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I want to tell you about three experiences from when I was a young man, from 10 years
old through to about 20. Then I'll show you how they shaped my perception of business,
selling and consumer behaviour, even to this day, so many years later. And how I'm
using that experience and know-how to help other people like you, avoid
becoming victims.
See if you can relate to any of these experiences, too.
Incident 1:
The Matinee Serial of the Mine Dump Salter
As a young boy of 10 years I loved Saturday afternoon matinee serials at the local
cinema. They'd open with a quick review of what had happened the previous week, then
they'd move into today's episode, then they'd finish with a spectacular, heart-stopping,
cliff-hanging event, followed by a hard-sell to come back next week to see what happens.
Of course, what really happened was usually a cheap cop-out of improbable proportions
that left young fans cynical and disappointed... until the latest cliffhanger, followed
by the tantalising trailer for next week's episode!
And we kept on coming back, week after week.
One of the most memorable of these serials, a western, told the story of how an evil
mine owner, who'd become fabulously wealthy during the gold rush era, bought up the
rights to all the tailing dumps in the region. Tailing dumps were the discarded soil,
gravel etc from the mines that were such an eye-sore (and often a health risk) in
any mining community.
He was selling rights to mine the tailing dumps after he'd "salted" them
with tiny traces of gold, and get-rich-quick ex-miners and newcomers to the region
were handing over their money in the desperate hope of becoming rich by uncovering
gold nuggets missed by the original miners.
He also owned the local stores selling picks, shovels and supplies to the newcomers
at exhorbitant prices. He owned the local saloons where they drowned their sorrows
or celebrated their rare lucky strikes usually a tiny nugget planted by his henchmen
to keep the suckers eager. He even owned the assay office that purchased any gold
found at rock-bottom prices. He cleaned up at every step of the way downhill, and
the mindless miners were too greedy, lazy, ignorant and stupid to see what his real
game was in keeping their vain hopes alive.
I never forgot how incredulous I'd been that people could be so easily duped by false
promises that appealed to what they wanted to be true in such powerful fashion.
And I never forgot the come-uppance the unscrupulous mine owner received when his
duplicity and greed were finally recognised, and the people he'd exploited and abused
turned on him.
Incident 2:
The Body Builder and the Direct Marketer
When I was about 14, I was captivated by a series of popular magazine ads telling
me I could build a better body and become more handsome, more attractive to women
and able to fight off bullies who kicked sand in my face at the beach and stole my
girl, etc by buying their body building program.
I mentioned it to my policeman father, and he explained how the ads were basically
"sucker bait" to lure fools and part them from their money with an endless
array of products and programs that promised to deliver the goods but, somehow, as
soon as you bought one of them, you discovered you needed the NEXT one... and on
it went.
I thought his view was a bit cynical, so I sent away for the free information
kit.
I soon received a well-written sales letter and brochures promising me a magnificent
physique, a swarm of beautiful young women, glory and good looks just as soon as
I sent the (to a 14 year-old) expensive purchase price.
I showed the information and sales letter to my Dad. He laughed and advised me to
do nothing, just to wait a few weeks. Then, he assured me, I'd receive another letter
and literature but at a lower price.
So I waited. And, sure enough, the next package arrived, offering the same deal at
HALF PRICE... but only if I made a decision right there and then, and sent my money
within 48 hours.
I didn't.
A few weeks later, another package arrived, this time offering me the same deal at
even LESS cost! So I decided to see how low they'd go.
Over the next few weeks, before the packages stopped arriving altogether, the price
dropped to somewhere around ONE-TENTH of the original asking price. I found this
intriguing. But what I found even more intriguing was that this company had gone
to the trouble and expense of printing all of these letters and materials. They obviously
planned this process to be ongoing, knowing that the true suckers would pay more
and the die-hards would hang out for lower and lower prices.
Incident 3:
The Lazy Man's Way to Riches
At about this time, I also sent away for a book advertised with full-page, long-copy
ads by a man named Joe Karbo. The books was titled "The Lazy Man's Way To
Riches" and Joe's ads were masterful pitches with enormous emotional appeal.
They obviously worked, too, because the ads kept appearing, month after month, in
those expensive national magazines.
Intrigued, I sent off my money and duly received a small (MUCH smaller than I expected)
book that told how Joe had been broke and at risk of losing his dream home, when
he discovered the secret of direct response advertising. The second half of the book
was a step-by-step guide for setting up a simple, direct response mail-order business
of my own.
The thrust of Joe's advice was to write and publish a book like his, then advertise
it to suckers like me, who'd soon begin sending their money to learn the "secret"
of how to get rich without any effort.
Luckily for me, I was more interested in the strategies and techniques these
advertisers had all used to tap into their audiences, than in getting rich quick
or building a new body.
Putting the
strategies and techniques to work legitimately
Some years later, I found myself in the advertising profession, writing very successful
copy for direct response clients. I hadn't followed Joe's advice exactly, but I had
certainly learned how powerful direct response copywriting could be from those early
experiences.
My first attempt at anything like what Joe had advised came in 1976-7. I was running
a creative and technical services business related to the printing and publishing
industries at the time, when a frustrating personal experience alerted me to a real
and pressing need in the market place.
I was living then in the town where I was born: Wonthaggi, the most photographed
town in Australia in the years from 1909 to 1914. Wonthaggi was a State planned and
owned town to support the newly-discovered Powlett Coalfields. The State Mine had
opened there in 1910 and the population of the initial "tent town" had
swollen to more than 5,000 people very quickly.
My grandfathers had moved to the town to work in the coal
mines. My maternal grandmother, with whom I stayed regularly
on holidays as a young boy, had a large box of photographs
that I loved to pore over on cold, blustery winter nights
by the light of her oil lamp. She promised me that, when
she died, her photo collection would be mine.
Now, in the early 1970s, her promise had been thwarted by the thoughtless actions
of family members, who had cleaned out her home after her death and, as so often
happened at the time, tossed most of her belongings onto a roaring bonfire in her
back yard.
I was devastated that such a priceless heritage had been so senselessly lost.
Then I began hearing of more and more photo collections, diaries, journals and other
priceless primary historical sources being destroyed around the district as more
and more of the older generation passed on. The straw that broke the camel's back,
for me, was the news that the family of two elderly, spinster sisters, daughters
of a local doctor who had settled in the town as children before it was even a town
in the late 1890s, had burned their journals a meticulously-kept historical record
of the town and its people for more than 80 years.
 I
decided to publish a book of photographs of the town, the State Mine and the people
of the region, together with some historical background to put it all in contect.
I began enquiring after sources of photographs and reached agreements with a number
of people to publish their collections. Then I began promoting the book by direct
response advertising to see if there was likely to be a worthwhile market and demand
for it.
In a nutshell, I pre-sold more than 85% of the copies at premium prices
before the book was even written or compiled, let alone printed. Some 10 months after
reaching those agreements I went to collect the photos for publication only to
discover, to my horror, that more than two-thirds of them were no longer available
because the owners had either died or gone into care, and their families had destroyed
their photo collections!
The book was a sell-out success, due largely to the direct response advertising campaign
I created to market it. But also to the very real perceived need for it, in order
to preserve a priceless historical heritage.
The More Things
Change, The More They Stay The Same
Over ensuing years I watched as different operators came and went in the magazines.
They all had one thing in common, : they targeted their market — the greedy, the lazy,
the fearful, the ignorant and gullible — and they milked
it dry.
First, they created a powerful vision that promised the reader they would
get rich quick, with little time or effort, if they just used the writer's exclusive
or unique system. All they had to do was pay the writer the sum demanded for their
secret, inside know-how.
I watched as the Pyramid-selling scams of the late 1960s and 1970s lured the same
audience with the same ludicrous, but oh-so-seductive promises of instant riches.
I watched the same people react with outrage when they discovered how they'd been
duped yet again, and I scratched my head in wonder at the never-ending gullibility
and mindless stupidity that drove them back into the clutches of the same predators,
over and over and over again.
The High Tech
Revolution
In 1996 I logged onto the Internet for the first time and began exploring. I guess
I shouldn't have been surprised, but I was, because the first thing that caught my
eye was a new "Gold Rush" Era peddling Internet-based systems of online
malls and related services and cyber "real estate".
- The emotional appeals
were all the same.
- The words were still
the same.
- The only thing different
was the product (this time, the Internet itself).
I
watched, appalled, as well-meaning (but clueless) people
paidoutrageous sums of money for the right to sell a new-fangled
marketing system to others at a lesser sum. One such scheme
was selling the first level of buyers a marketing system
for US$100,000.
These people would then sell the system for US$50,000 to the lext level, and so on.
What was the system? And what did it sell?
It was nothing more than a self-replicating web site and autoresponder system promoting
this system! There was NO tangible product. In short, you bought the right
to sell the right to sell the right to sell the right to sell the right to take people's
money from them. Right?
In other words... it was no different from an out-and-out pyramid selling scam!
But because it was set up and run by an Internet "Guru"
with a Ph.D and reputation as a self-proclaimed "Guru",
nobody thought to question it until I suggested in a leading
professional discussion list that the "Emperor"
was wearing no clothes.
A lot of people took major financial hits that they couldn't
afford.
The Low Tech
View
Around the same time — the mid-1990s — we saw
the rise of the property investment "gurus" and
their high-priced seminars and workshops. People flocked
to hear how they could buy up old, cheap houses, re-value
and rent them, then use the "instant" equity from
the re-valuation to fund dozens more homes until they could
retire, rich, on the rental income each month. They could
use the rent payments and tax breaks from negative gearing
to pay for the properties.
Over the next couple of years I noticed some things about the property market.
I noticed that property prices — especially for the
old, cheap homes the new graduates from these "Get
Rich in Residential Investment Property" programs
were all seeking — began to climb steadily. When I
asked the #1 real estate in our city if these people were
driving up prices, he laughed and said yes, they were, and
he was about to launch a whole new division of his business
that would teach people how to do it, too.
I noticed that, pretty soon, it was almost impossible to find any of the kind of
properties the "gurus" were advising their acolytes to buy, so they were
now advising them to look for good opportunities in apartments and units instead.
Not long after this trend developed, I noticed that the
"gurus" always seemed to have amazing "special
opportunities" just for their students. Always sold
"off the plan" (so buyers could save a fortune
in government stamp duty because the apartments and units
weren't built yet) and, with a wink and a knowing whisper,
that "these apartments would double in value by the
time they were actually built, in about two years time".
Then I noticed that each of these "gurus" seemed to have connections to
well-known property developers, and that new, high-rise residential towers began
springing up in strategic areas of the city, built by these same property developers.
Clients in the building industry told me that the "gurus" received very
lucrative commissions on every property sold to their followers. In fact, entire
developments were being allocated to individual "gurus" for them to sell
to their students.
I also noticed that the prices charged by the "gurus"
for their training courses climbed higher and higher. For
one course, mostly filled by people who'd attended previous
courses by the "guru" involved, the prices climbing
higher with each program, cost $55,000,
! Just to learn how to make your fortune in residential
property investment?
I wasn't surprised when this same "guru" announced
the availability of loans to fund your participation in
his exorbitantly-priced programs. Those loans were available
through his own finance company. Interest rates were outrageous,
but the loans were easily obtained if you had equity in
your home to offer as security.
I wasn't surprised, either, when a lot of graduates began running into trouble. These
were the same people who'd driven up prices of residential property to record levels,
ignoring the advice of the "gurus" to buy cheap properties, on which they
could gain an immediate boost in valuation, then use that overnight equity increase
to fund even more cheap property purchases to rent out, using the tax savings from
negative gearing to offset their own contributions.
What kind of
trouble?
For a start, a glut of rental properies began to occur. Many were finding
it difficult to attract tenants, especially at the the high
rentals the "gurus" had told them to be sure to
charge tenants in order to minimise their own contributions
toward loan repayments, and to cover the high mortgage repayments
created by them paying too much for their properties. So
they were suddenly being faced with the prospect of having
to cover monthly mortgage repayments on several properties
that had no tenants.
While the tax savings available were very attractive, before long they'd used up
all of the available tax deductions. After all, they only paid so much tax in the
first place. You couldn't pay less than zero. So, after the first few deductions,
there weren't any more tax breaks to help cover their contributions to mortgage repayments.
Ah... but there was fresh hope. Before long, there was a sudden surge of cheap properties
coming onto the market for residential property investors and still more eager
graduates from the "gurus'" expensive programs to snap up. A real buzz
flew around the city. But where were these newly-available properties coming from,
so unexpectedly?
Surprise, surprise! They were flooding onto the market because
the previous bunch of graduates couldn't keep up their mortgage
repayments! Their dreams of retirement riches had evaporated
as they found themselves faced with crippling debts, not
just for the properties they'd bought (but couldn't rent
for anything but rock-bottom prices, if at all), but for
the high-interest loans they'd taken out to pay for those
over-priced, over-hyped residential property investment
programs!
Not only were they having to unload their investment properties
at huge losses, they were being forced to sell their own
homes as well, to cover the shortfalls.
The biggest "guru" hit the headlines, shortly afterward, when government
regulators raided his offices and homes to seize records. Then, a few days later,
he was charged with fraud and deceptive conduct. Others soon followed. Within weeks,
it was hard to find any advertisements in the newspapers for residential investment
property seminars and workshops.
But before long, a new trend began to appear. "How to make your fortune in
share and options trading" seminars were soon the new rage. Computer software
systems were now making it possible to know exactly when to buy and sell, taking
all the risk out of a notoriously volatile, high-risk wealth creation opportunity.
I noticed, too, that most of the new share trading "gurus" were the same
as the previous residential property investment "gurus".
Then it struck me hard. In fact, I couldn't believe I hadn't noticed it before
this.
All of the "gurus",
high-tech and low-tech, were using the same techniques I'd seen used
when I was young!
Those "gurus" were
teaching inexperienced, eager people how to create wealth using the techniques and
systems that the "gurus" themselves had used to make their fortunes in
residential property investing, share and options trading and, now, internet marketing.
But notice the words here?
"HAD USED" was the key. Past tense.
These "gurus" had already made their
fortunes from riding the face of the latest wave. From stripping
out the gold mines.
Now they were salting the tailings and selling the know-how, the picks and shovels
to the gullible masses who'd missed the Gold Rush, but who were eager to get involved
now that most of the gold was gone!
They use expensive, dazzling, brilliantly-written and presented advertising campaigns,
direct-mail letters, free information seminars, web sites, e-books, email campaigns,
online videos and teleseminars that take the promotion strategies originally used
by savvy mail order marketers like "Young Hercules Body Building" and Joe
Karbo with such stunning success, to whole new levels and, with the Internet, to
whole new audiences.
Anyone who really knows about wealth creation knows that property and share trading
are opposite sides of the same wealth creation cycle. They go round and round in
waves, one side up, the other down, then vice versa. At the right time, as market
conditions improve, it's property investment that offers the best returns. Then,
as that market subsides, it's shares and options that begin to offer better returns.
What's happening now is that the cycle is getting shorter. The waves come
faster. So the windows of opportunity are bigger, but much shorter. You have to really
know what you're doing to cash in on those cycles, then get out before the wave breaks.
But if you're a good spruiker, you can still make a fortune
even after the wave passes by selling the tailings, the
know-how, the picks and shovels and supplies to the tail-enders...
those "nervous nellies" who are too scared to
ride the face of a wave, but can't resist joining all those
eager, ignorant imitators wallowing in the wake of the latest
wave, before finding themselves sucked out into deep water,
way over their heads, by the unseen rips beneath
those appealing waves.
, have you ever heard the expression "ripped off"?
As the old saying goes, "there's nothing new under
the sun" and "gurus" are no exception. As
long as people have been ignorant, anxious, greedy, lazy
or gullible, there have been "gurus" willing to
relieve them of their money. The trick lies in knowing how
to sort the legitimate sellers from the snake-oil peddlars.
And as long as legitimate sellers insist on mimicking the
antics of sleazy snake-oil peddlars, they'll continue to
be tarred with the same brush in the public perception.
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