THE BIZOP NEWS

Here is a puzzle, from the WSJ Law Blog,

Two Lawyers Convicted Alongside Conrad Black: "

As you all know by now, Conrad Black was found guilty Friday of stealing money from his former company and of obstruction of justice. (Here’s the WSJ story.) But we thought we’d remind you that of the three other former Hollinger executives also convicted of fraud charges, two of them are lawyers (bios courtesy of the Globe and Mail):

• Peter Atkinson: When Conrad Black began to empire-build in the 1970s, he retained Peter Atkinson, then a litigator at Toronto’s Aird & Berlis. Atkinson became Black’s right-hand man, and in 1996 he left private practice to become GC of Hollinger, later becoming an executive at Hollinger International. Atkinson is represented by Michael Schachter of Willkie Farr.


• Mark Kipnis: A lawyer and CPA, Kipnis previously worked at PriceWaterhouse and the now defunct Chicago law firm of Holleb & Coff. He joined Hollinger in 1998. Of the four defendants, Kipnis was the only one who didn’t receive money from the non-compete payments that were at the core of the criminal convictions. Kipnis is represented by Ronald Safer of Schiff Hardin.

As for Conrad Black, he continues an email correspondence with the Globe and Mail. Over the weekend he wrote: ‘We move on to the next phase in this long war. We got rid of most of [the charges], and expect to get rid of the rest on appeal.’

Also last week, Black continued to criticize the 513-page investigation of Hollinger by a special board committee headed by former SEC commissioner Richard Breeden that accused Black of heading a corporate ‘kleptocracy.’ Black wrote: ‘The Breeden ‘$500-million kleptocracy’ is now down to transactions totalling $2.9-million, which were in fact, approved and disclosed, while Breeden and his allies have milked the old Hollinger International for over $100-million [in legal fees]. The bunk about looting, racketeering, and personal extravagance has gone over the side.’

(Via WSJ.com: Law Blog - WSJ.com.)

Forget Conrad Black's attempt to picture stealing between $2 and $6 million from shareholders as some type of victory. The man is ill and has been for quite some time.

The puzzle for me is how Mark Kipnis, someone who received no monetary gain, got caught up in this net. Now, I don't believe that lawyers are some how by their profession less prone to being bullshitted than the ordinary individual. But these transactions were so offside -Black was a fiduciary who could not have competed against his own company and so could not claim any part of the non compete fees. Black could not have taken the opportunity to compete against the purchasers of his newspapers; as an officer with fiduciary duties, he has to turn down certain business opportunities.

So how did Mark Kipnis, who appears by all accounts to be a stand up guy, get caught up in papering what should be a clear no no? I would love to know and understand his thought process.

Posted by michael webster at 9:49 AM | Permalink | Comments (0) | TrackBacks (0)

Here is an interesting post.

iPhone Scams: ScamBusters.org Predicts the Top 7 iPhone Scams:

1. iPhone eBay scams:

As we write the first version of this article on Wednesday evening, two full days before the launch of the iPhone, there are already 1,796 products listed when you do an eBay search for "iPhone."

Most of these listings are for cases, screen protectors, cables and other accessories. (Although most of these products are likely not scams, we personally would not buy an iPhone accessory from a company that has never actually seen or touched an iPhone.)

There are some auctions for brand new Apple iPhones (2 days before they go on sale, and sometimes with incorrect information).

We found that eBay was very good about removing these iPhone listings during the pre-launch. However,

after the iPhone starts shipping, it will be MUCH more difficult to know which auctions are real and which are bogus

.

There are also auctions for email addresses, some with bids around $50, like "apple.iphone.outlet@gmail.com." Although you will probably actually get these email addresses if you win the auction, they typically are worthless.

Our recommendation: Think hard before you buy an iPhone on eBay. Instead, if you want to buy online, order directly from the Apple store online. Ground shipping is free and you aren't ordering from an unknown person.

Since no one will be discounting iPhones to start (and they are only available from Apple online, Apple retail stores and AT&T stores), it's hard to think of a compelling reason to buy on eBay or other online auction sites.

The other six are: iPhone standing in line scams, iPhone scalper scams, Free iPhones, iPhone spam, Fake iPhone websites and phishing scams, and finally iPhone viruses, Trojans and spyware.

The bogus eBay auction for iPhones is interesting. It combines a couple of compliance techniques. First, there is the reliance on the secular version of Pascal's wager: even though the chances of buying a low cost iPhone is low, the "winning event" is so desirable as to mask the first low probability. Ironically, this type of naive skepticism is even worse than no skepticism.

Second, the auction mechanism always appeals to low-cost shoppers, despite the fact the auction mechanism will tend to attract people who over pay.

Finally, there appears to be a general trend amongst consumers to "reward" brand names by buying knock-offs or counterfeits, a topic I will return to.

All three of these compliance techniques are sufficient to ensure that the iPhone auction scam will have a decent run.

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I was very impressed with Davis Freeberg's latest piece on advertising, Who Needs Spam When You Can Advertise?: Davis writes:

"After doing my research on GrowthStockGuru's most recent hot stock tip, I contacted the business press and asked for comments on why they would run an ad for a microcap company, whose former Director is married to a convicted stock promoter? I emailed Business Week twice and Smart Money once, but neither of them seemed to feel it was important enough to reply to. Forbes and Investor's Business Daily did reply though and unfortunately Forbes said that the print ads had gone out, but that future ads were being discontinued.

'Thanks for your note- we obviously take this very seriously given our
reputation in the industry. Just so you know Forbes.com and Forbes
magazine are separate organizations with separate sales teams. I had
some people here at Forbes.com run a check and it appears that we've
never shown those ads online. I can confirm that there had been ads run
in the print mag in the past but from what I'm told those are going to
be discontinued.'

While, it's unfortunate that Forbes ran the ad to begin with, I can understand how they could miss some of the details behind GrowthStockGuru's tip. Digging through the SEC files was like peeling an onion, the more I read, the more I wanted to cry. Forbes willingness to re-evaluate the history of the company and their decision to discontinue future ads, demonstrates that, while careless, they do care enough about their readers trust, to understand that the easy money, isn't worth the hit to their credibility.

Investors Business Daily on the other hand, did not seem to think that there was anything wrong with advertising a penny stock, in order to increase 'awareness' of the company.

'Thank you for your email regarding the advertising from GrowthStockGuru. Investor's Business Daily does have a policy in of rejecting display advertising that promotes penny stocks. Display advertising refers to the ads that are placed throughout the newspaper.

The ad you referred to ran in our Corporate News section. This is classified advertising section designed as a forum for public companies to increase awareness of their stock. Most of the ads that run in Corporate News are penny stocks. Many of our readers regularly read this advertising feature searching for new and interesting investment opportunities. The section is labeled as advertising and in no way is an endorsement by Investor's Business Daily. We also run a small disclaimer in the section stating that we can not guarantee the accuracy of the information in the ads.

Thank you for taking the time to share your concerns with us. We value your input and take all suggestions and comments very seriously.'

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What the heck was Richard Gere doing creating a Buddhist controversy over kiss?

"As pictures of Richard Gere kissing Shilpa Shetty on her cheeks and embracing her was flashed across the country's newspapers Shiv Sena, a conservative Hindu group burnt effigies of Richard Gere and set fire to glamorous pictures of Shetty.

Richard Gere bent and swept the popular Bollywood actress Shilpa Shetty into his arms and several times kissed on her cheeks before a cheering crowd at the Aids Awareness event in New Delhi.

Observers said it was ironic for Richard Gere to be at the center of such anger in the country of Buddha's birth. The actor is known as the most famous Buddhist in the United States who meditates daily, and as a compassionate man who is extremely keen in eradicating Aids/HIV from India."

Is it all about Richard Gere? Is this just another example of the Ugly American?

No, it is a spectacular display of breaking rules in order to be persuasive. Gere

"got utmost publicity as it was done before a press conference which was held to spread AID /HIV awareness especially among the New Delhi truck drivers as the disease is spreading among them rapidly." (my emphasis)

Brilliant and what you expect out of an actor. Even if you know that Gere has calculated this effect in advance -the publicity and outrage- it is going to advance his goal of making advancing AID/HIV awareness.

Sellers of income earnings opportunities -franchises, distributorships, and network marketing- instinctively know that it is all about the client. As a consequence, they are excellent mimics -sometimes so good that they make us instinctively uncomfortable.

Unconscious mimicry is known to be an effective tool of persuasion.

But sometimes you have to know when to break the rules.

Posted by michael webster at 9:20 AM | Permalink | Comments (2) | TrackBacks (0)

Mark Cuban in his post on Ripoff Commercials = Stupid TV Stations and Networks states that his television network

"HDNet wont run informercials or any ripoff commercials. We don't need or want their money and I would rather go without commercials than run them. My viewers are my customers. For some reason that is a strange concept to stations and networks these days. They would rather squeek out a commission on herbal enhancement pills and end up with a poorer, upset viewer than run a show without commercial breaks. Thats ridiculous. Its a brand killer"

I do wish that rip-off commercials came with the tag "rip-off commercials", but for good logical reasons, as I have articulated before, scams do not self-announce.

If rip-off commercials don't come with a tag screaming "I am a rip-off", then in order to filter them out we will have to rely upon the sensitivity of Mark Cuban or whomever he hires as his social censor.

Censoring commercial speech has never worked before, so why should it work now?

I suggest a different approach, one which relies upon the open network of bloggers to get to the heart of the matter. Cuban should run any ad for an income earning opportunity as long as he also confirms that the income earning opportunity is registered under the appropriate state business opportunity laws and the federal business opportunity rule disclosure is available. All of this information should be available digitally and television viewers allowed to comment and review the disclosure documents.

This would be a better solution that an outright ban for five reasons:

1. Cuban would not have guess at which ads to censor.
2. The audience would be provided with the relevant disclosure information.
3. Ads that didn't have the necessary registration documents could also be exposed.
4. There would be a lot more fire between the true believers and skeptics based on what the disclosure documents revealed.
5. Many people are unaware of the information that is legally required to be given to them, and having it disclosed would be generally useful. (None of the commentators on his post or the blogs that linked to his post mentioned the FTC or state business opportunity laws.)

The main trouble with any advertising is that the broadcaster lends some credibility to the content of the ad. By disclosing the relevant information that is required by the FTC and the various states, Cuban would be doing a great service and providing high quality internet broadcasting.

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There is just something very humourous about this Department of Justice Press Release.

"An Orange County man has pleaded guilty to a federal wire fraud count, admitting that he ran a real estate investment scam that lured victims with bogus claims of large returns on investments in commercial real estate developments.

Barry Landreth, 37, formerly of Coto de Caza, pleaded guilty Monday afternoon to the felony charge that carries a penalty of up to 20 years in federal prison.

By pleading guilty, Landreth, a former adjunct professor of real estate finance at the University of Southern California, admitted that he ran two schemes involving purported real estate development projects in Chicago and Las Vegas. Through his company, Webster Realty Investors, Landreth offered short-term, high-yield real estate investments in two projects that he called Discovery Chicago LLC and Discovery Las Vegas LLC. Landreth induced victims, including wealthy investors and several USC students, to invest with promises that their money would be used in one of the two projects. In fact, Landreth did not use the victims' money for either project, but instead spent the money on business expenses for Webster Realty Investors and on personal expenses.

As part of the scheme, Landreth falsely represented to victims that the projects would provide 190 percent returns on investments within 30 days to 45 days."

Webster Realty Investors!! I didn't see a dime from Barry Landreth, the rotter! But there is just something very amusing about an adjunct professor of real estate finance scamming his own students. I wonder why the regulators did not say, "if it looks too good ...."?

Posted by michael webster at 11:10 AM | Permalink | Comments (0) | TrackBacks (0)

Canada's award winning investigative journalism show, W5, has an excellent piece on affinity fraud.

The W5 summary of their investigation into affinity fraud can be read here. There is also a broadband connection to the actual television show, in which I am interviewed about affinity fraud.

According to W5, the four elements of an affinity fraud are:

"Affinity Fraud is a scheme that has four main ingredients. Which mixed together, can produce the perfect crime. Ingredient Number One - a trusting group of victims. Because church goers are trusting by nature this group had been particularly hard hit.

The front man is the second ingredient, someone who acts as a salesman within the group.

Which brings us to the third essential ingredient--the trusted insider. Someone within the church who will vouch for "the front man" Without the insider, the Affinity Fraud often could never occur. Not just anyone can walk into a church and win people over. Sometime he's an accomplice, sometimes just a patsy.

And the final ingredient -- the master mind. The person who orchestrates the scheme and after the money is collected, generally spirits it offshore where it can't be found by authorities."

This is a good description of the mechanics of the affinity fraud.

The picture can be made more clear by focussing on the first element. Why does a group who trust each other on one dimension, say religious beliefs, then come to trust each other on a another dimension, say investment advice?

On the surface, there is no connection. Yet, con criminals take advantage of this "halo effect" all of the time.

But there is also another logical confusion or illusion at work, something that we have talked about before, the confusion between "My friend is trustworthy and so is not lying to me" versus "My friend is trustworthy and could be mistaken".

Thomas Bayes was a 18th century philosopher who published small mathematical treatise on conditional probability. The practical import of his theorem was divined earlier by David Hume, who realized that when we are presented with testimonials that seem extraordinary we should focus on the possibility that the person testifying to this rare event is mistaken. That is, we should compare in our minds the chances that a "miracle" happened with the chances that the person was honestly mistaken about what they saw or reported.

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Brian Clark, a former attorney, and now a fascinating blogger at www.copyblogger.com, has dropped AdSense from his website, dissing it on the way out: "I gave AdSense a shot around here, and I think it sucks and cheapens my blog. It makes me about $200 a month, but I think you're easily worth more than that (although I'm too lazy to remove it from the archives)"

With all due respect, this reminds me of the famous Winston Churchill line:

W.C. "Would you sleep with me for $2 million?"

Famous English Lady "Why certainly, I would."

W.C. "Would you sleep with me for $200?"

Famous English Lady "No, of course not. What sort of woman do you think I am?"

W.C. "Madam, we know what sort of woman you are. We are just negotiating on the price."

So does Brian Clark have a price? (Only kidding.)

Kevin O'Keefe, at LexBlog Blog : Ads on blogs : Dissed again, agrees with Brian Clark and then adds:

"Lawyers who would never post ads on their reception wall run ads on their blogs to pick up twenty bucks a month. Nuts."

How is this different, in principle, from running a blog roll of your clients on your website, Kevin? Wouldn't this also cheapen the reception wall?

Generally, I actually agree with Brian and Kevin's view of AdSense, but for a completely different reason, AdSense may confer a website's authority on any ad which appears. As a result, scummy ads may gain some reputation by appearing on a high authority site.

So why are AdSense, now, running here. Is it because I believe that no reputation can be conferred by bizop.ca?

No, as I has stated on the front page:

Bizop.ca is a law blog about misleading advertising regarding the sale of franchises, business opportunities and network marketing.

But the ads that are placed here are done by Google.

Google AdSense will run any ad that it thinks is appropriate based on syntax.

Some of the ads may be for dubious opportunities.

So if you think that an ad is misleading, tell us in the Discussion Forum.

Tell us why the ad is misleading.

Use your own words.

Help with Bizop.ca's mission of providing quality information by analyzing ads.

Help us help others.

Isn't there some irony in using the ad budget of a scammer as a tool against their proliferation?

Technorati Tags: winston churchill, adsense, blogger, blog, due respect, dissing, madam, lawyers, blogs, brian clark

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Interesting story in the Wall Street Journal about one of Ameriprise's top stock broker, A Star Broker, 'Virtually Unsupervised,' Puts Ameriprise Arm Under Scrutiny.

According to the story, "David McFadden is one of the top brokers at Securities America. How he achieved this feat is now the focus of a National Association of Securities Dealers investigation and recently contributed to a $22 million arbitration award against the firm, a brokerage arm of Ameriprise Financial Inc.

For years Mr. McFadden courted employees of oil giant Exxon Mobil Corp. He boasted that he was a certified public accountant and told many of the employees they were set for retirement and promised impressive returns, according to documents filed in a 2003 arbitration claim.

His claims, however, didn't mesh with reality. His CPA certification had lapsed years ago, and several of his clients had to go back to work as he failed to deliver the rosy returns he promised."

The heart of the story appears to be Mr. McFadden's practice of putting his clients in mutual funds largely based upon how the fund would pay his compensation. Conflicts of interest is rife among professional advisors, but the current regulatory line of thinking is that if the conflict is disclosed, then there is no foul. We have already seen some academic work which calls into question this assumption. It will be interesting to see if this award is the beginning of a re-thinking about how to police conflicts of interest in the sale of mutual funds.

Technorati Tags: exxon mobil corp, david mcfadden, arbitration award, certified public accountant, wall street journal, stock broker, brokerage arm, top brokers, cpa certification, oil giant, rosy

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Roy Coooper, the AG of North Carolina announced that his office has shut down Mortgage Assistance of Carolinas, Inc. Mortgage Assistance is alleged to have preyed upon consumers whose mortgages were in default. Mortgage Assistance claimed that for an upfront fee it would negotiate with the consumer's bank and prevent the foreclosure. The AG's suit alleges that Mortgage Assistance obtain the list of consumers from reviewing the Court Documents, and that Mortgage Assistance simply pocketed the upfront fee without providing any services.

The AG's press release ends with some tips about how to avoid these type of scams. In particular, I want to focus on, a common element of in advance fee scams, the AG's advice that up-front payments for foreclosure assistance is not legal in North Carolina. The trouble with this law is that whilte it makes enforcement easy, it is at the expense of protecting consumers. Very few distraught consumers facing foreclosure are going to quibble about paying in advance for services - indeed it would strike them as odd, given their obvious credit problems, that anyone would take their case on for only a promised payment. Like the FTC Franchising Rule, this law is designed to maked enforcement easy whether or not the consumer is protected. It also is unlikley that anyone wish to provide these services would enter the marketplace under these conditions.

Technorati Tags: mortgage assistance, advance fee scams, foreclosure assistance, consumers, north carolina, upfront, distraught, court documents, negotiate, press release

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The Attorney General of Indiana announced that it:

"has filed a lawsuit against Peoria, Illinois based Liberty Publishing, Inc (Liberty), d/b/a Booster Club Promotions, for misrepresenting its relationship with Indiana schools. Businesses in Hendricks, Lake, and Marion Counties had been contacted by the company and told that proceeds from the sale of advertisements would benefit the local high school and/or the local high school booster club. Businesses paid for advertisements on posters displaying the schedules of local high school athletic teams, but the schools didn't get proceeds from the ad sales.

"This company capitalized on the generosity of local businesses, which are always eager to support their local high school and its athletic program," Indiana Attorney General Steve Carter said. "By falsely representing that local schools would benefit from the proceeds of advertisements, this company took advantage of what is a Hoosier tradition, pride and support in our communities' school system." (my emphasis)

This is a standard trick with vending machine scams, which are constantly being touted as being in some relation with a charity. Charities themselves are another black hole when it comes to doing due diligence. With the event of do it yourself press releases, a business opportunity scammer can "release" a press piece about doing business with a well established charity, steal some photos from the charity website, and insert the entire piece trumpeting their new found relation on their own website. Only someone with a serious warped sense of skepticism would go to the bother of checking out the press release: such a person is not a candidate for the con criminal's phantom dream in the first place.

Technorati Tags: local high school, local schools, indiana schools, indiana attorney, proceeds, advertisements, liberty publishing, booster club, peoria illinois, benefit, club promotions, ad sales, marion counties, steve carter, hoosier

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Over at SEOmoz Blog, there is a very interesting story about how to get 20 .gov backlinks in 20 minutes. Of course these are not real links, conferring authority on the site. There is some debate as to whether the technique actually fools the search engines, but it would certainly increase the SEOmoz page strength tool, which purports to demonstrate to the world, or at least to that part of world visiting your site, an objective measure of the importance of the site. I have already commented on how easy it is to hack other similar measures of authority, and even if this backlink hack does not fool the search engines, it will work by increasing the SEOmoz page strength tool, which can be displayed prominently on the website's home page. Like Dane Carlson's html script which calculates the monetary value of your blog, SEOmoz provides a user with the html code so that their fake page strength can be revealed to the world.

Technorati Tags: html script, search engines, blog, html code, dane carlson, objective measure, monetary value, interesting story, backlinks, fool, seomoz

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Florida Agriculture and Consumer Services Commissioner Charles H. Bronson announced today the arrest of a formerly married couple who allegedly collected more than $193,000 from 23 investors for candy vending machines and delivered nothing in return.

According to the complaint, "the pair are accused of operating a registered business opportunity company by the name of Kandy Kidz Inc., of North Miami Beach, which offered investors an opportunity to make a living by purchasing and operating candy vending machines. Representatives of the company told investors that the company would provide the machines, candy and stickers that they could place on their machines indicating that they were affiliated with a Texas charitable organization that searches for missing children. The company solicited investors by advertising in various newspapers and publications throughout the country". (my emphasis)

This is a very common feature of fraudulent business opportunities, the suggestion that they are affiliated with some charity. What this does is to dull the sense of skepticism of the consumer by transferring the goodwill we all have towards charities to the fraudulent scheme. Assuming that the charity exists, does it have any duty to prevent it's good name from being usurped?

Technorati Tags: candy vending machines, fraudulent business opportunities, investors, north miami beach, opportunity company, business opportunity, charitable organization, florida agriculture, kandy, bronson, kidz, stickers

Posted by michael webster at 11:12 AM | Permalink | Comments (0) | TrackBacks (1)

On June 15th, 2006 the FTC announced that a "credit counseling service and related companies and individuals have agreed to pay $926,754 in consumer redress and civil penalties to settle Federal Trade Commission charges that they made false claims about their debt management program and violated the FTC's Do Not Call Rule."

What is interesting about this fraud is that the "Credit Foundation of America, Inc. (CFA), and its associates sold debt management services nationwide through unsolicited, pre-recorded messages left on home telephones, falsely claiming that consumers were pre-approved for a program to consolidate their credit card debts to a single monthly payment at a much lower interest rate." (my emphasis) And obviously many consumers took the back and got caught in this advance fee scam, where you pay something for nothing.

What is the message for due diligence here? Well, I have been urging people to purchase answering machines as a protective measure against telemarketers. Ten or fifteen years ago, most of our social networks were small and we could count on answering the telephone machine as being response to a friend or at least an acquaintance. Now, the telephone network can be accessed by any clown, armed with a mental bludgeon to knock down your defences and steal your money

But even using an answering machine is not enough as the CFA example shows, they left pre-recorded messages -no doubt of good hope, and credit cheer.

I too have fallen for returning a 800 number call, when the correct badges of authority, as Cialdini calls them, are present. Recently, I was told "by my bank" that my debit card had been stolen and they were enquiring about some "bogus" charges. I immediately phoned the 800 number and gave out all sorts of private information to confirm it was really "my bank account". How did I know what number I was phoning, what foreign call centre, or cell phone I was going to end up being connected to?

So, how do you think that all this turned out?

Technorati Tags: credit counseling service, debt management program, debt management services, credit card debts, pre recorded messages, trade commission charges, ftc, consumers, pre approved, advance fee, answering machines, redress

Continue reading "Debt Management Telemarketers Settle FTC Charges" »

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Mr. Minkow's thoughts on critical thinking are worth reviewing, I used to give a special lecture in Professor Paul Thagard's Critical Thinking at the University of Waterloo. Mr. Minkow identifies three factors an individual could use in making an investment decision, which makes the individual a target. First, the individual relies upon the testimony or authority of a close friend or relative, who appears to making a substantial amount of money. Second, the individual cannot know very much about actual market conditions or have access to detailed information about the market. Third, there must be "blind and unsubstantiated" acceptance that the returns are significantly higher than the "current, underachieving returns" of the victim.

What would be the easiest due diligence step, if you wanted to filter out frauds and scams?

Technorati Tags: investment fraud, zzzz best, university of waterloo, target, barry minkow, critical thinking, us senate, senate special committee, investment decision, investigative journalism, paul thagard, discovery institute, professor paul, frauds, accountability, terrific

Continue reading "Due Diligence for Seniors" »

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Scott Plous, in 1993, wrote an excellent text or compilation of the then current state of the art on the Psychology of Decision making, and included a number of test exercises at the beginning of the text. The tricks of the mind that psychologists have discovered are very ably covered by Plous. There is a general agreement amongst scientists is that there are heuristic tools that we use to break down a decision problem, which generally work well. But we overuse these heuristics and make predictable mistakes.

Here is an example about the use of testimonials to aid our decision making. If I am going to buy a new computer, I will generally read product reviews, especially from authorities. Some of these reviews provide important information. When the "discovery" of a Mac OSX virus was a hot topic, reading authoritative reviews helped my understand what the problem was and how to gain protection until Apple released its security update. In general, relying upon authorities is a good idea and trying to identify an authority is a worthwhile exercise.

Where is this a bad strategy is when the event you are seeking information about is highly unusual, rare, or wildly out of the norm. How important are authorities in these cases? Consider the following problem. You are a member of jury in personal injury lawsuit. The plaintiff has testified that the car that hit him was yellow. Let's make the plaintiff an "authority" on spotting cars: if a car is yellow, then the plaintiff will correctly identify it as yelllow 90s% of the time. Further suppose that there are only two colors of cars: yelllow and green. Our authority is just as good as spotting yellow cars as green cars. You also know the total number of cars is 200, and 180 are green. What are the chances that if the plaintiff says that the car was yellow, it was yellow, given that he is an authority. Well, let's count the cases.

From the population totals, we know that A + B + C + D = 200, and that A + B = 20, while C+ D = 180. We also know that our authority doesn't make mistakes very often, so that A/A+B = .9, or A= 18 and B =2. Similarily, we know that C/C+D = .9, so C = 162 and D =18. What is the universe or total collection of cars and identifications in which our authority says that the "car was yellow". It is the information state containing A and D, a total number of 36 different states. Only in half of those states, A, does our authority get it right despite his 90% ability. This is because the chances of getting a yellow car are small, 20/200. So when our expert identifies a yellow car, he has picked a relatively rare event to be right about. As David Hume said, and I paraphrase, when presented with testimony as to a very rare event, I have to judge whether the rare event happened or that testifier has made some mistake.

What does this have to do with magic gas pills?

Technorati Tags: hot topic, authoritative reviews, heuristic tools, test exercises, mac osx, gain protection, topic reading, psychologists, new computer, predictable, compilation, state of the art, scientists, psychology, testimonials, discovery, heuristics, product reviews, scott plous

Continue reading "Testimonials, Covariation Tables and Magic Pills" »

Posted by michael webster at 8:24 PM | Permalink | Comments (0) | TrackBacks (1)

The press release was short on details about the representations made to potential recruits. But now there is a story in the Boston Globe which sheds more light on the alleged scam. The news story states that Seng Tam said "Don't tell anyone, she warned them. People grow jealous. We have suffered long enough. Now it is our people's time to be rich." (my emphasis added)

Why was this effective? Especially judged in light of the implausibility of the scheme.

Continue reading "Cambodian Scam - One Universe Online" »

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