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MLM Absurdities: Due Diligence is NOT Analysis Paralysis!

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One of the more subtle reality inversion techniques used by scammers (and unethical sales people), and cloned by clueless MLM noobs, is misrepresenting "due diligence" as "analysis paralysis". 

Analysis paralysis usually refers to an organization attempting to analyze a certain proposed project or change and the effect it would have, but so much time and resource was spent on the analysis that the project never was actually adopted.  For an individual, it could be that s/he is attempting to reach a decision, but that decision has so many factors s/he was overwhelmed by combination of scope and interactions and end up making no decision at all.

However, a decision to "not participate because I clearly have no idea what I am getting into" is a decision, and reaching that conclusion is NOT analysis paralysis.

Yet many MLM veterans and noobs will mischaracterize their moment of commitment as "overcoming analysis paralysis". Here is one example from MLMBlonde(dot)com:
Or they may have been polite but also declined and you were crushed
SO you went into what I call "Analysis Paralysis".
You began to question if this could work for you. You start to analyze
your decision.
YOU FREEZE. You begin to think something may be WRONG with you
or you made a bad decision, after all, if those closest to you don't "GET
IT", how you possible speak to a stranger.
You sit back and think and think , and then you just NEVER
get up the nerve to move forward. You lose your excitement. You
just DO NOTHING. 
The problem is MLMblonde had NOT described analysis paralysis. She described "self-doubt paralysis", but slapped the "analysis paralysis" label on it. 

And she's not alone in doing so. Many MLM noobs seem to think any sort of doubt is analysis paralysis, even a full on analysis (i.e. "trust, but verify"). 

And due diligence is NOT doubt. 


Due diligence is often defined as process of researching and verifying a particular claim. It's sometimes called fact-checking, though it often goes into more nebulous areas such as "risk assessment". 

MLM is full of misleading statements, as its participants are quite fond of saying just enough to make a sale, often outright lie or misrepresent facts and/or rely on logical fallacies to make their products/woo and/or business opportunity look wonderful. A single virtual mailbox in Nevada or Delaware becomes a "multi-national debt-free conglomerate". A chiropractor becomes "leading expert in brain health supplements". A dermatology clinic's head becomes expert on stem cells. An equine accupunturist (accupuncture on horses) is a company's "scientific and medical advisor" on nutritional supplement pills... the list goes on and on. (All these are real cases and can be found in this blog or on BehindMLM, I'll add links later)

Clearly, due diligence is required, as no major company in public scrutiny would publish such drivel. 

Yet many MLM noobs have an instinctive aversion of due diligence, probably passed on as a meme by their upline. Their thought process roughly goes like this:

Doubt = NO Sale
Doubt = NO Downline 
Question = Doubt
Analysis = Doubt
Due diligence = Doubt
ERASE doubt
ERASE question
ERASE analysis
ERASE due diligence

And most noobs, haven't learned any better, picked up on the mislabeled term, without realizing that it is a also cult "thought-stop" tactic. 

A cult don't want the members to leave, and one way is to prevent them from even THINKING of leaving, such as imagining a life without the cult itself. This is "Thought Control", one of the four parts in Steven Hassan's BITE model of cult control. And they do this by getting members to stop questioning the cult itself through various techniques. Except instead of a cult and cult leader, you have doubt of the MLM or the scheme being suppressed. 

And often, the MLM noob does not even realize this was done... i.e. s/he was already brainwashed and manipulated into manipulating others and use the same techniques s/he is now using on other new recruits. 

----------

The proper way to close a sale and satisfy the doubt in the mind of the customer is feed them information. Like "Warranty? Of course! This has a 3 year limited warranty! Give us a call, and we'll send a tech out within 48 hours if you need it!" 

A judas goat leading lambs to the slaughter
A judas goat leading lambs to the slaughter
(Photo credit: Wikipedia)
The WRONG way to erase doubt in the mind of the customer is to hard-sell them "Warranty? You're thinking too much!" (i.e. analysis paralysis!)  You're not going to tell someone who's worried about prospective purchase breaking down by telling him "You're thinking too much!" are you? 

So why use the analysis paralysis excuse at all? 

Perhaps... you don't WANT thinking customers... but sheeple? Customers who are a bit more... feeble minded and gullible than others?

That makes you the judas goat.
 
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New Years Resolution for Network Marketers (and Wannabes)

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It's New Year's Eve, December 31st, 2013, and a New Year is almost upon us.

So I'd like to propose some new year's resolutions for the various network marketers and wannabes. Here are 7 simple items.
All of these are for personal improvement, and none of them are very hard.

And finaly, some well wishes.
If your heart is pure, may you never be scammed, and never forget to do due diligence. 
If you spot a scam, verify, discuss, and make your findings public. Being silent about scams is letting evil spread unchecked.  
If you are scamming others, stop. Go forth and sin no more. And may the Lord have mercy on your soul, while you make restitutions and admit your guilt. 
If you were a victim, may be you receive the maximum restitution possible, and learn to be more skeptical so you may go forth and be gullible no more. 

Happy New Year, and here's to a prosperous 2014!

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MLM Absurdities: Do MLMers Actually *READ* What They Post?

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With the ease of simple share / retweet / like and similar buttons on social media, it seems we are less and les likely to perform any sort of fact-checking and due diligence on the information we "endorse" through our "like" or "share" and similar actions. This had lead to a plethora of spreading rumors innuendos, and just general "crap info", esp. when the original reply was misinterpreted.

Revanchist over at YPRPariah had a great example... Is it true that Coca-Cola offered BK Boreyko 2 billion bucks and he turned them down? Some Vemma noobs seem to think so and every once in a while tries to tweet this:

Tweet: "Coca cola offered Vemma 2.2 billion
dollars to buy them out. Vemma said no because
it will be worth way more. Still think it's a scam?"
The problem is there was no such offer EVER from Coca Cola. Whoever spreading this story was spreading crap info. Even BK Boreyko had debunked this... but only if you tweet him directly, like this:

BK Boreyko: Coca cola offered #Vemma 2 billion to buy them,
CEO @bkboreyko turned them down*  Actually no truth to this rumor. Thx.

But where did this rumor come from?




The source of this rumor seem to be Facebook, where BK Boreyko tried to answer the same rumor, albeit rather... circumspectly, back in August 2013. This probably emerged around August 26, 2013.



Please note that BK Boreyko neither confirm nor deny the rumor. He simply said he would not sell at any price (to anybody is implied). And he thought that's the end of it.

The problem is if you search Google for "Vemma Coca Cola Buyout", you'll find that many Vemma distributors STILL have this crap info listed on their own websites.

Here's one:



The EARLIEST mention of this rumor was found as a forum post on TeamLiquid, a gaming website, where it was spammed.



The poster was identified as 1Focus, part of the Gaming scene in the US. The linked Twitter profile iF0cus identified him as Fred Rivera through a profile on Area 51 Gaming website. That spam topic was closed within 24 hours by forum admin. Twitter profile was later closed and Mr. Rivera appears to be peddling "Air Jordan" shoes online now, and I can find no mention of his involvement in Vemma right now.

If any one can find any earlier references to "Coca Cola buyout rumors" please send me a link in the comments. This is the earliest I can find.

I have ran into people who made up 'facts' before. When I was busting the "TVI Express" scam, I ran into a "Rudy Phan" in Indonesia that basically made up all sorts of crap every few days to embellish TVI Express to help his recruiting efforts, talking about stuff that he claims to understand... stuff like international law (Indonesia cannot shut down TVI Express!), jurisdiction boundaries (Indonesian laws do not apply to TVI Express!), municipal boundaries (TVI Express can claimed to be "based in London" even though they are NOT inside London city boundaries), and so on and so forth.

This only emphasizes the need to do your own due diligence before you repeat any 'facts' your uplines tell you to impress you. S/he may have been exposed to crap info, and if you spread crap info... you not only lose credibility, you also leave a much bigger mess.
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BREAKING NEWS: Dawn Wright-Olivares found in Clarksville, Arkansas, owns restaurant there

MLM Absurdities: MLMers Encouraging College Kids to Drop Out and Do MLM Full-time... Crazy.

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One of the most dangerous absurdities is the notion that MLM offers an even playing field, therefore you need NO education to succeed in MLM, and thus, college is not necessary and a complete waste of money (thus you should drop out). Plenty of people dropped out of college and went on to successful ventures.

This is often used by MLMs that concentrate on younger people, such as Vemma, with their Verve energy drink line, signing college kids and even some high school kids as their affiliates (formerly "brand partners").

We have to look at this myth in separate pieces.

  • Does network marketing really offer a level playing field? 
  • Can *any one* succeed in network marketing? Or is talent / education required?  
  • Is College a waste of money? 
  • Are the the successful college dropouts actually relevant to the premise? 

Does Network Marketing Really Offer a Level Playing Field for All? 

One of the often repeated myths is that NM is a level playing field, in that anybody can succeed. 

Frankly, that is absurd. The idea that you have an upline and s/he benefits from YOUR work should tell you this is NOT level at all. He got there first. 

Furthermore, there are a LOT of circumstantial evidence that the industry is plagued by insider advantage and cronyism... just like the "regular corporate America". 

Did you know that a mother-daughter team in Vemma, both "Ambassadors" (making 15000 a month in commissions) actually is related to the head motivational speaker for Vemma, and the speaker is a close friend of head of Vemma BK Boreyko and his parents? 


Network Marketing is not as level as they want you to think. 


Can any one succeed in network marketing?

I've had network marketing enthusiasts claim that the top income careers all require heavy education or extreme amount of physical talent, like doctors, engineers, sports stars, and so on... Except network marketing.  The claim is anybody can succeed in network marketing, and the playing field is even. 

At first glance, this sounds reasonable, as the top twenty income careers based on US Bureau of Labor Statistics are mostly medical and engineering careers. However, is it true that any one can succeed in network marketing? 

US Bureau of Labor Statistics 2010 "20 highest paying occupations, by median annual pay, 2010 census data"
The top entries are doctors, surgeons, engineers, lawyers, and very senior managers
The idea that you need no education to succeed in network marketing is actually quite ludicrous. At the minimum, you need to learn how to market. It is network MARKETING, after all. While some people have a talent for it, all people need some tests to assess their skills and add some remedial lessons for the areas they are lacking. In a Harvard Business Review blog entry, the author estimated that 70% of top salespeople have innate talent or natural instincts that give them an edge ins ales, while 30% had to learn to sell, having no such talent.   


It's safe to say that if you had not specialized in sales career before, you probably don't have much sales talent or instinct. Thus, let's assume that you have no such talent or instinct. What are your chances of 'success'?

According to the same author, given 100 people with no talent, 40% will fail, 40% will do average, and 20% will do above average, in a sales career.

Keep in mind that in network marketing, in almost every major MLM, "average" means making a lot less than 2000. This is the figure directly from Direct Selling Association (DSA). As of 2012...  15.9 million people sold 31.63 billion worth of stuff in the US.

Now if you do the math... 31630/15.9 = 1989.31 dollars... that's average RETAIL sold per person.

That's not profit. That's just retail sold. Profit would be less than half of that, perhaps a LOT LESS. That's less than $1000 PER YEAR PER PERSON.

Extrapolating from that 40/40/20... That means 40% of you will earn practically nothing. 40% of you will earn just a little (less than $90 a month), and maybe 20% of you will actually earn enough to call it a part-time job. And a tiny percentage of that 20% will really really earn a car or whatever.

Saying that you *can* succeed in network marketing without an education is like saying anyone born in the US of A can be president. While factually true, it is of no practical use. It's like saying any valid lottery ticket has a chance of winning. Duh!

The reality is you will have to spend time and money and effort to become a good salesperson... assuming you have the right personality traits to be one. And you will keep paying for seminars, meetings, training calls, workshops, and so on and so forth, just like any other education.

Also keep in mind that there are TWO colleges in the US that offers courses in network marketing.



Is College a Waste of Money? 

By now you should have realized that college is only a waste of money... If you go there to waste it on non-educational stuff... such as plotting to make money with your non-existent skills (or party, or hook-up, or whatever).

But wait, you said, what about Kiyosaki? Doesn't he advocate no college? Why yes! In 1993 (years before before Rich Dad Poor Dad), he wrote a book that nobody seem to have heard of, called If you want to be rich and happy, don't go to school! Which is rehashed into, you guessed it, Rich Dad Poor Dad. Remember the scene where he described that other people came at the Rich Dad's beck and call? That's in that "If" book... page 64.  The description on Amazon says it all:
If you're like most of us, your years in school did little to prepare you for the challenges of the real world. They are more likely to have planted seeds of financial and emotional failure in your life. These seeds sprout later, sabotaging our most sincere attempts to get ahead and create happy, prosperous lives for ourselves and our families. 
Remember Kiyosaki said his real dad, i.e. "Poor Dad", was superintendent of education in Hawaii? Sounds like he's having some daddy issues, with that sort of attitude toward education.

What'll you earn with or without college? US Bureau of Labor Statistics says:


If you have no college, as of 2012, your weekly income is 735.

If you finished college, as of 2012, your weekly income is 1371, almost DOUBLE.

Obviously, this is average of all US wage and salary earners, all fields, blah blah blah. Go read it yourself. (PDF link)

Anything that has potential of double your income for the rest of your life cannot be a waste of money. Right?

So WTF was Kiyosaki talking about? Remember, he finished his equivalent of college... Merchant Marine Academy.

Hmmm... Maybe that's why he hated formal education so much. Maybe he hated academy life. Maybe he was hazed. That, plus his daddy issues.


Do College Dropouts Really Succeed? 

The answer is no, as the chart above from BLS had already shown. College dropouts earn a bit more than high school graduates, but a LOT less than college graduates.

The problem is the "poster childs" of MLM, the idols that did drop out of college, are all exceptions, not rules.

Steve Jobs -- audited some classes at Reed College, but never graduated, went on to work for Atari, then met Steve Wozniak, who's the real technical guru. THEN they founded Apple Computers.

Michael Dell -- quit college when his PC building business (out of his dorm, then his garage) took off

Bill Gates -- graduated from Lakeside School high school, the most expensive academy in the state (cost more than some colleges) and they had access to timeshare computers before colleges got them. Bill Gates learned how to program BEFORE he got to Harvard, so Harvard actually don't have much to teach him.

Mark Zuckerberg -- dropped out of Harvard to create Facebook.

Notice any commonalities? They were all in TECH, and they know they're good in something which is why they dropped out of college to do it full-time.

Conclusion

You don't know if you're good in marketing or not. You may or may not have those talent / instinct that make you a good salesperson, despite sales pitches to you that "any one can succeed, it just takes hard work".

You thought you have an equal chance of success, a level playing field, in network marketing, but there are data that suggests insiders, esp. those who got there ahead of you, are more likely to make money than you in network marketing than you are, no matter how hard you work.

You thought that college education is worthless, but statistics shows that college education virtually doubles income for the rest of your life. And the few success stories of college dropouts are exceptions, not rules.

You'd be crazy to quit college, halve your potential income, to go after something that you don't even know you're good in... just because someone told you some half-truths. 

But it's up to you.

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Same Wine, New Bottle: WCM777 is now "Kingdom 777"

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Apparently Ming Xu needs to remake the image of his Ponzi scheme being outlawed around the world.. by giving it a name change. It's now Kingdom 777.

There's an expression in Chinese: 換湯不換藥 (literally, change the soup, but not the ingredients)   The Western equivalent is "old wine, new bottle".

Feel free to browse through some old coverage of WCM777 / Kingdom 777 Ponzi scheme outlawed around the world.

http://amlmskeptic.blogspot.com/search/label/WCM777
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BREAKING NEWS: Rippln sued for Trademark Infringement by Ripple Labs

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Rippln, a mostly viral marketing income opportunity, has been served with a lawsuit dated 12/27/2013 in San Francisco Federal Court by Ripple Labs.

http://dockets.justia.com/docket/california/candce/4:2013cv05974/273189

Ripple Labs is a genuine tech startup backed by some of the biggest venture funds in Silicon Valley, including Google Ventures. Actually, to call it a startup is a misnomer, as Ripple had been operating since 2004 (and trademarked the term then).

Ripple Labs references multiple examples where users of Rippln signed up because they thought it's actually Ripple. Ripple Labs believes it had its reputation substantially damaged due to the "sliminess" of Rippln, as some are cautioning people to avoid both.



Rippln (not to be confused wtih Ripple Labs) had used extensively the term "ripple", including the URL 'startmyripple.com', as a chain signup tool where people who sign up are encouraged to create more "ripples" by signing up even more people, with the promise that if people in their ripple buy stuff that they referred / liked, they will share a piece of the commission. However, it has repeatedly made promises that had not been kept, and many in the tech press cautioned "you'll at best earn pennies". A promised "communicator app", promised in March, was not delivered until December. Other apps appear to be relabelled apps from yet some other app venture. Merchandise offered appears to be most fads.

You can find my review of Rippln here:  http://kschang.hubpages.com/hub/Investigating-Rippln-what-does-Rippln-do-Who-is-behind-Rippln-Is-Rippln-a-Scam

You can find more full review of Rippln and other developements on Behindmlm.com

(Thanks to Jack on SaltyDroid for the tip)

UPDATE: Ripple Labs is also known as "OpenCoin Inc.", who developed the "Ripple Protocol", a version of "distributed virtual currency exchange" that lets anyone send money with just email. It attempts to address the problem with Bitcoin in that you can't really *use* or exchange Bitcoin (i.e. do useful things with it) without going to one of the exchanges, which seems to be under attack all the time. For example, Mt. Gox had 5 million of their money in the US seized in 2013 for not registering as a money exchanger in the US. OpenCoin's "Ripple Protocol" is supposed to create a distributed exchange that's open/transparent to deal with that, and it's supposed to be currency neutral and difficult to censor.

You can read more about Ripple, OpenCoin Inc / Ripple Labs in this Gigaom special article:

http://gigaom.com/2013/04/12/why-bitcoin-crashed-and-how-ripple-might-avoid-the-same-fate/

UPDATE: Oz has weighed in on the lawsuit with a bit more details on the merits of the various points in the lawsuit.

http://behindmlm.com/companies/rippln/rippln-sued-for-trademark-infringement/
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MLM Dictionary: Autoship

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Previously a commenter asked me if I can put up a glossary page where some of the terms I often use are defined. I haven't thought about it for a while, as at the time adding to a page over and over sounds a bit... boring. Then I realized... why not define the term as a blog post, and link to relevant articles if I already discussed it?

Meet the new segment: MLM Dictionary

Today's term:  

Autoship (n)

Autoship refers to the periodic "subscription" of products shipped from company to you and your account is automatically debited. The amount is usually just sufficient to meet the minimum sales quota to stay qualified for certain amount of sales commission or rank level.

DSA code of ethics require DSA members to honor cancellation of autoship as well as accept returns of merchandise with a clearly defined return policy (usually it's 90% of price paid within 6 months). 

Usage: New affiliates are highly encouraged to enroll in "fast start", which includes autoship of 1 unit of product XYZ every month, thus qualifying you for rank of "supervisor" immediately.  

Analysis: Autoship is a somewhat controversial practice that has attracted attention of critics. 

Proponents of autoship, usually from inside network marketing, claim that autoship is no different from a subscription service, long used in magazines and other periodicals, and when properly used not only protects oneself from forgetting to order new stock ("Oh no, I only ordered 9 this month when I needed 10 to stay qualified!"), but also ensures a steady customer order volume.

Critics of autoship, usually from outside network marketing, point out that autoship, when delivered to the affiliate instead of to "ultimate consumers", does not prove existence of retail sale, which is the only real difference between network marketing and pyramid scheme. Basically, affiliates are selling to themselves to keep up appearances. 

-----

MLM Skeptic says... both sides have a point, the problem is... is there actual RETAIL going on? 

If autoship is used on actual ultimate consumers, i.e. if you sign up as a "preferred customer", then the practice is without controversy. For example... You enjoy 15% off our regular retail price, and you have the convenience of having the product delivered to your home every month! Cancel at any time!

The problem is when autoship is used on the affiliates THEMSELVES, thus forcing us to ask the question... Is there really any sales going on? How is the affiliate going to comply with the "Ten Customer Rule", part of Amway Safeguard rules that separated MLM from pyramid scheme?

One of the answers offered as "but the affiliate can consume the product him/herself!" (i.e. self-consumption)  Ah, but you see, this is non-compliant on two possible fronts...

1) It does not satisfy the Ten Customer Rule, as above, as self-consumption is only sales to ONE customer
2) It does not satisfy the Omnitrition case, where it's clearly stated that sales to someone WITHIN the compensation plan CANNOT be counted as "retail sales" to satisfy the Koscot Test. 

An affiliate is within the compensation plan (gets compensated for sales), while a preferred customer is outside the comp plan. 

Best Case:  customers use autoship to keep themselves supplied with the stuff. (So why would affiliate need autoship?)

Worst Case: affiliates use autoship, and recruit even more affiliates using autoship, thus resulting in a pyramid scheme, with little to no actual retail to actual consumers going on.  

The truth is somewhere between the two, and will vary heavily from company to company. Unfortunately, you cannot discern the truth from company financials or presentations. You can only discover where along this spectrum (legal to illegal) the company is by shadowing a rep for a week or more, through his reorder period, and see whether s/he actually makes retail sales, and does the company actually TRACK retail sales.

MLM skeptic notes that most major MLM companies do NOT track retail sales, but instead, pay the affiliates on what they ORDERED (and autoshipped), not what they sold. 
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BREAKING NEWS: How Many Corporate Entities Does Dawn Wright-Olivares Really Have?

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According to reports by PatrickPretty.com, Dawn Wright-Olivares's agent / attorney for corporation in Arkansas had been disbarred back in May 2013, and may be responsible for more than one of Dawn Wright-Olivares's corporations.

Dawn Wright-Olivares (just "Dawn" from here on) is owner of "Wandering Phoenix LLC", an entity registered through N. Donald Jenkins Jr. of Arkansas.

Search through Arkansas corporate records shows that Dawn is also owner of "Wandering Rex LLC".

Dawn was COO of "Rex Venture Group", operator of Zeek Rewards, for years before changing to Greg Caldwell 2 months before RVG was closed by SEC (August 17, 2012) as a Ponzi scheme.

N. Donald Jenkins Jr. , the register agent, was apparently disbarred in May 2013, which may have resulted in a disciplinary investigation that started on Aug 17, 2012, same day SEC closed Zeek. While this could be a coincidence, it could also be a coordinated effort between the disciplinary board and SEC as not to tip of the culprits that they are under investigation.

(Thanks to PatrickPretty.com for the lead  http://www.patrickpretty.com/2014/01/05/special-report-attorney-linked-to-zeeks-wright-olivares-has-record-of-disbarment-and-suspensions-possible-co-agent-spent-time-in-federal-prison-for-credit-card-swindle-and-was-charged-in-arkansas/ )
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Bad Argument: The Wall Street Legitimacy Myth

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One of the favorite arguments by proponents of network marketing is "Look at how big Amway is! And Herbalife! And Mary Kay! And Avon! And ______! Their stock prices keep going up! If they were a scam Wall Street would have never invested in them!"

A more recent version would cite Herbalife as an example, such as "Herbalife a pyramid scheme? Wall Street don't see it that way! Herbalife stock has MORE THAN DOUBLED in price since Ackman's accusation!"

While it is true that price for Herbalife stock (HLF) has indeed rose from 25's to 60's in 2013 (Ackman's accusation was in late 2012) one must question... Are the two even related to each other...  i.e. "price of stock" vs. "morality / criminality"?

Perhaps John Hempton of Bronte Capital put it best when reacting to Ackman's accusation in January 2013:
I agreed with Bill Ackman that Herbalife is mostly about ripping off distributors and people at the end of the chain. The product is more than twice as expensive as competitor shakes. I called Herbalife "scumbags". 
But they are highly cash flow positive scumbags and they will use the cash flow to buy back shares. Over the past five years the share count has gone from 140 million to 108 million and will fall further. 
They are scumbags then - but they are scumbags working for stock market investors.
In other words, as long as the stock prices keep going up, Wall Street wouldn't give a f*** about the company being scumbags.




You need more proof that Wall Street don't care of the company's a scumbag as long as it's profitable? Look no further than tobacco companies. (example given by Mr. Hempton)... Tobacco products give bazillion people cancer and other diseases, but tobacco company profits and stock prices keep going up... Phillip Morris has DOUBLED their dividends compared to 2009 dividends.

Remember the movie "Wall Street"? Gordon Gecko said "greed is good"?


Wall Street doesn't care who your company screw over as long as your company earn a profit to drive up the share prices.

Do you care who your company screw over?

Could your company be screwing YOU over?

Or are you going to stick a lampshade over your head and beat it with a slipper like Bart Simpson and claim that you can't hear the question?



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BREAKING NEWS: Is WCM777 / Kingdom 777 going to be banned in Brazil?

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TelexFree seem to be focusing all the attention of Brazilenos nowadays, it's rather interesting that some OTHER scam got mentioned along with TelexFree... But it did... via an official press release on the Ministry's website, issued by Prosecutor's Office of Consumer Protection:

http://www.mpac.mp.br/caso-telexfree-nota-de-esclarecimento-2/

And here's the automatic Google translation (click on link above to read original Portuguese)
On the same occasion, in view of the fact that news reached the public prosecution brought by people who invested in financial pyramids by foreign websites and does not receive any promised amount, especially by Chinese website, which has no relationship with the Ympactus , it is good to clarify, investors should be aware that standard does not exist on the cyberspace, and that there are only a few tried allowing the process tramite the Brazilian courts without prejudice to the foreign investors seek justice in the case, the Chinese with all the difficulties that this represents. These legal issues should serve to alert everyone of the risks they run.
Is there some OTHER Chinese website offering financial pyramid that's heavily promoted by Brazilenos?

Nope, this can only be Ming Xu's WCM777, i.e. Kingdom 777

There's a couple more countries in South America though...  They've only been outlawed in 3 so far...

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Bad Argument: If it were a scam it would have been busted by cops long ago!

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Previously we had covered the bad argument: Wall Street Legitimacy Gauge, where being traded on Wall Street, for a long time, was used as "proof" of legitimacy when it's proven that Wall Street don't care as long as the stock prices go up.

Today we'll cover a parallel bad argument: because the government(s) haven't closed them for such a long time (5 years, 10 years, or even longer) they must be legal beyond reproach.

Very often, the fact that the network marketing company had been around for more than 5 years was touted by some of the most junior reps as a sign of legitimacy (both to themselves and to others), with an implied corollary "If they were illegal government would have shut them down long time ago!"

If you put it in the A therefore B form, it would be

a) company has not been deemed illegal for X years
therefore
b) company will never be deemed illegal in the future

Logically, this doesn't fly, as it's "appeal to age/tradition" fallacy.  It is... because it always had been. That's not a reason, that's just a statement.

Frankly, there is one example in 2013 that easily disproves this bad argument... Fortune High Tech Marketing, otherwise known as FHTM. FHTM was founded by Paul Orberson in 2001, and closed by FTC and several state attorney generals in January 2013. Took the authorities 11 years to close this pyramid scheme.

However, the problem apparently was even more endemic than that... the problem is the authorities... In that the victims have to complain for the authorities to act... and Pyramid/Ponzi schemes are very good in keep its victims in the dark with the mushroom treatment.



In an interview with Herb Greenberg (CNBC) in 2013, FTC's just resigned chief of consumer protection, David Vladeck had this to say:
HERB GREENBERG: What kind of a business (MLM) is it if 90% of 2.7 million every year-- right now we're talking 2.7 million distributors for one company (lose money). 
DAVID VLADECK: It doesn't mean that-- that-- that doesn't mean that the company made misrepresentations. And it doesn't mean that the people who-- who bought these-- franchises or participated in these schemes necessarily feel that they were injured. I-- look, I don't know what the failure or success rate of new businesses are in the United States. But it is not high.
And when we get consumers who are willing to tell that story, and the sufficient number of them who are willing to stand up and be counted, then we can do something about it.
And that's the way we work. We work precisely because consumers like that, instead of talking to reporters, come talk to us.
While Mr. Vladeck sounds slightly flustered, what he said was actually quite clear:

FTC WILL NOT DO ANYTHING UNTIL ENOUGH PEOPLE COMPLAIN! 

But this is the same as the "where's the victim" bad argument....  Ponzi or pyramid scheme victims often do NOT know they have been victimized because they had been mislead into thinking their scheme is NOT illegal. Nobody joins a ponzi ot pyramid scheme *knowing* it's illegal... People always think they joined a legitimate investment or legitimate business (except those people who joined an HYIP, and those people are truly caveat emptor) And if they don't know they've been victimized, they won't complain!

If you don't even realize you're in the Matrix, how would you know that the Machines controlled your life, and all of your life was really a dream?  Same idea here. If you don't even realize you've been scammed, how would you know that you need to complain to the FTC or SEC or whoever the authorities are and get the authorities to investigate?

And remember, scam companies are very good in keeping its victims in the dark and fed them crap information to keep them compliant. Zeek Rewards knew it was being investigated for several MONTHS before they were shut down, yet it gave absolutely NO indications to any participants except some of the "insiders" so they can take their money and run. People were literally lining out outside Zeek's office waiting to hand over their cashier's checks right up to the minute Secret Service and other agents went in and locked the doors and started carting off the documents. And even then affiliates don't see Secret Service agents, and simply assumed "Zeek employees carrying off boxes of office supplies".

So expecting the authorities to shut down a scam early makes absolutely no sense at all. The most obvious scams will be busted, but the ones that are less obvious will last a long time.

In the meanwhile... Where does that leave you, except up s**t creek without a paddle?

Don't expect the government to save you. They likely won't do it in time to save most of your money, if they save any at all.

You have to rely on YOURSELF, and your "crap detector".
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Bad Argument: Neglect to Mention, Revisited (How Crooks are Riding the Coattails of Bitcoin to scam people)

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Do you ever hear something, accepted as "yeah, that's cool", only to realize later that you've been hoaxed or been told only half or less of the story? If so, you've been victim of "neglect to mention" bad argument.

The problem is with the modern tech devices such as smart phones and tablets, we often do "like" or "retweet" or "repost" without doing any fact-checking. I admit I sometimes do stuff like that, but I generally do it to cute-sy stuff like cute animals, funny pictures, and so on. I don't form opinions about something important, like money, based solely on one-sided info... Or I try to.

But apparently some people don't, as they've been influenced by half (or less) of the story.

Recently some celebrity / news / Bitcoin worshipper made the following comment in response to my opinion/rant about Bitcoin is too risky.
Forgive me K Chang. But Bitcoin has already been around since 2009 (5years). Even Sir Richard Branson And Lamborghini is taking Bitcoin payments.
Neither you or I have a crystal ball. But I would rather listen to Billionaires like Sir Richard Branson that have vision, rather than an opinion shot from the hip :-)
Nothing wrong with Lambourghini or Sir Richard Branson accepting Bitcoins... Except neither are true, or at least, not completely true.

Q: Is Sir Richard Branson accepting Bitcoins?

A: Sort of. Virgin Galactic, the $250000 USD spaceflight takes Bitcoin

Source: http://www.theverge.com/2013/11/22/5133362/richard-branson-endorses-bitcoin-says-virgin-galactic-will-accept-the

Analysis: Well, that's not so impressive now, is it? Can you buy a Virgin Atlantic ticket with Bitcoin? Apparently not! I guess if you're a billionaire you don't care if you accept some Bitcoins and they become worthless... And the PR value alone (getting mentioned in every newspaper in the world) is worth it.

Q: Is Lambourghini accepting Bitcoins?

A: No. One Lambo dealer in Long Beach claimed to accepted Bitcoins for a brand new Tesla Model S. However, later they admitted they asked the payer to convert it into dollars first.

Source: http://www.theverge.com/2013/12/6/5181864/lamborghini-dealership-starts-accepting-bitcoin

Again, the dealer is relying on the PR value, getting mentioned in every newspaper in the world (or at least the US) is worth it. Besides, they even made the guy convert the payment into dollars first. They will lose nothing. It's a publicity stunt, nothing more.

The commenter has made a fundamental mistake of not doing his/her own fact-checking, and fallen for the "sensational headline" soundbites, and then applied that mistaken impression as evidence to support a premise, that Bitcoin is NOT as risky as I claim it is.



I have a feeling that the commenter was sincere, but then s/he is a victim of "neglect to mention"... in that whoever told him/her about future of Bitcoin used those bits of info, and neglect to mention the not so sensational / impression bits.

But my point of that comment is actually not to point out how volatile Bitcoin value is, but instead, to point out how scammers and crooks are using the semi-familiarity of Bitcoin to aid their scam efforts, much like crooks back around 1898, used the Spanish American war to perpetuate their scam.

Scammers back then use the newspaper coverage of the war (which is obviously not as detailed as anyone would like) and spun that into their scam, with letters from 'soldiers' that claimed to have found treasures and needs help to get it back home, or some such.  The backgrounds will be incorporated into the letter, but the rest will be pure fiction.

Those letters were later copied by the Nigerians, resulting into the modern "Nigerian Prince" scam.

They use the semi-familiarity of their audience to make them stop checking for facts, and accept the rest of the story (i.e. the fraudulent parts) as true. And REPEAT IT to bazillion more people.

And that is how "they" got the commenter fooled... Newspaper headlines say it's true... Thought Stop.

Don't stop thinking. It makes you stupid.

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MLM Dictionary: Koscot Test

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Koscot Test was a 4 part test that determines whether the business or a scheme is a pyramid scheme. It was established in 1975 in the court case "FTC vs. Koscot Interplanetary" i.e. 86 F.T.C. 1106, 1181 (1975) "Koscot".

Koscot Interplanetary is a part of "Glen Turner Enterprises", ran by Glen W. Turner (who's still around!). Despite the fancy name, Koscot sells "Kosmetics (sic) for the communities of tomorrow!"

Original charges from the FTC was filed in 1972, and the trial started two years later. During the trial, the court created what's known as the Koscot Pyramid Test, often shortened to Koscot Test. It has four parts:

(1)Payment of money to the company;
(2)The participant receives the right to sell a product (or service);
(3)The participant receives compensation for recruiting others into the program;
(4)The compensation is unrelated to the sale of products (or services) to the ultimate user.

Koscot case has been referred to in every suspect pyramid scheme case since.


Koscot Interplanetary is basically a cosmetics pyramid scheme, sometimes called pyramid selling, where majority of the participants paid thousands of dollars ($2000 for supervisor, $5400 for director) and make money by recruiting other people who also buy in. The three ranks available are beauty advisor, supervisor, and director.

Beauty advisor: Pay $10 to join, can buy cosmetics from "supervisor" (sponsor/upline) at "40% discount", and can get a 'refund bonus' based on volume of their own purchases.

Supervisor: can be created by a) Pay $2000 to Koscot  b) order $5400 worth of products from sponsor/upline, or c) sell some stuff to retail, buy the rest of $5400 worth of products from sponsor/upline. Supervisor can order things from company at 55% discount, and gets 25% bonus commission on each new supervisor's order (of $2000) that was placed by his downline.

Director can be created by a) Pay $5000 to Koscot, b) become supervisor, then order $3000 of products from supervisor / sponsor / upline. Director is entitled to order from company at 65% discount, gets 10% commission from ANY downline supervisor's "order", plus $500 for every supervisor, and $1350 for every director.

FTC alleged and proved in court that little if any actual retail sales happened and most money are moved from supervisor to director, and most products are simply left in a garage somewhere unused, in a situation known as "inventory loading", where the upline simply made their downline order way too much stuff to be retailed, so upline can qualify for the commission for "sales".

Thus, based on the 4-item "Koscot Pyramid Test" aka "Koscot Test", Koscot Interplanetary is a pyramid scheme.

Glen W. Turner eventually went to jail in 1984 for little under 5 years, and after completing the sentence, went back to Florida, still marketing himself, albeit a lot more low-key nowadays, claiming to be the ORIGINAL America's motivationals speaker.

Commentary

When you see/read someone starts to explain what a pyramid scheme is... If they do not mention the Koscot test, they have NO IDEA what they are talking about, as this is the ONLY definition that counts. If they claim some other definition, they are using the "strawman" defense.

If you are looking for what is the difference between MLM and Pyramid Scheme, that's the next item: "Amway Safeguard Rules".


Historical Note

SEC tried to prosecute Koscot in 1973 but was successful on appeal in 1974 that a "business opportunity offer" can be judged a "security" if personal investment of assets is required (and other items in the "Howey Test" are satisfied.)

This is Glen W. Turner (GWT), in an old video (uploaded by himself?) daring Americans to be great (and join one of his schemes?). He named himself "Mr. Enthusiasm" and travelled from coast to coast in various seminars / stage shows where he allegedly appeared with two midgets wearing neon colored suits, rhinestone pins, and allegedly boots made from unborn calfskin. (huh?)


GWT, an eighth-grade dropout (according to People) had been in trouble with the law before 1975, as SEC tried to prosecute GWT for Koscot Interplanetary as a security by applying the Howey Test (to be covered later) on whether it is an investment. SEC lost, but won on appeal, but not a decisive victory. It fell to FTC to prosecute Koscot, which started in 1972, and ended with final judgment in 1975.

(GWT was profiled by Florida newspaper in 2004, and he's still selling stuff then)

Incidentally, GWT also ran "Dare to be Great", allegedly, the first popular American self-help seminar tour. Dare to be Great itself was prosecuted as a pyramid scheme as it promised a lot of money for people who sold the seminars (and LPs and lesson plans and so on) and bring in even more salespeople.

Please also see

How an Aussie Tries to create his own definition of Pyramid Scheme
What is a Product-Based Pyramid Scheme? And how is it similar to MLM? 
Will DSA recognize the danger of Product-Based Pyramid Schemes and save MLM as we know it?
Common myths about Pyramid Scheme busted

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MLM Mythbusting: Does Having a real product prove business is not a pyramid scheme?

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One of the most often repeated myths spoken in the network marketing industry is "we have a product, therefore we are not a pyramid scheme". In fact, this position had apparently been adopted by Direct Selling Association itself. Here's one example:


Is this myth confirmed, plausible, or busted? Let's examine a few things:


  • Is there an example (or more) where a proven pyramid scheme (closed by FTC or other authorities) have real, actual, non-woo products? 
  • Does the definition of pyramid scheme precludes the existence of real non-woo products? 


Let's get started.



Question 1:  Is there a proven pyramid scheme (closed by FTC or other authorities) that sold real non-woo products that clearly has "real actual value"? 

Answer 1: Absolutely. Fortune High Tech Marketing (FHTM) was one such, closed in early 2013. FHTM sold everything from DiSH satellite subscription, Frontpoint Home Security, cell phone plans, and so on. From the FTC press release:
According to the complaint filed by the FTC and the state attorneys general, the defendants falsely claimed consumers would earn significant income for selling the products and services of companies such as Dish Network, Frontpoint Home Security, and various cell phone providers, and for selling FHTM’s line of health and beauty products. Despite FHTM’s claims, nearly all consumers who signed up with the scheme lost more money than they ever made.  To the extent that consumers could make any income, however, it was mainly for recruiting other consumers, and FHTM’s compensation plan ensured that most consumers made little or no money, the complaint alleged.
Dish Network, FrontPoint Home Security, etc. are real companies and their services are real. Yet FHTM is a pyramid scheme.

How about another example? FTC vs. Burnlounge. From FTC press release:
The FTC filed a complaint against BurnLounge in 2007 as part of its ongoing efforts to protect consumers from fraud and deception. BurnLounge had touted itself as a cutting-edge way to sell digital music through multi-level marketing, but music sales accounted for only a small percentage of its sales. The agency charged that BurnLounge recruited consumers from across the country by telling them that participants earned huge incomes. Investors could buy into the BurnLounge organization for prices ranging from $29.95 to $429.95, plus monthly fees. While participants were compensated for music and album sales, most compensation came from recruiting others into the plan.
Burnlounge sells music, online, real licensed stuff too. Yet Burnlounge is a pyramid scheme.

Thus, having a real product (or service) has NOTHING to do whether the company itself is a pyramid scheme or not. These two examples prove that there is no such correlation.

Question 2: Does the definition of pyramid scheme preclude the scheme from having a real product/service? 

Answer 2:  The true definition of a pyramid scheme is the Koscot Test and thus we must examine that. The 4 steps in the Koscot Test are:

(1) Payment of money to the company;
(2) The participant receives the right to sell a product (or service);
(3) The participant receives compensation for recruiting others into the program;
(4) The compensation is unrelated to the sale of products (or services) to the ultimate user.

There is nothing here that says the product/service being sold had to be non-existent or have "little or not actual value".

Conclusion: Busted. Having a real / valuable product/service does NOT preclude the scheme from being a pyramid scheme (and vice versa).

But why would DSA have such a view of things? We need to look a little deeper into the issue on how did this mistaken view was formed.

By definition, network marketing is about selling products. Thus, having either no products, or products with little or no retail value is definitely a warning sign that one is not dealing with network marketing, but its illegal cousin, the pyramid scheme.

The problem is when you try to apply the criteria in reverse... That a pyramid scheme *must* have no product or product with little or no retail value.

Let me write it a different way:

  • network marketing is about selling products to people who want to buy them
  • scheme X has no products, or products nobody would buy at the price given
  • scheme X is not network marketing
  • network marketing done illegally is a pyramid scheme
  • scheme X is a pyramid scheme
(technically, this is not quite true as the 4th statement is not always true, but it's true often enough so we'll just let that go for a moment)

The problem is when you turned the statement around, and try to use that one definition "not network marketing", and apply that to "pyramid scheme". 


See the problem? In formal terms, this is called 'denying the antecedant', which confuses cause and effect.

  • I can hear the rain on my roof if it rains
  • I heard no rain on my roof
  • Therefore it did not rain
or in other words, "If P, then Q. Not P, therefore Not Q". 

That's clearly not true, as a drizzle can "rain" and got the ground wet, yet make no sound on the roof. 

If we rewrite the argument, it becomes "If a network marketing company sells worthless products, then company is a pyramid scheme. Scheme X has real products not worthless, therefore it is not pyramid scheme". 

The problem here is the statement itself, "If P, then Q", that the inverse version "Not P, therefore Not Q" is not true.  That's a fallacy, with two real live example that sold real goods, yet closed as pyramid schemes. 

But *why*? The problem here is a very subtle logical flaw... 

You see, the proper version of this logical statement is

"If and only if P then Q. Not P, therefore Not Q". 

In other words, if the ONLY characteristic is P that leads to Q, then if we ruled out P, then it's clearly not Q.  or in other words, if the ONLY characteristic of a pyramid scheme is "worthless product", and the products are NOT worthless, then there is no pyramid scheme. 

But clearly, worthless product is NOT the ONLY characteristic of a pyramid scheme. In fact, it's not even a primary characteristic. Worthless product is just easier to setup and make the pyramid scheme that much more OBVIOUS. A truly dedicated scammer would insist on making the scam UN-obvious. 
Having a real retailable product does NOT prove the business is not a pyramid scheme.  It makes it somewhat less likely to be one, but that doesn't mean much. 

So when next time someone tries to claim 'we have a product, we must be legal', you would know he's talking cow poo. 
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Bad Argument: Lion Doesn't Lose Sleep Over Opinion of Sheep

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Tywin Lannister armor
Tywin Lannister armor (Photo credit: paul.hadsall)
Sometimes, when confronted with detailed criticism and lacking a proper reply, a MLMer would resort to sloganism, such as

"Lion Doesn't Lose Sleep Over Opinion of Sheep"

Origin of this quote... Good question. It appeared all over the place but it was recently uttered by Tywin Lannister in "Game of Thrones" in the following form:

"A lion doesn't concern himself with the opinion of a sheep."

Apparently it had been adopted recently by Vemma followers as a general psych defense against criticism, as a substitute for "I don't care what you think. Ha!"

This is dangerous, stupid, and illustrates a serious lack of critical thinking on the part of the speaker... which is what some uplines want... sheeple who don't think.

And that's not good, obviously for the sheeple. Let's examine why.


If you are the lion, you would not care about the opinion of sheep, since they are irrelevant to you except as source of food.

Clearly, the speaker is trying to imply that he doesn't care that the critics think, as the critics are irrelevant. However, that can NOT be true, since the speaker is trying to deflect the criticism, so he obviously *does* care what the critics think.

This sort of "words don't match the reality" is strangely reminiscent of statements that are completely detached from reality, much like "Baghdad Bob", aka. "Comical Ali" claiming Saddam's army is "defeating" the Imperialist invaders in the Iraq War, and American soldiers are committing suicide in face of glorious fighting sons of Iraq, and other WTF was he talking about announcements issued daily by him during the war.


But also consider the following implication: By referring to critics and doubters as sheep, doesn't that confirm that he considers everybody as sheeple, to be lead and preyed upon? Nice attitude toward your "customers", marketing guy.

Furthermore, is the speaker really a lion... Or merely a sheep brainwashed into believing s/he is a lion, but in reality, is a judas goat, leading the sheeple around for the real lions, who don't even have to hunt any more?



The solution is quite simple: Stop acting like sheeple.


Start thinking about what you actually say, and do they actually make sense.

Be a real lion, not a sheep brainwashed into a goat thinking its a lion.

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Scam Psychology: The Need for Self-Delusion

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Saul Bellow, Miami Book Fair International, 19
Saul Bellow, Miami Book Fair International, 19
(Photo credit: Wikipedia)
MLM Skeptic has tracked various scams over several years, and it is always amazing to the MLM Skeptic how much self-delusion can the victims of a scam engage in, refusing the believe they were involved in a scam. Instead of probing for the truth and understand how they had been deceived, they instead invest their intelligence into justifying their own delusion that they could not possibly be involved in a scam.

The following quote seem to illustrate the point perfectly.
“A great deal of intelligence can be invested in ignorance when the need for illusion is deep.”
Saul Bellow, To Jerusalem and Back
And indeed, the victims of a scam, so shocked by the news, have a deep need for illusion, or delusion, to prove to themselves that somehow, they could not have made a mistake, that everybody else must be mistaken.

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




Self-Serving Bias

Self-serving bias is a personal tendency to take credit for anything good that happened, but blame external factors for failures.  (See Psychology Today article)

"I made great moves and bought stock for XYZ last year, and it went up, but this year, XYZ tanked because the CEO is a moron."

Note how he took credit for buying XYZ when it was going up, but when XYZ went back down it's someone else's fault.

Scam victims do the same. When the scam paid them, they congratulate themselves on "finding the perfect opportunity". When it was revealed to be a scam, they blamed the government for shutting it down and ruined a good thing.  Because they need to believe they had NOT made a mistake, that they had NOT be conned.

Don't believe that happened? Here's one example:

"Curt Miller" claiming, days after Zeek Rewards was shut down by SEC in August 2012,
that there were no victims until the government came around, and Zeek was not a Ponzi. 

Mr. Miller was referring to Zeek Rewards, only a few days after it was closed by US Secret Service and SEC in a joint raid. He claims that there were no victims, and government ruined a good thing. And there are many like him. Of course, they probably gotten more money out of that Ponzi scheme than they put in, i.e. they're a "net winner", which means they don't want to give up their 'winnings'. They prefer to live in the Matrix like Cypher, eating that "juicy steak"...  That "ignorance is bliss".

Personally, ignorance is just ignorance, and if you wish to live in ignorance that's your personal choice, but don't try to convince other people that ignorance is for everyone, esp. when it makes you look like a loon when compared against reality of life.

However, some of these people can go absolutely... irrational when it comes to their delusions. In case of Zeek Rewards, some affiliates have retained their own lawyers with claims that they want to sue the SEC and restart Zeek Rewards. It's believed that some donations were even accepted for this cause.


Contrafreeloading and Ikea Effect

Modern scams have moved beyond pure Ponzi schemes and now adds some minimal busy-work to make you feel more involved with your new "opportunity".

The idea of making you "work" for your reward, even though it can be given out for free, was discovered by zoo keepers, when they discovered that a lot of animals, when fed without doing any work, go into a depression and sometimes, died. Modern zoos use "enrichment", which basically means they hide food in containers, dispensers, and such and forces the animals to figure out how the food's released.

Turns out, humans work the same way. Instead merely giving out the scam money such as those done in pure Ponzi schemes or pure pyramid schemes, modern schemes makes you do some busy work, such as take surveys, watch video ads, or post ads online. Not only this makes the victims feel more involved, it also kept them busy and made the scam seem more legitimate, i.e. "What I did is helping the company earn the money that I get a share!" When logically, what they did should have had no noticeable effect on the company's revenue.

The effect of doing some work and thus "own" your project was noticed by Dan Ariely, and termed "Ikea Effect", which refers to the furniture you had to put together yourself as you buy unassembled kits from Ikea. Even if the final result is not as pretty as the Ikea catalog showed, you love the furniture because you had put it together. You took ownership of it, and you feel pride for it.

Organic Vanilla Cake Mix
Organic Vanilla Cake Mix
(Photo credit: artizone)
The effect was actually noticed back in the 1960's by General Mills, when they started to notice that the "cake mix", a sort of all-in-one pouch of powder with which you can help you quickly make a cake, is not growing its market fast enough. They did several focus groups, where they were surprised to learn that the housewives felt that the recipe is TOO EASY. Ernest Dichter was head of the study. Sometimes, the story was told as if they merely took the dried eggs out of the recipe, and made the housewives add a fresh egg or two instead, but it was more than that. It was full recasting of the role of the cake mix, not as a product, but merely as shortcuts to cooking masterpieces. If you can customize the result and have a hand in the creation (but not too messy or difficult!) you'll love the product more (and thus buy more of it).

Scammers know this, so they invented these busywork (posting one ad per day, or watch a few video ads per day) to make you feel involved in the fate of the company, when they contribute virtually nothing to the company's revenue, either directly or indirectly. The busywork's purpose is to keep the victims' mind occupied so it does not question the system, much like cult mind control, as well as to feel involved and not to question the scheme itself.

Once the victim convinced themselves, the rest is just reinforcement and maintenance, as the victim will seek to reinforce his/her own self-delusion due to the self-serving bias, in order to maintain their own self-esteem. They now have to need to keep believing the self-delusion, as their self-esteem is now tied to it.

All in all, the need for self-delusion in a scam is deep. There is a Chinese saying... Those inside the strategem are confused. Those outside the strategem see clearly. Part of the problem is those people inside, blinded by the biases noted above, no longer see reality, but their own delusions.

Getting people out of their delusions can be difficult, but one thing that seem to help is get them AWAY from the elements that enticed them into joining in the first place. Those "friends" or "group" would be a good start. However, that requires the victim to understand his/her role... that s/he was DEFRAUDED. If s/he won't admit to that, then helping him/her will be difficult. Once acceptance of that fact was done, you can use that wean him/her from the "communal enforcement" and disengage from the bad influences.
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Breaking News: Former Zeek Bank, Four Oaks Blank, settled with DOJ for being negligent regarding Zeek Ponzi Scheme

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Dismissed U.S. attorneys summary
Seal of US Department of Justice
 (Photo credit: Wikipedia)
Breaking news out of North Carolina: Four Oaks Bank, which held money for Zeek Rewards, as well as a payment processor called NX Systems, settled with the Department of Justice for its role in the Zeek Rewards ponzi scheme and other scams that processed funds through Four Oaks bank, and agreed to fine of 1.2 million dollars without admission of guilt.

DOJ charged that Four Oaks Bank granted "Automatic Clearing House (ACH)" check processing access to Rex Venture Group, parent company of Zeek Rewards Ponzi, despite multiple warning signs such as no visible prinpals and unverifiable or suspicious address (one of which is a vacant lot).



According to DOJ, Four Oaks Bank, which has direct access to ACH, allowed a Texas company direct access for a price, without little if any oversight, since 2009. The direct access means any one with checking account number (which is on any check), can directly debit account with or without authorization. This Texas company then sold its services to many unscrupulous companies, such as possibly up to 22 payday loan lenders who continue to debit even though loan had been paid, and Zeek Rewards ponzi, to process checks through itself (and thus, through Four Oaks). Four Oaks apparently ignored a request from Arkansas Attorney General to look into payday loans made to Arkasas citizens paid through Four Oaks, since payday loans are illegal in Arkansas. According to DOJ, at least 60 million dollars worth of checks was processed through Four Oaks through a 5 month period for Zeek alone, and at least one bank official knew that Zeek was suspicious because apparently the owner "keeps changing company names so his reputation will not catch up with him." It was not known which "owner" was being referred, but it's likely to be Paul Burks.

Four Oaks claimed that the contract was written favoring the other party and it had no choice... until the DOJ order. The settlement stipulated that Four Oaks must break the contract in 30 days, help the Feds investigate any wrongdoings related to this, and to audit itself and report to DOJ every six months how it had performed proper background checks on any potential ACH customers and they do not have a history of unauthorized charges and so on... for the next ten years.

DOJ stated that it will go after more banks who neglect their duty to prevent fraud.

Referenced articles

http://www.patrickpretty.com/2014/01/09/urgent-bulletin-moving-justice-department-sues-four-oaks-bank-says-it-turned-blind-eye-to-red-flags-at-rex-venture-group-operator-of-zeek-rewards/

http://www.wral.com/government-accuses-four-oaks-bank-of-turning-blind-eye-to-illegal-activity/13285954/

http://myfox8.com/2014/01/10/settlement-reveals-new-details-in-zeekrewards-case/
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Bad Argument: "You can't live a positive life with a negative mind"

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Recently, I ran into some MLM promoters, who, when confronted with problems about their particular scheme(s), tossed back this particular reply:
"You can't live a positive life with a negative mind."
Frankly, this is just sloganeering. And it's often used with a favorite:"Analysis paralysis."

Care to guess who was this quote attributed to? Miley Cyrus. Yes, *that* Miley Cyrus. Though this is apparently from her pre-Twerk days, as part of her song lyric. 


Of course, nowadays, when we think of a Miley Cyrus quote it'd be like this:

Obviously Miley Cyrus didn't invent the quote, but she sure made it popular in recent years. 

Of course, I'd tell you first that who said it wasn't important. If it's true, it's true no matter who said it. So, is the quote "you can't live a positive life with a negative mind" true or false. 

The answer is: it is true for life in general, but false in the context in which it was used. 

Now you're probably thinking: did you just give a weasel answer? 

No, I'll explain that in detail. 


On BehindMLM, a supporter of TelexFree posted the following, and I replied:

And here's it in text form, just so the search engines can find it easier or if you're using a screen reader:
Javen: I’m done researching for 2 month whether Telexfree is ponzi or not because it is NOT Ponzi,it is time i join Telexfree and make money.It seems to be a good business.A negative mind will never give you a positive life 
K. Chang: you cannot get blood from a stone, no matter how much positive thought you have.
There is no doubt that TelexFree is a scam. Brazilian authorities froze it since early 2013, and TelexFree have lost every appeal in court (over 20 at last count) at almost every level of Brazilian justice system. And they refused mediation, or offered some ridiculous concessions like "let us put our name up as collateral and let us restart that allegedly illegal part that you say we can't do". 

That implies that Javen is in a neighboring country to Brazil, where the Brazilian shutdown does not affect them, as TelexFree also runs itself from the US through two virtual offices. Indeed, TelexFree was already outlawed in Peru. This suggests Javen is in one of the other South American countries such as Chile, Argentina, or Bolivia. It's probably not Colombia, as Colombia is very quick to kill such scams, only took them 2 weeks to outlaw WCM777. 

But back to my conclusion... "true in general, but false in this specific context". 

If you look at the BehindMLM link I gave above in which the comment appeared, you'll see that it's a news item about TelexFree being fined for "dealing in bad faith", basically a type of "contempt" charge for wasting the court's time or "filing frivolous lawsuit". Nothing has changed in Brazil... Or in the US. TelexFree is outlawed in Brazil, and TelexFree US works the same way. In fact, there are reports out of Brazil that some local TelexFree promotors are STILL signing people up, and telling them to use Proxy servers to make them look as if they are NOT coming from Brazil, and going to the TelexFree US website and sign up there. 

Would a proper company allow its minions to bypass the law? Would a company lost 20 times in court and offer ridiculous concessions? Would a company promise you hefty profit... If you pay them a lump sum first, and all you need to do is post one ad a day somewhere on the Internet? 

It's clear we are NOT dealing with a truthful and truly profitable company here. 

So when Javen talked about "negative thought", he was referring to all these unscrupulous behavior that lead to the Brazilian authorities shutting them down as a Ponzi scheme

That's a lot more than "negative thought". It's EVIDENCE OF GUILT. 

And minimizing evidence of guilt as "negative thought" shows some serious problem in dealing with reality, or complete misunderstanding of the risks involved. Or both. 

Or the guy's just out to troll us all. 

"Negative thought" in the original quote was referring to general feeling of pessimism, but not just any pessimism, but irrational and unfounded pessimism that is not based on any evidence.  it would indeed be stupid to be held back by irrational fears and baseless pessimism. 

"Negative thought" in the quote was NOT referring to evidence of guilt, suspicious behavior, losses in court of law, and outright illogical behavior.

Let us use an analogy in an area we are often foolish about... love.

To not ask her out, just because you are insecure, you heard some things that may be about her that's not nice, that you thought you smell bad, or sweat on your palm, or you worry about you may fart in her presence... etc. etc. THAT is irrational fear. THAT is "negative thoughts".

To not ask her out because she's a known cheater, juggles three boyfriends at a time (from 3 different schools), reputation of not showing up on dates and made up various stupid excuses... That is NOT 'negative thought'. That's just... stupid... that you've been treated like dirt, and you STILL want to date her.

HUGE difference.

No amount of positive thinking will turn her into a nice person, just as no amount of positive thinking is going to negate all the signs around TelexFree that lead to it being shut down in Brazil as a Ponzi scheme (and there are now signs that the US may get in on the act soon). 

This sort of "negativity avoidance" is called recklessness. Risk? What risk? Who cares about risk? 

That will get you hurt... and hurt badly. 

So when you hear that 'rebuttal' next time, double-check what were the "negative thoughts" being ignored and decide for yourself whether you should really ignore them, rather than succumb to someone else's decision (to ignore the evidence). 

Remember, scammers don't want you to think about things. And if you decided that the slogan is good enough, you stop thinking. And if you stop thinking, you're stupid. Just the way scammers like it. 

Don't be blind and stupid for money. It's not worth it. 
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BREAKING NEWS: Peruvian Police Raided WCM777 office in Lima, Peru

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