the SBA. And of the 50% that did close, 17% were closed VOLUNTARILY. So the REAL failure rate after 5 years is NOT 90%... It's not even 50%, but 33%. 

If 90% of MLMers fail after 5 years (or even 18 months), that's MLM's problem. 

There is ANOTHER point to make. Eric Worre seems to think that businesses cost 65K. No citation was given. 

The average person in the United States that wants to start a traditional business, spends $65,000 to do it. -- Eric Worre (ibid)

Where did he get this number, and did he just make this up out of thin air, or worse, pull it out of his... (ahem).. ear?  SBA.GOV website says many microbusinesses can be started for less than $5K, and Kauffmann Foundation in 2009 estimated average start-up cost at 30K.  And that's AVERAGE. Many businesses were started for much less. 

Bothering friends? They're doing it wrong.  Aren't they?

This is where Eric Worre admit that a MLM came from a tradition of overpromise and underdeliver. 

...network marketing as a whole has set an unrealistic expectation around the world.  We’ve made it seem too easy for when we talk to prospects.  No argument there. -- Eric Worre (ibid)

But other than claiming "they did it wrong, we'll fix it", there was little else offered. 

But let's examine a few more stats...  Ever heard of TruthInAdvertising.org, aka TINA? They are very active in consumer protection, and most of their recent focus were on MLMs. Herbalife, Vemma, Jeunesse, Jusuru, Nerium, SevenPoint2, Kyani... the list goes on and on. All of them are egregiously violating various ethical rules including income claims, product efficacy claims, and more. 

In fact, many of these unethical claims were done at the CORPORATE level. Prime example: Vemma. 

Vemma was shut down by FTC as a pyramid scheme September 2015 and was forced to reorganize to a compensation plan that was mutually agreed between Vemma and FTC as not to be a pyramid scheme. The first quarter 2016 results were pretty damning... Vemma lost millions of dollars when it was forced to operate ethically. Yet Vemma had received an "Ethos" award from DSA from 2013 supposedly for "highest standards in business practices and ethics". DSA, or Direct Selling Organization, was supposedly watching over all MLMs, but is actually a lobbying org that was funded by the MLMs that pays for advocacy campaigns to improve MLM's image. 

How did a company that was supposedly following the "highest standards in business practices and ethics" in 2013 got sued by FTC in 2015 for operating an alleged 200 million dollar pyramid scheme? Clearly, the so-called standards and ethics are just words written on paper and have no practical meaning. 

And if a company that was recognized by DSA, supposed standards body of the industry (it's not) for "highest standards in business practices and ethics" was accused of being a pyramid scheme within 2 years... What does that say about the rest of the industry?

Message to Mr. Worre and MLM Supporters

Truthiness, a term made popular by Stephen Colbert, is usually defined as 'a quality characterizing a "truth" that a person making an argument or assertion claims to know intuitively "from the gut" or because it "feels right" without regard to evidence, logic, intellectual examination, or facts'

After examining the facts available, it's quite clear that Eric Worre's reaction stemmed from truthiness, not truth. He had lived his life around MLM. He now lives off MLM as a motivational speaker and trainer. 

His various "rebuttals" to Dave Ramsey are based on incomplete hypothetical scenarios that does not exist in real life. And his conclusion claiming the other side is using innuendo to slander MLM is not only uncalled for but a gross misinterpretation of the advice given. 

He heard only what he wanted to hear (OMG Dave Ramsey hates MLM) and posted a "gut reaction" based on factoids, not facts. 

Mr. Worre, you can do better than that. Your followers deserve better. Your INDUSTRY deserve better. 

The past twelve months has been tough on the industry. First Vemma, now Herbalife. 

Yet instead of self-reflection on where did things go wrong, your first reaction is to rebut, to attack, even reasonable even-headed response from Dave Ramsey. You heard only the cautionary tales, and immediately used the "demand for parity" trope. Then you used factoids that are NOT facts and gross analogies to support your viewpoint. 

No doubt you have die-hard supporters who will support you no matter what you say, and I'm a mere blogger. 

But facts are facts. 

MLM is extremely risky and often misrepresented. And it's far more about management than sales. 

Pretending otherwise will NOT fix the industry, but destroy it. 

Related articles

• MLM History: DSA Killed a Bill in 2010 That Would Have Saved MLM(amlmskeptic.blogspot.com)

  ---

• OPINION: With HLF consenting to reforms, and Burks of ZeekRewards Guilty, justice prevailed, but work is never done(amlmskeptic.blogspot.com)

  ---

• MLM Basics: Is Multi-Level Marketing a Shared Delusion?(amlmskeptic.blogspot.com)

  ---

Where do these MLMers get their "facts"? Certainly not from this reality.

August 23, 2016, 2:55 pm

≫ Next: Scam Tactic: "Don't knock it until you try it" slogan is very bad advice

≪ Previous: Eric Worre is wrong about Dave Ramsey: or, why MLM advocates only knows truthiness, not truth

$

0

0

In attempting to engage with some MLMers regarding their unbridled enthusiasm, I've since found out they seem to be armed with a lot of... nonsense from somewhere. They surely don't seem to have just... invented it. But where did they get such nonsense that they perceive as "facts"?

Here are a random sample of  several "not-facts" thrown out for sake of argument by these MLM supporters, all the while chanting "Worre pwn'ed Ramsey!" in the Youtube comments of a Dave Ramsey show where Ramsey provided some realistic outlook on MLM.

It makes one wonder, do they just make up "facts" as they go along?


S1. "MLM works for thousands of people around the world"

S2. "Amway Japan is the biggest company there and has been trading for over 55 years."

A1. I never said anything about "MLM doesn't work", but that's ignore that for the moment, as he did. He put up a strawman, then cited a non-sensical fact in support. "Thousands of people around world" found MLM to be working...

DSA estimates that there are 20.2 million (per 2015 fact sheet, DSA.org) in the US alone, and probably 100 million around the world, in MLM. If only "thousands" found it works, that would suggest TENS OF MILLIONS found it did not work, doesn't it?

Factualness rating: D, true, but not placed in context. A system that works for a tiny minority cannot be considered a working system.

A2. Even a modicum of logic should tell you this is impossible. The biggest corporations in Japan, the haibatsus are hundreds of billions big.  Toyota's revenue from 2013 was 224 BILLION dollars.  This guy seriously thinks Amway in Japan can beat 224 billion? How old did he thinks Amway is any way? Amway Wiki states clearly that Amway Japan opened in 1979. That makes it 37 years old, certainly quite a bit off from 55. And its revenue, as per Amway was 1.1 billion USD (2006) again, AmwayWiki.

Factualness rating: F, completely false in every facet




S3.  "marriage the figures of failure are much much higher"

S4.  "traditional business two in four fail in their first year"

A3. What is the marriage failure rate, compared to "thousand succeed, millions fail" in MLM?

Let's assume that by "thousands", he means 10 thousand, and 100 million in MLM. That's... 0.01% success rate, isn't it?

Even common sense should tell you marriage success rate is greater than 0.01%.  Indeed, latest figures, as cited by Jezebel, states that "nearly 75% of marriages from the last decade are going to make it to death."

Factualness rating: F    Not only it's wrong, it's wrong by a couple extra 0's.


A4.  Ah, the "50% of businesses die in first year" urban myth. What are the real stats? According to Bureau of Labor Statistics, who actually do keep track of such stats, 4 out of 5 businesses survive the first year.

Furthermore, based on a survey, 1/3 of the businesses were successful when shut down at the end of 5 years, at which point 50% of businesses are still standing. So the real "failure rate" is 33% at 5 years, not 50% at 1 year as this guy cited.

At least he's not being as egregious as Rand Paul who claimed that 9/10 startups die in the first year.

Factualness Rating: D  wrong, but not as so wrong as to be "not even right".


S5. Network Marketing is a 1.7 Trillion dollar industry

A5: WFDSA, that's World Federation of Direct Selling Associations, the parent organization of DSA, the spokesbody of MLM industry, only claimed the following:

Direct selling accounted for more than US$182 billion in retail sales globally in 2014 -- a new sales record for the industry -- Pg 5, WFDSA Annual Report 2015

Where did one get 1.7 trillion which is 10x the actual amount?  Who knows?

Factualness rating: F  Off by a few percentage, no big deal. Off by 1000%, very big deal.


S6. Avon is nothing compared to the bigger network marketing companies.

A6. How big is Avon? According to Google Stocks (search NYSE:AVP) tells you its revenue was 9.955 billion USD in 2013.

What are the biggest network marketing companies? Let's pick... Herbalife (HLF) and Amway. Big enough? There are none bigger, right?

Searching NYSE:HLF tells you that HLF's revenue 2014 was a mere 3.825 billion USD. That's 38% of Avon's revenue. HLF is MUCH smaller.

Amway is a private company so we have to do a bit more searching, but fortunately, their own press release states that their global revenue is 9.5 billion for 2015.

So Avon is still among the largest network marketing companies.


Factualness rating: F  That's what happens when you post without fact-checking first.


What is interesting are the reactions of both when their... non-factualness was called into question. Remember earlier when Mike Cutts told me "come on do your research properly"? I did and posted a reply. His reaction?

Mark cutts: You never deal with reality Kasey as all your arguments are flawed there are tons of video and the one above proves my point with a surname like your Chang how big Amway China is too

Boy, he sounds like a sore loser, doesn't he? And trying to make a big deal with my surname? Muhahahaha. Ad hominem at its finest, and a derailment attempt. Pitiful. "Tons of videos online prove I'm right"?  Quite hilarious. Youtube had thousands of videos uploaded every day. As for the video by Eric Worre, I already answered it in a previous blogpost.

Clearly, Mr. Cutts is not dealing with our *the* reality, just as he accuses others of not dealing with his reality (which is not *the* reality, clearly).

So what's the takeaway?

When you post online, fact-check everything you write, else you end up looking as stupid as these two yahoos.

And if you are reading such stats... fact check them yourself. THAT is how you should determine what to believe or not, instead of how "sincere" the speaker looks or sounds.

Related articles

• MLM Basics: Is Multi-Level Marketing a Shared Delusion?(amlmskeptic.blogspot.com)

  ---

• MLM Mythbusting: Is MLM really a growth industry? (The Numbers May Surprise You)(amlmskeptic.blogspot.com)

  ---

• MLM Mythbusting: No, Network Marketing is NOT Among the Best Paid Careers(amlmskeptic.blogspot.com)

  ---

---

Scam Tactic: "Don't knock it until you try it" slogan is very bad advice

September 1, 2016, 11:10 pm

≫ Next: Scam Psychology: How Threshold of Collective Behavior Affects Victim's Mindset

≪ Previous: Where do these MLMers get their "facts"? Certainly not from this reality.

$

0

0

One of the most common arguments for income schemes is "don't knock it until you try it", i.e. "it paid me so it works". This is actually a VERY flawed argument. Recently I came across the Skeptoid episode: don't try it until you knock it. While that's about general skepticism, it works very well for financial scam debunking as well, as it destroys all the variations of the bad argument.

Don't Knock It Until You Try It?  Nah. 

Personal experience is "sample size of one". It is noise. It subject to sunk cost fallacy, subjective validation, self-superiority bias, confirmation bias, and all the other cognitive biases. Mankind invented science and scientific process to counteract such biases.  Personal observation is subjective, and therefore biased information. Advocating one to "try it" simply proves nothing.

Yet MLMers love to fly this particular argument. They value personal experience over all others, the exactly opposite of scientific process trying to filter out bad data. It is basically fully faith-based.

I was skeptical until I tried it

A true skeptic would know NOT to try it due to all the reason discussed above. The proper way to evaluate something is through scientific and statistical process from a large sample set, not through a single subjective personal experience.

Falling for a dare / lure to "try it" just makes you gullible, not skeptical. Yet MLMers selling nutritional supplements or unproven "treatments" love to fly this particular argument.  (also see "What's the harm" below)

I know it works, because it worked for me

So somehow, you're God, and what you experienced is the universal truth for everybody, eh? It's just your subjective experience, based on your circumstances at the time, and based on all your PRIOR memory and experiences. If any one else had different life history, experienced the same thing at a different time, under different circumstances, or any combination of such, the experience will be different.

What you experienced is only good for yourself. It is not a data point. It is anecdote.

What's the harm?

The harm is people will pay for the bogus stuff rather than stuff that really works.

For income opportunities, they would at best, wasted months (or years) "treading water" spending time for no appreciable result, or at worst, losing thousands or tens of thousands of dollars in the process, as well as alienating all friends and family. There are occasional exceptions that do make a living at it, but that's the exception, not the rule.

For nutritional supplements and such, the stakes are much higher. One winces at the stories about gullible people stopping their medicine because they believe their nutritional supplement will cure them. At least one caused permanent brain damage in his daughter using nutritional supplement as potential cure.

"I know what I saw"

Nope, you don't.  You interpreted what you saw to suit your narrative. That's why there's the scientific method to discount anecdotes, and rely on repeatable experiments to gather reliable data.

How about magic? Magic tricks are obviously "impossible" on the surface, yet it's done. When you see magic, do you believe magicians can levitate people, cut people in half and put them back together, and so on? Of course not. You know such things are impossible and it's merely an illusion. So why can't you accept that OTHER things you see may be an illusion as well? A fraud, an act done for your benefit? Ponzi schemes pay people, often in big ceremonies with the fancy show checks, to "prove" to the sheeple that it really pays. But it's a facade depending on more people paying into the scheme. The net winners getting paid creates the illusion that everyone will be paid, when it's clearly impossible. People who saw others getting paid (or are paid themselves, i.e. "proof is money in my bank account") are quite fond of this argument. Yet few if any of the victims realized that Paul Burks of the ZeekRewards ponzi scheme, and recently found guilty of 4 counts, was a trained magician.

A scam bomb detector maker called Quadro Corp scammed dozens of police officers into recommending purchases even though one was taken apart by Sandia National Labs and found to contain NO electronic or chemical sensors inside. Yet none of the police officers scammed by bogus detection tests were willing to admit in court they had been duped, and instead, insisted that they saw successful "trials" (which were clearly rigged, as the results are impossible). The jury was forced to declare the company heads "not guilty" of fraud despite FBI warning the police across the country not to buy the fraud. The police officers "knew" what they saw too, even though it's impossible.

You may have seen what you saw, but you could have misinterpreted it, or have been deceived into making a particular conclusion that's not the truth.

"You are close minded"

MLMers are quite fond of throwing this out, when they ran out of arguments. They then accuse you of unwilling to see their side of things, despite them giving flawed, non-sensical evidence, or often, no evidence at all.

As Carl Sagan said, "Extraordinary claim requires extraordinary evidence." Open-mindedness is willingness to admit one is wrong when presented with evidence to the contrary, not merely willingness to try nonsense.  If you provide evidence, I'll evaluate your evidence and if necessary, reconsider my position. If not, why should I even treat your position seriously?

"I'll try anything" attitude is one of an adventure seeker, not of a skeptic.

In not understanding the definition, the accuser is the real closed-minded person, yet accusing others of close-mindedness. Ironic, isn't it?

Conclusion

When you see these arguments being bandied about, it's time to avoid whatever is being advertised. They have no proper arguments, no scientific evidence to back it up, just stories by unreliable narrators.

Related articles

• Do You Know Where Your Money Went If You Invested in a Suspect Scheme?(amlmskeptic.blogspot.com)

  ---

• Is it just series of bad judgment, or "once a thief, always a thief"?(amlmskeptic.blogspot.com)

  ---

• Scam Absurdities: Birds of a Feather Flock Together, or the Rodrigues and Filho financial links(amlmskeptic.blogspot.com)

  ---

Scam Psychology: How Threshold of Collective Behavior Affects Victim's Mindset

September 2, 2016, 10:01 am

≫ Next: Cognitive Bias: Sunk Cost Fallacy

≪ Previous: Scam Tactic: "Don't knock it until you try it" slogan is very bad advice

$

0

0

Readers of this blog have remarked that they are very surprised at how a victim will refuse to acknowledge s/he is a victim, despite very clear evidence that are indisputable, repeatedly demonstrated, even by the leader of the scheme. The victim simply ignores any evidence that is "negative" and accepts any evidence that is "positive". It is... completely irrational.

Yet irrational behavior is so prevalent, even when the behavior is CLEARLY demonstrated to be irrational. The perfect example? Basketball legend Wilt Chamberlain.

Wilt Chamberlain's 100-point game (Photo credit: Wikipedia)

Wilt Chamberlain, despite his legendary status, was a HORRIBLE free throw shooter. For his entire career... his free throw shooting percentage is... 51%. However, this guy once scored 100 points in an NBA game... BY HIMSELF!!!!!!  And in this game, he made 28/32 free throws... with UNDERHANDED throw! He made the first nine free throw shots! He tried doing this underhanded throw for a while and improved to 70+% accuracy rather than 50% of his normal overhand throw. So you'd think he'd keep doing it, right? WRONG! He went back to being a BAD shooter, because... Wilt Chamberlain does NOT want to throw underhanded. He "felt silly, like a sissy."

The choice to switch back to the 50% overhand free throw is an IRRATIONAL decision.  How can one of the greatest NBA players choose to play badly... just because... he felt bad even though the results speak for itself? Even today, the underhand throw is known as a "granny shot", and there are almost NO professional or semi-pro basketball players using it (only two in NBA, IIRC).

This sort of irrational behavior is very much in evidence when it comes to scam victim's mindset. Scam victims have been known to organize rallys "in support" of their ponzi scheme, interfere in government probes and sometimes, even sue the government in attempts to "clear the name" of the scheme they were involved in.

Sociologists believe this may have something to do with "threshold of collective/group behavior", where people will choose to follow a group, despite the group is NOT something they believe in. Like Wilt Chamberlain who chose to follow other players (in order not to feel sissy) instead of improve his scoring, scam victims will follow their group until the bitter end despite they know this can only turn out badly.



This is often found among MLMers who choose of live in echo chambers / reality distortion fields, thus choose to debase themselves, held themselves back, just to "fit in". One of the often bandied about slogans is the following:

"When you let go of negative people, positive ones appear." -- Unknown

(You find this quote all over the "inspirational quotes" websites, with no origin. )

MLMers are often incapable of separating "negative people" from "people trying to give honest advice". By avoiding feedback and only listen to encouragements (i.e. "get rid of the negative, leave the positive") the participant end up isolating themselves while blaming the outside world of isolating them. Reality has been inverted, due to collective behavior.

There's also some factors of badly misinterpreted "linguistic determinism", i.e. what you say affects how you think. This concept is also known as Sapir-Whorf Hypothesis after Edward Sapir and Benjamin Whorf, who coined them decades ago, or sometimes, just the Whorfian Hypothesis. Basically, the hypothesis states that structure of a language either determines (strong version) or strongly influences (weak version) the modes of thought and behavior characteristics of the culture in which it is spoken.  Experts do not believe the strong version is right as it would prevent translations from ever working, while there are some evidence of the weak version being true.  However, this does not seem to stop the MLMers from modifying language to suit their needs.

Did you know there are at least ELEVEN terms for "multi-level marketing", even though most of the other terms are wrongly applied?

Did you know MLMers hate negativity that much of their counterarguments usually consists of slogans and myths?  "If you look for negative stuff you'll find it", "let go of negative people" (reference above), "positive thinking will let you do everything better than negative thinking" (misquoting Zig Ziglar), and the infamous Mary Kay bumblebee pin based on the bumblebee myth. There are plenty more such examples.

Did you know MLMers often seem to make up their own "facts" which are easily busted by simple fact-checking via Google?

It can be said that much of MLM done wrong involves badly used language, so much so they are classified as commercial cults by some cult experts, much like a religious cult would force its members to adopt new definitions of words.

A victim who don't feel like a victim, is nonetheless a victim, whether the victim is influenced by groupthink echo chamber or self-deluded through use of proprietary language (or both), it doesn't matter. A victim will stay a victim until s/he recognize the victimhood and start doing something about it.

And there's no doubt that an industry where 99% of direct sales reps suffer significant financial losses, majority of MLM participants are victims... or prospective victims.

Related articles

• Scam Tactic: "Don't knock it until you try it" slogan is very bad advice(amlmskeptic.blogspot.com)

  ---

• Where do these MLMers get their "facts"? Certainly not from this reality.(amlmskeptic.blogspot.com)

  ---

• Podcast #224: Why Smart People Do Dumb Things(artofmanliness.com)

  ---

Cognitive Bias: Sunk Cost Fallacy

September 6, 2016, 3:08 pm

≫ Next: Scam Psychology: Cognitive Biases that leads to bad money decisions

≪ Previous: Scam Psychology: How Threshold of Collective Behavior Affects Victim's Mindset

$

0

0

Answer this following question to yourself, truthfully please. Remember, it's for you and you alone. Only you would know the answer.

Q: Do you make rational decisions based on the best-estimate future value of objects, investments, and experience? 

Your answer to yourself is probably going to be: Yes, of course.

You are wrong. In reality, your decisions are based on your EMOTIONAL investment you already made and accumulated, and the more you invest, the less likely you can let it go. 

This is a cognitive bias known as "sunk cost fallacy".  In short, you are basing your decision on what has been invested, rather than what it's worth NOW (or in the future).

And it's very simple to make you feel you've invested time and effort... by making you do trivial tasks that amounts of zero importance. Zookeepers (and pet owners) know this principle well... it's called "contra-freeloading".

Contrafreeloading is a term coined in 1963 by animal psychologist Glen Jensen, who created an experiment where 200 albino rats were given a choice: unlimited food pellets in little bowl, or a mechanism where they have to learn to press a lever to release a food pellet. Logically, rats should simply gorge on the effortless food and never touch the lever. However, the opposite happened... rats actually prefer the food source where they had to press a lever, by a large margin. This was since repeated in gerbils, mice, birds, fish, monkeys, chimps... and more. (The only exception is the domestic cat). In short, animals prefer doing a little work (but not too much) for their food, rather than just take a handout.

A great example of contra-freeloading in a scam is ZeekRewards ponzi scheme (as accused by SEC and USSS), an $850 million scheme will soon go to trial. In ZeekRewards, one supposedly buy bids in the Zeekler penny auction, give away the bids to random strangers as promotion, and gets rewarded with certain amount of daily profit based on the bids purchased for the next 90 days. One also needs to post ads to random places on the Internet, and then post the URL on the ZeekRewards website as "verification" to be rewarded. In reality the vast majority of the bids were never used (i.e. the participants simply put money into the system) and expect daily "profit share" of up to 1.8% of the money they put in. The daily posting of ads were never tracked and verified, and indeed some people started a blog just to post ads... that nobody will ever read or see. It's rather obvious, in hindsight, that the "posting the ad" must be contrafreeloading... to make the participant feel they "worked" for and "earned" their share of "profit" amounting to as high as 1.8% DAILY, when the trivial task can literally be done in a few minutes, and be outsourced to some kids for pennies a day.

Yet when all these facts were pointed out to the ZeekRewards affiliates, their answers often are "you work for a competitor", "you work for the 1% to oppress us", "why don't you want us to succeed", and so on. After Zeek was shut down, several members even outright claimed "there were no victims until the government came along."

Curt Miller, on FB, soon after Zeek was closed by USSS and SEC, claiming that "there were no victims (in ZeekRewards) until the government came along".

They are so emotionally (and financially) invested into ZeekRewards, they can longer think rationally and see reason, even when there is NO REASON to continue to behave irrationally.

It is illogical to continue to support an alleged scam AFTER the owner made a plea deal with the government. However, hundreds of people donated money to a organization that promised to put the money toward "defending" ZeekRewards from the SEC. The owner of such organization was later jailed for defrauding the US government in an unrelated matter. The so-called defense ended up being an attorney who attended the receivership meetings, and filed several motions that was denied. He accomplished nothing useful except delay the process for the rest of the victims, and it was widely rumored (but never confirmed) that the rest of the money went to the organizer's private plane's upkeep.

They are the embodiment of sunk cost fallacy.




A related phenomenon is known as the IKEA effect, made popular by Dan Ariely. The term described the feeling of pride by a person after assembling an IKEA furniture, despite less than stellar results. "It may be crooked, but it's mine."  The assembler value the item based on the effort they put in, than the actual results.

Perhaps the IKEA effect can also explain why many people value network marketing... They are really there for the network, not the marketing, despite what should have been the purpose of starting a business... to generate profit.

There is no doubt that network marketing is NOT as profitable as many want you to believe. Based on DSA's own figures, in 2015 20.2 million people involved in direct selling sold 36.12 billion worth of still in US retail. Average sales per person per year: $1788 or $149 / month. And that's revenue, not profit. And this average is FALLING (in 2014 it was closer to $1900)

But why would you join a business if NOT for the profit? This becomes clear when you read the various articles touting the virtues of network marketing and the reactions to them, such as Regan Long's "The Brutal Truth About Those Pyramid Schemes" posted on HuffPost.  The article can be roughly summarized as "MLM is not a pyramid because I am HAPPY with MY MLM, therefore it can't be illegal, and therefore all MLMs are not pyramid schemes. And why are you so mean toward MLM promoters? Buy their products! You're helping moms like me!" It is basically an illogical appeal to emotion, presented as if it's the gospel truth. But it's the overall tone and the defenses offered that makes the article interesting.

The reactions to the article generally falls into three camps:

* Loverz: OMG thank you! You're telling it the way it is! We're not pyramid schemes!
* Haterz: You're just deluded. MLM are pyramid schemes and you're stupid to have joined it.
* Tweenerz: You both are partially right...

On the "Loverz" side, the typical argument would be

"...Most people don't understand how lucrative and empowering it can be to be your own boss and earn whatever amount of money is equal to the effort you put in."

Basically, they're selling the IDEA "be your own boss, own your destiny", rather than the actual profitability, as it is immediately followed by the disclaimer, albeit phrased as an accomplishment: make as much money as YOU want based on effort YOU put in.

What's left unsaid: if you fail, it's your own fault. (Don't blame us)

Basically, this is sunk cost fallacy reinforcement. If I worked this hard, and I don't see success, it's obviously my fault. I have to work "harder"! I have to keep going! I can't let all the effort go to waste! I must be about to turn the corner! When the rational choice would have been to quit and start looking for alternate income sources than to continue a money losing venture.

And if I were the 1 in 100 (roughly) that do end up succeeding (the stars aligned, I recruited the right people, at the right time, at the right place, blah blah blah), and started earning a comfortable income... I would not remember the luck factor. I'd believe that it's my brilliant plan and my "grit" that lead me to my success. This then becomes self-serving bias.

But chances are I will fail (99 out of 100), in which case, I blame external factors. Market is not receptive. Haterz poisoned the market. People just don't understand...

And I keep going, because I somehow STILL believe that I can't let all this effort go to waste.

And maybe I develope a network, even though I'm not making much money from it, but all that effort usually means a group of like-minded people...

Which is how certain MLM markets itself... Come for the income, stay for the friendship. But friendship is NOT why you join a business, is it? It's a fringe benefit at best.

Which reminds me of the Concorde. Everybody remember the Concorde, the supersonic airliner? It turns out, Sunk Cost Fallacy is also known as the Concorde Fallacy.

British Airways Concorde G-BOAC, circa May 1986, source: Wikimedia

Back in 1976, Richard Dawkins, noted skeptic, dubbed the term "Concorde Fallacy" on the UK and French government for continuing to fund the plane (which first flew in 1969 as a prototype, but dated back to an agreement between the two governments in 1956) despite rapidly shrinking orders. At one time, as many as 200 were planned, but due to rising fuel costs and other factors only 14 was ultimately made.  The project cost well over one billion British Pounds (more than 6 billion at current rate) before the first plane was delivered in 1976. But the plane flew on and served admirably. The crash in Paris back in 2000 however, signaled its end. In 2003, Concorde flew its final flight.

While the plane, as an investment, did not pan out, the plane itself is actually profitable enough to operate for both British Airways and Air France. It cuts an transatlantic flight that takes 8-12 hours down to 3.5 hours. There's a matter of national pride, demonstration of technological prowess, and so on.

Dawkins dubbed it a fallacy before the Concorde had a chance to prove itself and it did so for the next quarter of a century.

So the "Concorde Fallacy" by itself is not really a fallacy, as Concorde is NOT measured by simply the cost to benefit ratio. The OTHER intangible factors were not in the equation.

But do you join network marketing for the income... or the network / friendship?

And if you didn't get the income, but stayed for the friendship, did you just gave yourself a paycut and a demotion? Can the business be judged a "success"?

Or did you just used sunk cost fallacy to justify staying aboard a sinking ship?

Related articles

• Scam Basics: When you're beyond "not right", but into "not even wrong"(amlmskeptic.blogspot.com)

  ---

• Scam Psychology: The Need for Self-Delusion(amlmskeptic.blogspot.com)

  ---

• MLM Basics: Why a MLM Comp Plan is MORE important than the product, not less(amlmskeptic.blogspot.com)

  ---

Scam Psychology: Cognitive Biases that leads to bad money decisions

September 9, 2016, 7:29 pm

≫ Next: Scam Psychology: The "Hard Work" Narrative vs. the Luck Factor

≪ Previous: Cognitive Bias: Sunk Cost Fallacy

$

0

0

Recently Lifehacker posted an article about cognitive biases that lead to bad money decisions. They are, obviously, perfect described the mindset of an MLMer.  Indeed, MLMskeptic here has covered most of them.

Sunk-Cost Fallacy -- if you have put money and effort in, you would not want to give up. This is also related to "Ikea Effect".


Choice-Supportive Bias -- also known as post-hoc rationalization, you made an impulsive decision NOT supported by logic, and later you tried to come up with reasons why you made that impulsive decision.  You will even rewrite your history and memory to somehow "prove" that you made the right decisions.

Anchoring Bias -- you rely too heavily on the FIRST piece of information and let that information affect your subsequent decisions, even of that first info is outrageous or wrong. Even when you are shown proof that the initial information is wrong, you fail to correct yourself and your thought process.


Bandwagon Effect -- "everybody else did it" somehow proves that it's logical, even when scams can have millions of victims. Popularity does not prove veracity or truth.


Status Quo Bias -- If you prefer the things the way they are, even though it's bad for you, you're definitely affected. Scam victims often refuse to take action to protect themselves because they believe they cannot be in a scam, and they want to "wait things out" even as the scam continue to take their money and provide one excuse after another.


But go read that article.

Related articles

• Scam Tactic: "Don't knock it until you try it" slogan is very bad advice(amlmskeptic.blogspot.com)

  ---

• Scam Psychology: "You have to try it to understand it" fallacy(amlmskeptic.blogspot.com)

  ---

• Scam Psychology: Luck Blindness, or why lucky people see it as skill, not luck(amlmskeptic.blogspot.com)

  ---

Scam Psychology: The "Hard Work" Narrative vs. the Luck Factor

September 11, 2016, 7:51 pm

≫ Next: Scam Tactics: Whip Up Fear, Provide "Solution", Take Your Money under false pretense

≪ Previous: Scam Psychology: Cognitive Biases that leads to bad money decisions

$

0

0

The words "hard work" often appears in the MLM supporter's arguments or narrative trying to discredit their "opponents". Any one who failed can be explained away as "they didn't work hard enough".

The problem is technology has shrunk the required competence in skills that makes a difference. It has "leveled the playing field", so luck now plays a much larger factor than any one realizes.

This is total anathema to network marketing / MLM, whichever name they choose to go by. Indeed, luck and success are almost opposites in the MLM mindset. Those who are successful and "self-made" never want to talk about luck, or even want to HEAR about luck.  This is a cognitive bias known as luck blindness. And MLM feeds into the self-made narrative directly. Most MLM pitches involves "entrepreneurial spirit""be your own boss""get away from the J.O.B. (just over broke)" and so on. These people are taught that any success they had is due to their "hard work" and the brilliance of the system (despite the same system, in another breath, claimed "anyone can do it")

This sort of mentality leads to some truly amazing (in a slow train wreck sort of way) claims. One of such claim is how some net winners in the ZeekRewards ponzi scheme are claiming they provided "value" to the business, and thus they are entitled to their ill-gotten gains and thus not have to hand them back to the receiver to be redistributed to the victims.

Let's forget for a moment that ZeekRewards ponzi scheme head Paul Burks was just judged guilty on all four counts in July 2016. How did these ZeekRewards Ponzi net winners claim they are working hard and thus entitled to be compensated, according to their brief, worth $50K to 80K a year? They are pasting 10 short text ads per day on anywhere they can get away with it (i.e. "spamming"). For the record, while they are required to copy the URL where they posted the ads back to ZeekRewards for "verification", no such verification was ever done. In other words, they don't even have to be done. Their work were worthless. It can be done in minutes. For this simple work, they they claim such to be worth 50-80K a year...

Right, and pigs can fly.



Yet the same sort of argument was leveled at regular MLM... that anyone who said MLM is a scam is just lazy. This is what "Nathan Sloan" wrote in his "6 Biggest Myths About MLM" (which, BTW, is "so wrong it's not even right")

The reason you many have heard it might be a scam is because someone you know, may have joined a company, realized that there was actual work involved and then quit. To make themselves feel better, they then tell their friends and family that it was just a scam to save on any embarrassment. Today, it is just an easy excuse.

While not MLMs are scams, there are enough scams (FHTM, Vemma, Herbalife, TelexFree, etc.) that one should do proper due diligence rather than assume the next MLMer you run into is legitimate in every way. Further more, victim-blaming is cousin to slut-shaming. Blaming MLM lack of success to "laziness" without considering the actual circumstances is very much like blaming rape victims for "dressing slutty" without fact-checking. Such stereotyping is merely propaganda.

By discounting the luck factor, and blame any and all failures on "laziness", a narrative is reached... All those who "succeeded" are "hard workers" and "self-made". It's an easy trap for the unwary, and it's a self-healing narrative. If you don't succeed, "work harder!" And if you fail, "you didn't work hard enough!" Luck has no factor in this success narrative. Why? It's in the Western Culture: accomplished people bristle at the suggestion that luck or chance played a role in their success. Once, Stuart Varney, FOX Business anchor, grilled a Cornell Economist (who wrote a book on Luck and the Myth of Meritocracy), basically hated the idea that any one can question how self-made man could be dependent on luck.

Yet those who do acknowledge good fortune are MORE likely to succeed. Careers and success are based on hundreds, thousands, or more decisions over time. And a lot of it is just being at the right place, at the right time. Those who don't acknowledge luck will often turn into egomaniacs claiming sole credit for group or collaborations, or claim "leadership" credit not earned.  An example given was former Apple Senior VP Scott Forstall, who was chief architect of iOS, possibly even succeeding Steve Jobs as a future CEO, but he was dismissed in 2012, according to Tim Cook, to preserve the company's collaborative culture. It's pretty obvious that his colleagues believe Forstall claimed more credit than he deserved.

But people in MLM who claim MORE credit than deserved are lauded and decorated and recognized for their "sales prowess". Any success was attributed to his leadership and team-building... because the company said so, and have huge conventions and ceremonies "recognizing" reps who achieved "sales goals". There were definitely NOT quietly being shown the door, because they can blame the downlines, the minions, for "not working hard enough". Any failure on their part is because their minions didn't work hard enough, not because of their leadership, even when they chose a pyramid scheme.

S. Dossey blaming all her downlines for not working hard enough when TVI Express was kicked out of US for being an international pyramid scheme and she fled to a different scheme, circa 2010.

The problem of such sales goals is with very few exceptions, MLM companies actually do NOT track retail sales. They track sales to the distributor, relying on distributors promising that they will only reorder after selling 70% of their existing inventory to retail customers before ordering more, and many companies have "autoship", where you subscribe to X amount of products automatically in order to qualify for commissions, where the company assumes that you will sell or consumer enough to meet the 70% goal. There is almost no audit. Any audit would consist of randomly calling a few people up and "hi, did you sell 70% of your stuff?" In FTC's lawsuit against Herbalife, Herbalife was documented to have picked less than 1% for audit via a simple phone call, and even that is 5 months late.

If you are being "taught" that hard work is success, consider the following factors:

• What constitutes "hard work" here?  In MLM, that should be "marketing". Yet many people will insist it is recruiting, completing missing the point. In other schemes, they simply give you "busy work" that has practically NO contribution to success.  
• What constitutes "success" here? Is it really money in your wallet and in your bank account, or is it simply some meaningless certificates of achievement and recognized as a "weekly sales leader" with some people clapping? 

Related articles

• OPINION: With HLF consenting to reforms, and Burks of ZeekRewards Guilty, justice prevailed, but work is never done(amlmskeptic.blogspot.com)

  ---

• Will US Recognize a new mental disorder: Cult Sales Addiction?(amlmskeptic.blogspot.com)

  ---

• Eric Worre is wrong about Dave Ramsey: or, why MLM advocates only knows truthiness, not truth(amlmskeptic.blogspot.com)

  ---

Scam Tactics: Whip Up Fear, Provide "Solution", Take Your Money under false pretense

September 16, 2016, 11:49 pm

≫ Next: Bad Argument: Citing Celebrity Endorsement as Evidence despite Celebrities said Some of the Craziest Things

≪ Previous: Scam Psychology: The "Hard Work" Narrative vs. the Luck Factor

$

0

0

A lot of so-called "entrepreneurs" (read: MLM noobs) are so fond of repeating marketing speech they don't ever stop and wonder WHY are they doing what they're doing, and whether it makes any sense. One of which is the "mystery tease", where there's practically NO public info about the company, or the promoter is trying to keep things VERY VERY vague. You pretty much have to join, get the info, then consider canceling in order to get ANY information on the company.

When questioned why does the company operate this way, the rep, either stammer "so don't join" or retorts with insults such as "you're obviously not an entrepreneur".  The implication for both is "if you want to know about the company before you join, you're obviously NOT ready to join."

Isn't that just faith, i.e. "I am willing to join without knowing what I am joining"?  Does that even make sense? 

But this just reminded me of the infamous diamond scams during the late 1970's in the US. 

The scam is simple... The sellers claim to be sourcing diamonds and are offering them as investment instruments to folks who are afraid of the stock market fluctuations. The concept is simple: "everybody loves diamonds", "it only appreciates because supply is strictly controlled by a monopoly", "all diamonds are sealed with certificate guaranteeing their quality", and so on. And all of these statements are even... true. 

Sufficiently convinced, the buyer sent off a check for thousands, and in a week or so, he gets diamonds... sealed in plastic with the certificate guaranteeing their quality... Except for the caveat: the quality is only guaranteed if the plastic is NOT broken. I.e. any attempt to have it appraised means it's no longer guaranteed. And many customers did break the seal only to find the diamonds are inferior or even worthless quality. It was bad enough that New York's Attorney General has to establish a "Diamond Task Force" just to process the hundreds of complaints of fraud.

This is related to the modern "shrink-wrap contract", i.e. "if you break the seal, you accept the licensing terms", usually for software. And it's in a legal gray area. 

But these diamond hawksters also book hotel or resort ballrooms and hold "diamond investment seminars" where they prey upon fear of the audience ("at this inflation, your stocks and bonds are not keeping up"), and esp. seniors ("if you don't have some easily liquidated assets like diamonds, your kids can seize your cash assets and ship you off to a nursing home")

Doesn't that just reminds you of the modern equivalent? 

Do you know the modern equivalent? Investment scam. They will tell you that all existing investments are run by the rich, and only whatever they are providing is good for you.

Following picture is a promo photo of an alleged cryptocurrency called Gemcoin, supposedly backed by amber mines and such. 

USFIA alleged Ponzi scheme's promo seminar in Canada, circa 2015, where "Gemcoin, backed by amber" was heavily promoted to the audience as investment

Yes, that's promo photo of promo event of a Ponzi scheme, called USFIA. They claim to own mines in the Dominican Republic of top grade amber. In reality, there was no mine. Quoting from the link of Pasadena news linked earlier:

“As for the amber mine in the Dominican Republic the defendant professed to own, no mine has been discovered. The receiver has learned that the address of the purported mine is a residential address of a house ... located in a residential area and there are no mines adjacent to it,” according to Seaman. “The receiver is in the process of domesticating the preliminary injunction order in the Dominican Republic for the purpose of seizing and securing assets of the receivership entities located there.”

The tall Chinese guy was portrayed to be a "gem appraiser". What USFIA did not tell you is he's really just a security guard:

Mr. Zhang as a security guard in front of USFIA at a USFIA Gemcoin promo event

Mr. Zhang as a security guard posing with Gemcoin "fans" at a USFIA Gemcoin event

They tell you stuff to make you fear existing investments, then they claim whatever bogosity they are selling (approved by bogus amateurs pretending to be experts) are the solutions to your financial security. In reality, your money simply disappeared into their wallets.

Does your MLM do something similar? Does your MLM leader start with a pitch that whips up fear then pitch you some solution you barely understand? With outrageous promises propped up by some "proof" that aren't really proof?

Why would people consider this sort of behavior actually acceptable, i.e. you had to pay to get information about the company?

Yet it's often "hand-waved" away with the excuse "we need to know if you are serious".

Basically, you just have "IKEA effect" and "ownership bias" used against you.

Which is why you should RUN AWAY from suspect schemes that use this sort of tactics. 

Related articles

• Scam Absurdities: Birds of a Feather Flock Together, or the Rodrigues and Filho financial links(amlmskeptic.blogspot.com)

  ---

• Scam Basics: When you're beyond "not right", but into "not even wrong"(amlmskeptic.blogspot.com)

  ---

• Scam Psychology: The Need for Self-Delusion(amlmskeptic.blogspot.com)

  ---

Bad Argument: Citing Celebrity Endorsement as Evidence despite Celebrities said Some of the Craziest Things

September 30, 2016, 7:22 am

≫ Next: Bad Argument: Flip the Burden of Proof

≪ Previous: Scam Tactics: Whip Up Fear, Provide "Solution", Take Your Money under false pretense

$

0

0

It is a fact that celebrities have said some of the kookiest stuff in public including

• Earth is flat (claimed by a rapper)
• Cancer is caused by "negative attitude" (claimed by a TV show host)
• Homeopathy and anti-vaccination (too many to count)

There are even dedicated lists of celebrities idiotic comments. Yet celebrity endorsement remains one of the top forms of advertising. Indeed, MLM has repeatedly used celebrity endorsements. Back when Vemma was a thing, Vemma followers have repeated cited association with Dr. Oz, mainly because B K Boreyko, Vemma's founder, had once said it is Dr. Oz's "favorite fatigue fighter." The real truth is Dr. Oz never endorsed Vemma... The linkback is a courtesy because Boreyko is on the board of one of Dr. Oz's charities.  In other MLMs, Both Donald Trump and Ben Carson (candidates for 2016 Presidential Campaign) have had dealings with MLM (ACN and Mannatech respectively).

SIDENOTE: Trump was quoted by Wall Street Journal, "I (Trump) know nothing about the company (ACN) other than the people who run the company, I’m not familiar with what they (ACN) do or how they go about doing it, and I make that clear in my speeches." A ringing endorsement indeed, despite Trump pocketing millions in speaking fees from ACN events. 

MLM itself often tout their "sales leaders" as minor celebrities, complete with big pageantry of award ceremonies and such.  As an example, Mary Kay is well known for its huge spectacles which are deceptively called "seminars" where new sales rep who reach some minimum goal are showered with praise from the crowd. It is very intoxicating and "inspiring".

Mary Kay convention, all the "ruby" folks getting recognized (date unknown)

But what makes celebrities seem to goof up more often? This can't really be merely explained by the spotlight effect, i.e. anything celebrity said is repeated ad infinitum, while a regular person's kook can often be overlooked. It is a factor, but it can't be all that there is.

Other factors at work includes:

• Luck blindness / Survivorship Bias
• Dunning-Kruger effect
• Self-Centered bias
• Positive reinforcement / confirmation bias / Echo chamber effect

Self-Centered Bias / Luck Blindness / Survivorship Bias

People in general attribute more competence to themselves than they deserve. This is known as self-centered bias. Such people generally deny luck as having a factor (or having only an insignificant one) which is known as luck blindness. They believe whatever they did is what lead to their success, even though there is no basis for that belief. This is known as survivorship bias, as they are the survivors and we don't hear from the people who didn't make it.

When you combine all three of them together, you get inflated ego and belief in one's own infallibility.

Dunning-Kruger Effect / Competence Substitution

Dunning Kruger effect describes how some people are so incompetent, they don't even recognize their incompetence, much less competence in others. In other words "know just enough to be dangerous".  Competence substitution is how a person believes (often mistakenly) that their competence in one area makes them expert in a somewhat related area. For example, a lawyer may come to believe that he can spot a scam due to his knowledge of the law.  A regular businessman may think he can succeed in MLM due to his business experience.

When you combine the two, you got someone who has NO IDEA what they're talking about... and has no idea that s/he has no idea.

Positive Reinforcement / Confirmation Bias / Echo Chamber Effect

Celebrities often have people at their beck and call, and their "managers" are very good in isolating them from the public and negative feedback, but instead, only pass through the positive. This is known as positive reinforcement. If the celebrity already has an ego, they would come to believe only the positive news about them, confirming their beliefs and ignore the negative things. This is confirmation bias. Finally, celebrities only associate with other celebrities, and simply hear the same things over and over, like in an echo chamber, and it leads to a biased world view.

MLM teaches "negativity avoidance" as a fundamental lesson, and treats any sort of criticism or even skepticism as "attacks by dreamstealers". This teaches followers to ignore reality, only accept the positive, and only associate with people who think alike (i.e the team). As a result they reside in a reality distortion field.

Conclusion

When you combine all of the biases and effects above, you end up with someone who is full of themselves, and that is a VERY dangerous combination, both for him-/herself and his/her followers.

References

https://www.theguardian.com/science/brain-flapping/2016/feb/10/opinion-vs-facts-why-do-celebrities-so-often-get-it-wrong

Related articles

• Scam Tactic: "Don't knock it until you try it" slogan is very bad advice(amlmskeptic.blogspot.com)

  ---

• How to spot shady opportunities V2.0: a 10 item checklist(amlmskeptic.blogspot.com)

  ---

• 5 Secrets of the Top Bullshitters (and scammers)(amlmskeptic.blogspot.com)

  ---

---

Bad Argument: Flip the Burden of Proof

October 10, 2016, 10:22 am

≫ Next: Apology for lack of updates

≪ Previous: Bad Argument: Citing Celebrity Endorsement as Evidence despite Celebrities said Some of the Craziest Things

$

0

0

One of the most often tactics used by bad arguers is refuse to prove anything, even when you prompt them "where's the proof?" Instead, they claim it is YOUR responsibility to give THEM proof that they're right.

Hilarious, right? Yet that's exactly what happened here.

K.S. : So provide evidence to prove him (Dave Ramsey) wrong. Where is it?

C.M. : Thousands of millionaires

K.S. : Citing please, or is that you just spitballing?

C.M. : Use Google, it's easy. do not be lazy.

K.S. : Sorry, telling people to "Google It" is not a valid answer to "citings please". You claimed it, so it is your job to provide evidence to support what YOU wrote. So it is YOU being lazy. Try again.



Here's a screencap of the whole thing.

There is no further answer from C.M.

Bad arguers don't have facts. They have FEELINGS, they have "truthiness", as Stephen Colbert say it. Like C.M. here, they will attempt to flip the burden of proof.

Remember the rule:

You claim it, you prove it. 

Don't let them flip the burden onto you. 

Related articles

• Scam Basics: Do you "Google" your upline, the company leader, and so on?(amlmskeptic.blogspot.com)

  ---

• Eric Worre is wrong about Dave Ramsey: or, why MLM advocates only knows truthiness, not truth(amlmskeptic.blogspot.com)

  ---

• Where do these MLMers get their "facts"? Certainly not from this reality.(amlmskeptic.blogspot.com)

  ---

Apology for lack of updates

November 11, 2016, 2:47 pm

≫ Next: MLM Basics: Numbers Needed To Profit

≪ Previous: Bad Argument: Flip the Burden of Proof

$

0

0

Apology to followers of this blog. I went off to do some other things but rest assured, this blog is NOT being abandoned.

I am working on a couple posts right now, I should have something with in 24 hours, and you should look forward to at least weekly updates from here on.

MLM Basics: Numbers Needed To Profit

November 11, 2016, 2:53 pm

≫ Next: MLM Basics: Why is MLM so... addicting?

≪ Previous: Apology for lack of updates

$

0

0

One of the hardest things to analyze in a MLM is "How Much Money Will I Make".

The stupid ones recite the slogan: "As much as you want!"

The weasel ones add a disclaimer, "As much as you want (don't blame us if you fail)"

The realistic ones don't feed you BS, "Your success is dependent on your ability to sell, your ability to form a sales team, your effort and willingness to dedicate yourself and a whole lot of luck."

But none of them will be able to quote you a number, except what *they* have personally earned, or what someone in their team earned. And that doesn't say whether they do this every pay period, or where did this money come from: "personal volume" (retail sales by oneself), or commission from "group volume" (i.e. team total sales volume)

Amway is one of the few companies that even calculates what average member earn via retail.

The average monthly Gross Income for "active" IBOs was USD $183 (in the US) / CAD $206 (in Canada) in 2014.  53% of IBOs in the US (and 49% of IBOs in Canada) were considered "active" (in 2014) source: Achieve Magazine, published by Amway, August 2014 issue, from AchieveMagazine website

Amway calculate "gross income" from retail sales, minus the cost of the goods sold, which basically means they ASSUMED that product purchased by the IBO (independent business owner, i.e. participant) will be sold at MSRP and thus profit can be calculated. While they did not include any commissions (most MLMs report ONLY commissions), it also (and quite understandably) did not attempt to estimate business expenses, such as time and effort to attend meetings, demonstrations, seminars and events, and so on.



According to the Amway Bonus System PDF, the "retail profit" varies between 25-30%. Calculate backward from this, you can estimate that average retail revenue per active IBO per month is $732 (assume 25% retail profit). That's not much in terms of Amway's "BV" or business volume, in dollars.

Bonus (i.e. Commission in Amway speak), however, is based on PV, which is a separate value from BV, and the value varies from product to product, and from region to region and season to season to season. And the problem is this number depends on the number of downlines AND their BV / PV.

You can see that this makes the "average" income for a MLM being practically IMPOSSIBLE to decipher, as there are just too many variables, and that's why most compensation plans takes a dozen pages to explain, with a dozen different examples. And those with fancier examples like trees, balanced branches, loops/cycles, and so on? Even worse.

So how do you know you'll make money in a MLM?

You don't.

But here's a question for you to really think about:

Are you sure the efforts you put in will result in a commensurate amount of compensation?

After all, think about it... most of your money comes from OTHER people's sales, for those that made it into the big times.

But how do you know those are really SALES (i.e. they sold stuff), vs. they just buy stuff every month?

You are their upline. You are making money off THEIR backs. Is that really SHARING success?

What does that make you? A leader... or an exploiter?

Related articles

• MLM Basics: Is there such thing as "good MLM"?(amlmskeptic.blogspot.com)

  ---

• MLM Basics: Just What is Deductible in MLM, and what is NOT?(amlmskeptic.blogspot.com)

  ---

• Where do these MLMers get their "facts"? Certainly not from this reality.(amlmskeptic.blogspot.com)

  ---

MLM Basics: Why is MLM so... addicting?

December 14, 2016, 9:52 pm

≫ Next: One unexpected victim of Ponzi schemes: College Sports

≪ Previous: MLM Basics: Numbers Needed To Profit

$

0

0

Many people who are NOT in MLM wonder WHY MLM seems to be so addicting to its participants, and even as members lose money month after month. After all, an "entrepreneur" is supposed to be making money, right?

MLMSkeptic has studied the issues, and it is clear that the participants are not merely valuing the economic benefits from MLM (for there is minimal evidence of such enrichment except for a few near the top), but actually SOCIAL and MENTAL benefits that came with the MLM participation. It is the social and mental benefits, not the financial, that keeps the members in despite their minimal economic gains.

Those social and mental benefits can be divided roughly into three types:

• Sense of belonging (family and group dynamic)
• Sense of being something greater than oneself
• Sense of accomplishment  (recognition)

Let's discuss each one.

Sense of belonging (family and group dynamic)

Many of the articles that tout the benefits of MLM emphasize the camaraderie of the group and team. There are even articles that tout "come for the opportunity; stay for the relationship".

One such leader asked the question:

Have Your “Why” Established. This is very important. This is your major driving force, your reason WHY you decided to make a move and become a network marketer. It could be family, financial freedom or even time freedom.  

It's not an accident that the author talk about family being a driving force, but have you ever wondered which family did he mean?

He probably doesn't mean YOUR family. Not your wife/husband/partner, not your father/mother, not your children.

He probably means your SALES/NETWORK family: your upline, your downlines, your lateral marketing folks.

But doublespeak is a standard tactic in unethical network marketing.

So how do you know if your specific network marketing is ethical or not? You don't.

There were plenty of examples where families have been torn apart because half of the partnership saw and recognized the hidden dangers, but the other half was already in too deep to see the forest for the trees. It will take a huge jolt for someone to recognize the threat to one's family from cultish-MLMs and some just sank deeper and deeper.

One example was when a wife, who's in MLM was talking with her MLM female friends, and the topic drifted to the husband, who was not in MLM.  One of the so-called female friends suddenly suggested that the husband is such a loser for not joining the MLM and the wife should leave that loser of a husband. Clearly, the husband is what's holding the wife back from true success. Wife was shocked into silence. WHICH does she value more... her family (husband and children)... or her personal success for a few dollars? And what sort of people are around her that would suggest NOT placing her family first?



Another example was the tale of "RogerWilco", who relayed a story about how he was right beside someone who believed she was successful in her MLM career, when in fact, she had been losing 20-50K PER YEAR as an "executive director". In the almost ten years he had been at her side, she had lost in excess of 250K and despite numbers in black and white, she refused to give up on her dreams, even when threatened with the ultimatum "I am leaving".  So he did.

Cultish MLM is addicting because it replaces your family with a pseudo-family that CLAIMED to love you while reaching into your wallet every month.  Basically, you're PAYING for affection, much like paying hookers for sex.

Sense of joining something greater than oneself

A lot of MLMs make members believe they are joining some sort of a revolution or higher purpose.

Vemma (pyramid scheme shut down by FTC) used to have a "Young People Revolution" program that specifically goes after college aged (or younger) kids.   When Vemma ran into trouble, the founder jumped to a different company and tried (and failed) to recreate the organization with a slightly different name.

Herbalife marketed itself as a "nutritional" solution in countries with virtually zero obesity even though those are weight-loss products in North America. Yet the sales people there are not shy spending a month's salary on a SINGLE can of "nutritional supplement powder".

WakeUpNow had a company rally its own marketing director claimed "was not a good measure" of what the company is though the members loved it.  The company self-destructed no long after it was profiled by NPR's "This American Life" podcast.

Every participant who paid into these schemes believed they have joined a great cause and they are going to do great things. Some people never stopped believing even when they were forced out as they were squeezed dry.

Sense of accomplishment  (recognition)

MLM itself often tout their "sales leaders" as minor celebrities, complete with the pageantry of award ceremonies and such.  As an example, Mary Kay is well known for its huge spectacles which are deceptively called "seminars" where new sales rep who reach some minimum goal are showered with praise from the crowd. It is very intoxicating and "inspiring".  And all the major international MLMs have similar award ceremonies yearly or more often, held at exotic locations more appropriate for vacations than some actual business.

Mary Kay convention, all the "ruby" folks getting recognized (date unknown)

However, Mary Kay Ash herself have talked about "dollar recognition for a 10 cent ribbon". In other words, people will do crazy things for these "prizes" just because they are there. People will make "sales" for thousands just to get some trinkets you can get from Amazon for $20.

Conclusion

Once you looked past MLM's initial attraction, you will realize they have most of the characteristics of cults that use social and mental benefits to keep its members that are most vulnerable to addictions under control.

Related articles

• Eric Worre is wrong about Dave Ramsey: or, why MLM advocates only knows truthiness, not truth(amlmskeptic.blogspot.com)

  ---

• Bad Argument: MLM Strawman Arguments Labelled as Mythbusting(amlmskeptic.blogspot.com)

  ---

• Scam Psychology: Luck Blindness, or why lucky people see it as skill, not luck(amlmskeptic.blogspot.com)

  ---

One unexpected victim of Ponzi schemes: College Sports

January 1, 2017, 2:58 pm

≫ Next: MLM Veteran on answering MLM income question: Be evasive

≪ Previous: MLM Basics: Why is MLM so... addicting?

$

0

0

Did you ever consider where are the ponzi scheme victims?  I mean, you usually think that the ponzi scheme victims are rich folks like Madoff victims, right?

You'd be very wrong.

ZeekRewards had an estimated 2.2 million victims all over the world.

TelexFree had almost TWO MILLION victims in US and Brazil

But here's a victim you'd never expect... College football.

You're probably exclaiming, "WTF? What does Ponzi scheme have anything to do with college football?"



The answer is... College football is big money business nowadays, backed up by "athletic associations", which has assets in the millions. And when there are a lot of money involved, scam inevitably makes their appearance.

Houston Athletic Foundation, which back up athletic scholarships for the University of Houston, was believed to have lost up to 40% of its 5 million dollar assets due to a ponzi scheme fraud. They gave their money to a Houston financial advisor David Salinas, who gave them bogus bonds worth nothing. When told by SEC he's being investigated, Salinas swallowed a bullet.

At least EIGHT college coaches were believed to be victims of Salinas, in addition to the Houston Athletic Foundation.

So next time you think you don't know any ponzi scheme victims... Think again.

Related articles

• Do You Know Where Your Money Went If You Invested in a Suspect Scheme?(amlmskeptic.blogspot.com)

  ---

• Is it just series of bad judgment, or "once a thief, always a thief"?(amlmskeptic.blogspot.com)

  ---

• Investment manager charged in $5.3 million Ponzi scheme(bostonherald.com)

  ---