Used right, testimonials are great. But sometimes they can be used deceitfully to market crap products, even when the testimonial writer is being honest.

In “The Value of Testimonials“, James Laidler, MD, shows how quack medicine promoters can obtain a constant supply of sincere testimonials from customers who honestly believe they’ve bought something great.  Laidler begins with a painfully clever introduction from the “financial services” arena:

“The scam artist gets a list of potential victims and sends half of them a letter (or e-mail) telling them a particular stock will rise in price over the next week - the other half get a letter saying the stock’s price will fall. After a week, he checks the stock price and discards the names that got the “wrong” advice. Next week, he sends half of the remaining potential victims” a letter saying that another stock will go up - the other half gets the opposite prediction. And so on.

After four predictions, he is now down to a list that is 1/16th the size of the one he started with, but those people have seen four “amazingly accurate” predictions. They are much more likely to pay to continue to get stock tips now that they have seen this incredible demonstration.”

Remarkable, isn’t it?  There’s no end to the different ways that scammers can do their work.

Caveat emptor — let the buyer beware.

Back in March, my friend Barry Campbell and his wife started investing in their own White Trash and Minor Vices Portfolio.

As Barry explained:

Everyone says “invest in what you know.”

I’m about to put my money where my big mouth is. Carrie and I invest, mostly in index funds and ETFs, every month through Sharebuilder, which allows fractional purchases of shares in stocks and funds for a flat monthly fee.

The vast majority of our modest monthly stake goes into a total-market index fund and an aggregated bond fund.

But I’m going to make a modest investment in a stock portfolio — a mini-fund of my own making, if you will — called “White Trash and Minor Vices” (motto: don’t beat your wife, beat the Dow) the constituent stocks of which are:

• BFB - Brown-Forman Corp. Cl BHolding company for distilleries that produce Jack Daniel’s, Early Times, Canadian Mist, Southern Comfort, Finlandia, and others. Recently acquired a major stake in a Mexican tequila manufacturer.
• BUD - Anheuser-Busch Cos. Inc.Brewer of cheap domestic beer; owner of theme parks.
• CHB - Champion Enterprises Inc.Major manufacturer of mobile homes and modular buildings.

For Barry’s description of the whole portfolio, click here.

How are they doing?

[November 8, 2007] The market has its ups and downs, but White Trash just keeps on gittin’-r-done.

Since its inception in March 2007, the White Trash Portfolio is up 11.1%.
…Over the same time period, exchange-traded funds (ETFs) tracking the major indexes performed as follows:

• DIA, which tracks the Dow Jones Industrial Average, is up 6.9%.
• SPY, which tracks the S&P 500, is up 3.2%.
• VTI, which tracks the performance of the broad US stock market as a whole, is also up 3.2%.
• IYC, which tracks the Dow Jones Consumer Cyclical index, is down 6.5%.

Go Barry!

Early in my career, the management team of a large professional firm asked my opinion about how they were conducting their affairs. I responded with a very honest, direct and candid answer–”Here are the things you are messing up, and this is what you should have been doing!” To my surprise, I was fired for being a disruptive influence. This was hard to understand, since I knew (and I knew that they knew) that I was correct in my diagnosis and prescriptions.

Eventually, I learned the obvious lesson. It is not enough for a consultant to be right: An advisor’s job is to be helpful. I had to “earn” the right to be critical. Critiquing one’s clients is, by definition, a part of every consultant’s job, since suggestions on how to improve things always imply that all is not being done well at the moment. We must not only be smart, we must be diplomatic, sensitive and gentle–and behave in such a way that we are trusted!

– David Maister, in The Advice Business: Essential Tools and Models for Management Consulting. Excerpted at DavidMaister.com

I suspect that David Maister is the most highly regarded mainstream* consultant writing today. While most of his teaching is based on personal experience and observation (rather than academic research methods that rely on broad surveys), he does not present himself as a guru. His insights are strong enough and presented clearly enough that all you have to do is read. He doesn’t need a cult of personality to get people excited.

——————

*other consultants like Peter Block may be as highly regarded as Maister, but I classify them as “non-mainstream” because their teachings reflect and call for a spiritual approach to business leadership that Maister does not.

Excerpt from:

An Unordered List of Thoughts I Had During a Conference Call with a Potential Client Today:

- There’s no way in hell this is going to be under thirty minutes. Why are you lying to me? It’s not possible. You know it’s not possible. You are a liar, sir.

- God, I wish I’d been paying attention in college when they went over the definition of “synergistic” in English and “how to leverage it” in Business… Oh yeah, I didn’t go to college. That’s probably why I use regular words and thoughts to describe how I want to create a product and then make money on it. And why I know you can’t “leverage” anything, given that it’s a noun.

- IF YOU SAY “Drink the Kool-Aid” ONE MORE GODDAMN TIME, I’M GOING TO BURST THROUGH THE WALL AT YOUR OFFICE, KILL YOU IN A VERY UNSIGHTLY AND BLOODY WAY, AND THEN SCREAM “Oh, YEAH!”

- Facebook isn’t the internet, dipshit.

- You want four million users by DECEMBER?? You have four hundred active licenses for your product currently! Nothing - and I mean NOTHING - is going to add four zeros to the end of that number in three months short of hiring Arthur Anderson to handle the bookkeeping…

Full piece here at The Journal of Joe the Peacock.  Yay.

Hat tip to Claire Doyle at Red Beret Design.