I guess that it might be a little too much to ask that any home-based business attract and retain the best and brightest. Generally, those folks (like myself) are looking at them for a variety of other reasons. At the top of that list would be the desire to make an equivalent or greater income compared to the other opportunities available to me in a manner that does not make as many requirements on my time. In other words, I'm looking for something that doesn't require me to be in a specific place, dressed a specific way at a specific time.
However, sometimes you see the work that others are doing in the promotion of a plan to create wealth that is just plain silly. The following is from this RFS article on Squidoo:
I think that everyone who is intelligent enough to do their research
and find the facts behind the Reverse Funnel System should know "TWO
VERY IMPORTANT THINGS" First there are 2 perspectives that you will encounter when trying to reach a "real Person" in the RFS:
1) This is a Fully Automated System. PERIOD.
2) Systems are run by people. People Need Help.
this means that you will either be a product if the RFS fully
automated, then you will start marketing, testing, succeeding and
failing at a basic level. www.innercirclewealthsystem.com.
OK. Let's look at a couple things here. First, look at the numbered statements. Anything about those seem a little off to you? Let's start with the definition of the word "automation":
"the technique, method, or system of operating or controlling a process
by highly automatic means, as by electronic devices, reducing human
intervention to a minimum."
By that definition, you would think that statement number 1 is telling you that you, as a human, need not intervene to have the system work. It is, after all, automated. But then, statement number 2 tells you that this system needs people and that people need help.
Which begs the question: if it is automated (reducing human intervention to a minimum), then why would I need help from other humans?
I can't say that I know the answer to this question just yet. But here's what it looks like to me:
1) Though the system may be tangentially related to the travel industry, you are not really promoting travel as your base form of revenue; 2) What you are promoting is a system that generates its revenues from the cost of new people to join and spreads it to other people in that system; 3) There may be some value in that because much of what is being taught is how to market yourself and your system through new avenues of promotion such as blogs and online video.
As long as you, as a home-based business owner, are comfortable with that, then this might be a decent system. However, as I mentioned in a previous post, I'd like to see some W2s before I hop on board myself.
In addition to better understanding the upside, I'd like to understand how many people are doing it now and what their failure rate is. One thing that you have to remember is that the vast majority of the people that you see promoting the system online are the ones who have succeeded or they haven't given up yet. This is called selection bias. If you look at a group of people who have been successful doing things a certain way, you are leaving out the people who have done it that way and failed. So, do the people I see on YouTube today represent 7 successes out of 10 who have tried? Or do they represent 1 out of 100? And, really, how many people are out there doing it? If you were to open up a McDonalds franchise in your home town, would you already want to know how many other McDonalds are around that you'd be competing with? Not to mention how many Subways, Burger Kings and Taco Bells?
On another note, I want to comment on the f#@k you money aspect of the program. At the latest count, the system has created over $6MM in revenue for those using it. Well, if that is 6 people making all that money, then that counts as f#@k you money. They can retire (according to the measure I introduced in my first entry). Chances are Ty Coughlin is the guy who has made the most of that money. So he can retire. Chances also are that not to many other people are in that category given the number of people out there trying to promote this system.
I'm not sure I even know what to say about this one. I've come across as system called the Reverse Funnel System. I don't even know what to say about this one. Don't worry, it won't be quite as breathless as some of the other material you'll come across if you go looking for it. Like this:
Or any one of the 493 postings that you'll find on YouTube. I've been trying to log some research on this one, and I feel as though I'm almost drowning in different sites, blogs, and video postings on youtube claiming that this is the best money-making system of all time.
Let's look at this with a healthy dose of skepticism, shall we?
First, let's be clear what this is: a pyramid system. Maybe that is too strong. Let's revise that and say that it has some of the principal markings of a pyramid system. Take the name, for example. A funnel is broad at the top and narrow at the bottom. Reverse it, and you have what looks a lot like a pyramid. But that is probably just semantics. So let's look at it a little more closely.
In a great number of the posts that you'll come across about the Reverse Funnel System, you'll probably notice a large number of references to the Global Resorts Network or, more opaquely, the $7 billion a year travel industry which the system is promoting. You'll also probably come across references that you will get $1000 commissions on your first transaction and that it will often cost about $3000 to $5000 to get up and running.
Let's think about these things a little more logically. First, the travel industry. The only people who are making $1000 per transaction are the people who own the hotels and the first class seats on the airlines? Its not going to be you Mr. Internet Marketer. Sorry to break the news. I'm not trying to rain on your parade or anything. Take a good look at the other sites out there that are marketing travel related goods and services. Like Orbitz. Compare the price of a flight that you find on an airline website to the price you find on Orbitz. The difference? Usually about $5, if any at all. If the big guns in the travel industry like Orbitz and Expedia are not making $1000 on their first transaction, where do you think that they are going to get the money to pay the good people of the Reverse Marketing System?
In fact, unlike other opportunities, there is no reference or clarity on what it is that you are actually buying of selling that is of value that you will be using to turn a profit. That is, unless it is there in front of you: getting other people to sign up.
I will give credit where credit is due, though. They very clearly promote teaching and mentoring the usage of "Web 2.0" sources such as blogs and youtube to create a vast reach and to create a personal brand. This they do quite well, especially given the number of people videotaping themselves talking about the system and all the benefits of it.
Frankly, I haven't signed up for this one yet. It is a little too pricey and a little to opaque as to how I will be investing my money to make more. If you are one of the folks who has signed up on this system and done well for yourself, please let me know. I've definitely got some questions for you.
Oh, and one suggestion: if you want people to believe the amounts that you've made, show us something truly legit, like a W-2. Then I'll gladly get on board.
Fun fact: total words on the 3 marketing pages for this system is 33,956.
Sometimes I think that the companies serving ads to me in my email are only reading my spam folder. That's how I came upon the ad for www.doublingstocks.com. As with many RIOS, this one featured one long, scrolling page with promises of riches and a history of results over the past year. All mine for $47. Under $50 seems like a reasonable price for someone to tell me how to become wealthy on a couple stock picks. And I have some "speculative" cash set aside in my trading account, so I figured, what the heck.
The picks they send out are weekly. Unfortunately, I was promised a pick on Sunday and nothing came through. I double checked my spam filters . . . everything. After contacting them it turns out that they didn't make a pick this week.
They way that they claim to make their picks is a combination of fundamental and technical analysis. Fundamental analysis plays a roll in their longer-term picks, but does not really in their short term ones. Technical analysis plays a role in both. According tot he site, they have built a software program that is capable of identifying trading patterns across thousands of different stocks to identify those that are ready for a breakout.
None of this is particularly unreasonable. The questions remains: to what effect? There are many traders out there doing the same sorts of analysis, whether by hand or by their own software. If the gains that they claim on their site are true, then this looks like a great opportunity. Check out the numbers:
Recommended Buy Price
Recommended Sell Price
CorVu Corp. (CRVU.OB)
1-900 Jackpot, Inc. (ONJP.OB)
Metwood Inc. (MTWD.OB)
Calpine Corp. (CPNLQ.PK)
Crown Crafts Inc. (CRWS)
CIC HOLDING COMPANY (CICG.PK)
Recyclenet Corp. (GARM.OB)
360 Global Wine Company
Nova Biosource Fuels, Inc.
Tasker Products Corp.
InfoLogix, Inc. (IFLG.OB)
Le@p Technology Inc.
President Casinos Inc.
FirstFlight, Inc. (FFLT.OB)
Hydron Technologies Inc.
CLEAN POWER TECHNOLG
Optionable Inc. (OPBL.OB)
Regal One Corp. (RONE.OB)
Transbotics Corp. (TNSB.OB)
PAETEC Holding Corp. (PAET)
BioStem Inc. (BTEM.OB)
LANTIS LASER INC (LLSR.PK)
SUPERCLICK INC (SPCK.OB)
DHANOA MINERALS LTD (DHNA.OB)
SUSTAINABLE POWER CP
BIOQUEST TECHNOLOG (BQTG.PK)
HOLLOMAN ENERGY CORP
INTL OIL & GAS NEW
Platina Energy Group, Inc.
NATCO INTL INC (NCII.OB)
IDS WORLDWIDE INC (IDWD.PK)
Patriot Scientific Corp.
CHINA YOUTV CORP (CYTV.OB)
Voyager Petroleum, Inc.
NATURALLY IOWA INC (NLIA.PK)
The stock name, buy price, sell price and percentage return are all listed on their website. They even identify the month and year that they make the recommendations. All good stuff. So what I did is used that information and applied to to a hypothetical $1,000 investment. The column "Shares Purchased" indicates how many shares I could have purchased and "Sale Proceeds" indicates how much I would have had after. Then I let compounding take effect. So, for each pick, I bought as many shares as I could buy with the proceeds from the previous pick.
The end result is quite nice. After 18 trades, I'm a millionaire. After 36, I have almost $1.8 billion. Not to shabby for a years work.
Of course, this is the point that at which you should be a little skeptical. That's a lot of money for one year. Especially when I only started with $1,000.
So let me point out some flaws. First, with my own analysis. I assume here that every trade happens linearly - or one right after the other. The truth of the matter is that according to their recommendations, there might be several live trades going at the same time. What this does is increases my initial capital outlay required from $1,000 to as much as $5,000-$6,000 depending on how many trades are outstanding. Also, this takes away some of the benefit of compounding since I can't just apply the proceeds of a big winning trade to the next pick. You'll notice, though, that in since April of 2007, there have been many fewer trades outstanding per month than in November/December of last year and that they seem to get in and out of them much quicker. I think that this might bode well going forward because the losses seem to be smaller and less often.
Another couple limitations: first, volume. Clearly my numbers aren't totally reasonable. Once you get to a large enough number of shares, you are the one moving the market. At some point, you're buying all the available shares the firm has. The second one, also related to volume is that there aren't always enough buyers on the market for a large batch of shares. Take, for example, Recyclenet. The average volume on that stock is 6,000 a day but is has ranged from 0-228,000 over the last year. If you bought $1,000 at the suggested price, that would be 50,000 shares.
Let me summarize my points: 1) Their analysis (fundamental and technical) is probably pretty standard; 2) Their means of analysis (The MARL software) may be novel; 3) As we move forward, that software may be a significant advantage; 4) Penny stocks, just by the law of large numbers, have an inherent upside, so don't plan on being a billionaire this year; and 5) This just might work out for the best.
Before I get to the first opportunity, I'm going to set some ground rules as to how I plan on evaluating each of the opportunities. That way we can look at each relatively objectively and make some apples-to-apples comparisons.
Defining the terms:
Opportunity Investment. The cost of the opportunity. Other Investment. Any other costs required to get started.
Ongoing cost. Any additional costs related to maintaining the opportunities incomes stream.
ROI. ROI here means return on investment. But the way that we're going to calculate it is a little more complex than what you'll see elsewhere. Often, ROI is a misnomer - people use it to describe a multitude of different things and none of them are actually ROI. The base of the calculation is simple enough: it is the amount of money you make divided by the amount that you have invested. However, users of this metric often forget to discount the amount they have earned to account for the time value of money. Put simply, a dollar in your hand today is worth more than the promise of a dollar in your hand tomorrow. If you invest $100 in a given opportunity, then that money can't earn a return elsewhere (stocks, savings account, etc). Most venture capitalists use a discount rate of around 35% (per year) for new businesses. Sometimes more. By comparison, you'd use a discount rate of 3-5% for a savings account and 9-11% for stocks. Since we'll be treating each opportunity as a new business, we'll be using a base rate of 35%. In addition, we'll include an additional costs incurred beyond the initial investment.
Payback period. This is how long it takes for you to earn back your investment so that you break even.
Income replacement. According to the census bureau, the median income for American families is about $48,000. Just for the sake of using round numbers, we're going to assume that the median is $50,000. Each opportunity will be rated on a percentage basis of the amount of annualized income that it will replace. So for example, if I have been testing an opportunity for 1 year, and it has earned $20,000, then its Income Replacement rating is 40%. If I have been testing it for 3 months, then the expected income over that period would be (3/12) * $50,000, or $12,500. Is the opportunity has generated $6,250 during that time period, then its Income Replacement rating is 50%.
Sweat Equity Hours. The fewer the better here. If you are trying to pursue a new opportunity in your spare time or minimize how often you work, then you want to put in fewer hours rather than more. And since you are likely to have to put in some work, this measure will tell you how much.
Sweat Equity Cost. The baseline here is the median income ($50,000) divided by the average number of hours that average American works in a year (2,000). That number of hours assumes 40 hours a week, 50 weeks a year and two weeks of vacation time. The total Sweat Equity cost will be the number of hours invested multiplied by $25 per hour. If you make a different amount than this and want to adjust it, just input your income and divide it by 2,000.
SEROI. This is the ROI calculation including the value of the time that you put into the opportunity.
F#($ You Money. This measure tells you how well each opportunity can help you come to retiring. If you have $1,000,000 and invest it all in bonds, then you'll be pretty close to having a self-generating flow of income. The amount of money BEYOND $50,000 will be counted here. This assumes that you want to live with an income of $50,000 for the rest of your life.
Verbosity. I've noticed that many of the websites that have these sorts of opportunities are also incredibly long-winded. Just for fun, I'll include a word count on how long it takes for the promoter of the opportunity to get to the point.
These terms will keep popping up over time and will be the way I rate opportunities going forward.
So what are we doing here? Or rather, what am I doing here? It is actually quite simple. I want to believe. Call me a sucker, but I believe that one of these promises of being able to automate income has got to work. This is the land of opportunity. Just because the opportunities are few and far between doesn't mean that they aren't there. Let's face it: the opportunities are few and far between in real life as well.
Who knows what a Black Swan is? Take a read through Dr. Taleb's book "The Black Swan: The Impact of the Highly Improbable". Lots of ideas are pondered in this tome, but among the most important ideas is the one that says there are lots of things that we can't predict in this world. Things that have such a massive impact that it skews and screws the mean for everyone else. That goes for both negative and positive outcomes.
I know what your next question is: if I can't predict anything, why even bother? If it is all random, then why should I even believe that I can control the outcome. Well, you may not be able to control the outcome, but you can control your exposure. For the negative outcomes, you limit your exposure. Like wearing a seatbelt. You can't necessarily predict an accident, but you can limit the likelihood that you die. The flipside is that you can also make small bets and try to expose yourself to some upside. And that's what this blog is about.
My objective: explore all the most well-advertised and best known opportunities to "get rich quick". I don't really expect to, so I'll keep my day job. But who knows? It might just work.