Friday, November 11, 2016

MLM Basics: Numbers Needed To Profit

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.

Apology for lack of updates

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.

Monday, October 10, 2016

Bad Argument: Flip the Burden of Proof

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.

Friday, September 30, 2016

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

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

Friday, September 16, 2016

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

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? 

Sunday, September 11, 2016

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

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.

Friday, September 9, 2016

Scam Psychology: Cognitive Biases that leads to bad money decisions

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.