Any form of leadership may gradually turn into dictatorship.

Thinking of the recent challenges faced by a specific franchisor.

Quote:

Being a leader, carrying great power and responsibility for other people’s lives, is a monumental test for the human psyche. The weak leader is the man who cannot meet it, who simply abdicates his responsibility. The dictator is the man who replaces the existing standards of justice and morality by more and more private prestige, by more and more power, and eventually isolated himself more and more from the rest of humanity. His suspicion grows, his isolation grows, and the vicious cycle leading to a paranoid attitude begins to develop.

The dictator is not only a sick man, he is also a cruel opportunist. He sees no value in any other person and feels no gratitude for any help he may have received. He his suspicious an dishonest and believes that his personal ends justify any menas he may use to achieve them. Peculiarly enough, every tyrant still searches for some self-justification. Without such a soothing device ofr his own conscience, he cannot live. His attitude toward other people is manipulative; to him, they are merely tools for the advancement of his own interests…

It is because the dictator is afraid, albeit unconsciously, of his own internal contradictions, that he is afraid of the same internal contradictions of his fellow men. He must purge and purge, terrorize and terrorize n order to still his own raging inner drives. He must kill every doubter, destroy every person who makes a mistake, imprison everyone who cannot be proved to be utterly single-minded…

— Dr. Joost A. M. Meerloo, The Rape of the Mind: The Psychology of Thought, Control, Menticide, and Brainwashing, 1956, p 115-6.

(false) Patriotism is the last refuge of a scoundrel.

Is preying on a military  family’s post-service vulnerability the sign of insincerity per se?

From a New York Times classified ad:

Come join a network that has pioneered and led the industry for 30 years. The UPS Store is the #1 Business and Postal Services Franchise for the 20th consecutive year (2010 Entrepreneur Magazine’s Top 500 Franchise List). The UPS Store is the #1 most popular franchise with veterans in the IFA’s Vet-Fran Program (2008 International Franchise Association). With over 4300 The UPS Store and Mail Boxes Etc. locations nationwide, our network continues to lead the market.

Baiting the Fish: Note how Cialdini’s “Weapons of Influence” are used to lure pensions and life savings capital:

1. New York Times (authority of a traditional media outlet),
2. Entrepreneur magazines’ Top 500 franchises (McMedia: authority for the unskilled and unaware),
3. 30 years… (franchisor success means individual franchisees will succeed, see Dunning-Kruger above),
4. Vet-Fran program (liking: acceptance, a member of the fraternity, endorsed/vetted by the “government”),
5. International Franchise Association (expertise/authority, funded 100% by franchisors and their friends), and are especially
6. vulnerable to the authority siren song from 2 directions: vivid, personal success born from supporting a strict command-control structure  while lacking the airy-fairy concept of discerning legitimate from illegitimate sources of authority.

Vets believe very strongly that people get what they deserve in this life (Just World fallacy) and would, therefore, strongly but heavily discount any non-authority based advice on a pre-sale basis. Going on “civvy street” is one of  life’s major transitions involving new/strange: work, employer, location, one/two incomes, schools, income levels, physical/mental challenges, diminished family/friend support.

Setting the Hook: The next marketing stage is an “exclusive” invitation to a very sophisticated, one-day seminar at head office (a “discovery day”). Just like in a gambling casino, these environments are very, very well thought-out, for one side’s benefit only. A real investigative journalist (John Lorinc) published an excellent description of this circus in a real media outlet (The Globe and Mail) in 2000. The Sure Thing describes the extremely effective individual and social psychology that allows predatory franchising to flourish in plain sight.

I’m glad to know great spirits like Peter Thomas or Carol Cross who, by making wise choices for their future, help me make mine.

— Samuel Johnson 1709 – 1784

The science of persuasion

Robert Cialdini‘s work is important to understand.

His 6 Weapons of Influence:

1. reciprocity, (giving a United Way pin)
2. scarcity, (limited quantities available)
3. authority, (basketball shoes)
4. commitment,
5. liking  (Tupperware example) and
6. consensus (social proof).

Understanding these techniques goes a long way to understanding franchising.

Can an empire be saved by shaming investors like Ariel Buk?

There are costs involved in maintaining investor confidence and commercial relationships. Some people need to learn to “take one for the team”.Ariel Buk and Sonia Karabin may need to understand that they should cool down, be quiet and go away about losing a $85,000 deposit on a non-existent Ontario, Canada franchise. They and, by extension, the many hundreds of other “failed franchisees” need to be taught their role in this confidence game by the industry stakeholders: take one for the team or risk being shamed.

1. James Daw presents the story in yesterday’s Toronto Star article,  Ice cream dream becomes nightmare about Mr Buk’s experience with Piazza Gelateria and Café. This is shrewd. For example, Mr. Daw opines:

They [husband and wife] should have looked more closely at the business opportunity, and their decision to use mainly borrowed funds after Buk had lost his job.

They should have considered the minimum $300,000 cost of a lawyer to sue for a refund if things went wrong, and the chances of recovering anything from a relatively young numbered company.

2. Robert Cialdini lists authority as one of Six Weapons of Influence. My experience is that attorneys are given a  lot of authority by new Canadians. Many of us see past their pretensions, BS and fear. [Examples of authority.]

Ben Hanuka of Davis Moldaver LLP is quoted as saying:

“Very few mom-and-pop franchisees ever go to that length (of hiring experts to research a franchise opportunity),” says Hanuka. “It sounds too complicated to them.”

All it well with the world the reader is assured. Go back to sleep because these people get what they deserved. The blame lies with:

1. the anonymous, individual “other” (mildly retarded immigrant scapegoat) deserved what he got (“your success follows from your blind obedience to authority” dogma)  and not that
2. stakeholders align their self-interest in maintaining a facade of legitimacy: not a fake, or a Potemkin village scheme which has preyed upon identifiable groups, in plain sight,  since at least 1971.

Social Psychology-based Hypothesis: Elite stakeholders deflect systemic wrongdoing by using the largely-internal mechanisms of On Cooling the Mark Out by Erving Goffman (shame-humiliation effect) while using the public’s widespread fallacy of the Belief in a Just World, BJW (Melvin Lerner, retired University of Waterloo, Canada) in the country’s largest daily newspaper.

Every dying empire resorts to displays of public humiliation.

Why were people crucified in Jesus’ time?
Crucifixion was a Roman custom used on the worst malefactors and rebellious slaves. Judea was a tributary to Rome at that time. It is recorded by the Jewish historian Josephus that after the last rebellion of the Jews and the capture and razing of Jerusalem, the countryside was practically denuded of trees the Romans crucified so many. WikiAnswer

Detail: Crucifixion was often performed to terrorize onlookers into submission. Victims were left on display after death as warnings. Crucifixion was usually intended to provide a death that was particularly slow, painful (hence the term excruciating, literally “out of crucifying”), gruesome (hence dissuading against the crimes punishable by it), humiliating, and public, using whatever means were most expedient for that goal. Crucifixion methods varied considerably with location and time period…

While a crucifixion was an execution, it was also a humiliation, by making the condemned as vulnerable as possible. Although artists have depicted the figure on a cross with a loin cloth or a covering of the genitals, writings by Seneca the Younger suggest that victims were crucified completely nude. When the criminal had to urinate or defecate, they had to do so in the open, in view of passers-by, resulting in discomfort and the attraction of insects. Despite its frequent use by the Romans, the horrors of crucifixion did not escape mention by some of their eminent orators. Cicero for example, in a speech that appears to have been an early bid for its abolition,  described crucifixion as “a most cruel and disgusting punishment”, and suggested that “the very mention of the cross should be far removed not only from a Roman citizen’s body, but from his mind, his eyes, his ears.” Wikipedia

Humiliation is the most unpredictable, violent and destructive human emotion. It can result in many types of loss (see Bob “Bhupinder” Baber, WikiFranchise.org)

Julian Assange: Why the world needs WikiLeaks

WikiFranchise.org helps create nodes within whistleblowers’ minds.

• It is makes the industry’s weapons of influence redundant.

TED video

The controversial website WikiLeaks collects and posts highly classified documents and video. Founder Julian Assange, who’s reportedly being sought for questioning by US authorities, talks to TED’s Chris Anderson about how the site operates, what it has accomplished — and what drives him. The interview includes graphic footage of a recent US airstrike in Baghdad.

Social proof: “Fitting in” as a franchisee serves somebody’s interests

Behaviour is influenced much more that that we commonly think.

Bob Cialdini suggests a very useful model in his Science of Persuasion.

Social proof is a central one used in franchising. What our peers believe to be true is very persuasive to us.

Social proof:

a psychological  phenomenon that occurs in ambiguous social situations when people are unable to determine the appropriate mode of behavior. Making the assumption that surrounding people possess more knowledge about the situation, they will deem the behavior of others as appropriate or better informed. Wikidpedia

“Normal” in franchising is initially set by the franchisor for their newbie.

Another “Weapon of Influence” (authority) helps the franchisor orient the new franchisee to a subservient, look-to-Big-Daddy mentality.

However, this new “normal” is eroded as franchisees become more experienced. It all seems to go one way.

Sharing information between peer franchisees defuses the power of social proof and authority as behaviour-modifying techniques.

YouTube can help stop corruption

People talk about injustice in franchising.

How many people do something innovative to change it?

Alexi Dymovsky uses YouTube to apply pressure to solve police corruption in Russia.

Russia’s whistleblower cop is a YouTube sensation, Miriam Elder, Global Post

Deer: Are We Trade Show Activists?

A good question but a better one is:

Can we afford not to understand how we got roped into a losing deal?

I think you better Get Smart or you’ll find yourself on the wrong side of the next buffet.

• In confidence games, it’s a fact that more than 50% of the chumps are good for at least a 2nd fleecing.

I took a look at a trade show advertisement this week and the posting was picked up on Michael Webster’s weblog.

Anyone who contacts me is invited to join me in interpreting how a trade show works. Live.

It is a very sophisticated and well-thought out selling environment that is used to qualify candidates; economically but mostly psychologically.

Your lack of awareness of the dangers [ignorance?] is really your admission ticket.

The first step in protecting your family is education.

I’ll be relying on the Six “Weapons of Influence”: social proof, authority,commitment and consistency, reciprocation, liking and scarcity. Bring your copies. You’ll get a tutorial on not only the Science of Persuasion but on relevant cognitive biases (especially confirmation), The Tipping Point, behavioral economics, Theories of Unusual Events and Risk Homeostatis, heuristics (eg. human thinking shortcuts that usually help us but sometimes result in catastrophic errors) and 10 years of intense industry analysis.

Agenda

1. We’ll go over the basic confidence game role structure and process: house, roper, inside man, shill, chump, fixer, etc.
2. Why it is so critical to have independent legal advice before you sign (goes double for deals less than $20,000).
3. The selling value of comparing (anchoring) a new system with the best, most successful franchisor: McDonald’s.
4. What something called “Prospect Theory” has to say why you will stay in a losing business much, much longer than you could ever imagine.
5. Why you should only sign when there is an Independent Franchisee Association, IndFA present (versus the lapdog Franchisor Advisory Council).
6. We’ll decode the hidden messages within the marketing material (worked for an advertising design studio + Ivey MBA + McLuhan disciple).
7. I’ll explain the role of the current SME loan guarantee program.
8. Why Canada is a safe harbour for white-collar crime.
9. How this recession is shattering the conventional wisdom that franchises sell better, the worse the economy gets [HINT: new sales, now, are the worst on record].
10. Why the hook has to be planted in the male first.
11. How shame is invoked to silence particularly new Canadians.
12. Why exceptionally thorough pre-sale due diligence is much more limited than you think and could in fact increase your chance of business failure.
13. The role of the expert seminar.
14. Why the most rational and dodgiest should absolutely force a copy of Ontario’s franchise law into your hands.

All of these fraudproofing skills are entirely understandable, applicable to many situations and will last a lifetime. I was taught by the best.

In these days of Bernie Madoff, BIM, CitiGroup, etc., I don’t think you (or anyone you know in the traditional or new media) can afford to turn not to learn more about the Science of Persuasion and applied psychology.

Offer to Sellers: You can join us as well. I will gladly discuss my views in front of anyone, at anytime. These persuasion techniques have been proven scientifically and it’s time that more people understood how skillfully they are applied in franchising.

If I were in your shoes, I’d much rather guarantee us free rein rather than be seen to be resisting evaluation. That old hand-in-the-lens shot sells television shows but is, by its airing, basic proof of guilt.

Consumer education is good and only the fraudsters have anything to hide.

Cost?: Nothing

Just call me at 705-737-4635. Bring the whole family. les.j.stewart@gmail.com

PS: Do me a favour: Sign up to receive each new post (see top right, RSS feed). FranchiseFool is now read in 44 countries. Not bad for a single Canuck in one year, I think.

— UPDATED for Fall 2009

Pickpocket signs & Disclosure Docs: The same outcome

Disclosure documents are the fraudulent sales agent’s best friend.

They:

1. give the [to me, intentionally designed] false impression that some body in authority is overseeing franchising (note the federal agency’s logo, illusion of relevant information, see Robert Cialdini, Authority as “Weapon of Influence”) and
2. identifies very efficiently and early the sucker’s major source of ignorance and fear (the obstacle the predatory member of the selling mob needs to overcome to close the sale).

Pickpocketing (or “the cannon” in professional thievery lingo) usually consists of two, three or four people working in a mob (a group of experienced specialists). It is an ancient underworld art that has been profitably practices for centuries. It relies on distraction, manual skill and very close cooperation between specialists within the criminal group.

The operation consists of 5 basic steps:

1. Fanning: determining which pocket the wallet is in,
2. Pratting the sucker: pushing the mark (intended victim) around gently in order to distract his attention and to get him into a good position for the next operations, (usually done by the “stall”, sometimes by faking drunkenness),
3. Put the Duke: someone else the “hook, wire, or tool” puts their hand (“Duke”) into the victim’s pocket and removes the poke (wallet),
4. Cleaning: the hook then transfers the wallet to another member of the mob who
5. Stashing: takes the wallet off-site so if the next mark objects, the whole day’s take isn’t at risk.

A “Beware of Pickpockets” sign is very helpful to pickpocket professional thieves because:

…whenever a sucker sees this sign he feels the pocket in which his money is located to discover whether his pocketbook is still there, thus relieving the mob of the necessity of fanning him [see Step 1, above].

The Professional Thief: An astonishing revelation of criminal life, The University of Chicago Press, 1937

Disclosure documents assist opportunistic sales agents in a similar way. They not only trade on false authority but provide an efficient means of defining the next mark’s fears.

• Defining a sucker’s fears goes a long way toward getting the chump to sign.

Disclosure laws have never been designed to protect potential investors and they are emphatically not a step toward Relationship Laws.

Disclosure and relationship laws are McLaws (intentionally ineffective) in protecting investors’ interests against the major ROI threat: future franchisor opportunism.

Undue Influence: The Case of the AUS Professor

Publicly funded institutions can become co-opted or captured by special interests.

Some university faculties have a better or worse reputation for pandering to special interests when compared to other disciplines. Business schools are not well respected by other faculties for their independence of thought.

I’ve seen it at my old school and confirmed it in other universities as well.

The Greeks defined 3 modes of persuasion:

• logos (reliance on facts and figures: can be true or false),
• ethos (authority, honesty of speaker, morality), and
• pathos (appeal to emotions, sense of injustice, outrage).

Franchisees appear in front of public hearings and rely almost entirely on the rhetorical device of an appeal to justice: “It’s not fair that they did this and that.” Policy makers listen and judge its “truthiness“.

• Generally, their narratives are concrete, visceral and credible.

Big Franchising responds if they have any remaining credibility, directly with at times shaky logos and ethos.

1. Consider the following article in Australia’s SmartCompany: Survey reveals drop in franchising disputes as franchising inquiry continues.

It says:

A new survey of Australia’s $130 billion franchise sector has shown disputes between franchisees and franchisors have declined, with just 2% of Australia’s franchisees classified as being in dispute.

Let’s stop there and list the persuasive assumptions that this single sentence relies upon:

• survey: a scientific, logical, rational, independently verifiable academic study that is reviewed by other academics [did it appear in a refereed academic journal? no],
• $130 billion sector: size matters: infers that big = successful, growth is good [uses social proof, is a huge credit crisis and run-away cancer growth good?],
• declining number of disputes: situation is getting better [what is a dispute? how many have abandoned? is the mean dispute big or small?],
• just 2% of franchisees in disputes: tiny problems, inconsequential, minuscule [can use anchoring to deceive].

This opening sentence is strictly a blatant misrepresentation, lacking in any connection to formal logic or any verifiable measure. The “just 2%” is a hallmark give away as to lack of any journalistic standards or any pretense of editorial oversight. Shame on SmartCompany but why is a university named?

If the 2008 Report is similar in method to the 2006 Report, it may be junk science: bought and paid for by its funders, the Franchise Council of Australia. Franchisor-controlled associations are well-known for blocking any changes to a statute, regulations and public regulatory body mandate.

You decide.

2. Next, let’s take a look at more detail into the role of the Griffith University. See the FCA’s media release: THE POWER OF ONE STRONG SECTOR REVEALED IN POSITIVE RESEARCH FINDINGS

Authority is clearly defined as another Weapon of Influence by social psychologist Robert Cialdini that can be applied to universities. They can be used to give the impression of academically rigorous research when really the work is simply a consultant’s report.

I don’t begrudge business admin profs or their peers earning the vast majority of their income from consulting to one or the other industry.

What I wonder is whether it is appropriate for an academic to overstates their conclusions (either intentionally or unintentionally) during a time of national lawmaking?

You decide if Professor Powell has exercised undue influence or abused his duty:

“The continued growth and maturation of Australian franchising is impressive, particularly considering the current economic outlook, a recent change of government, and a franchising sector that has faced close government scrutiny” said Professor Michael Powell. Pro-Vice Chancellor (Business), Griffith Business School.

Did Professor Powell interfere with the Parliamentary Joint Committee on Corporations and Financial Services’s Inquiry into the Franchising Code of Conduct? I checked the 140 written submissions and didn’t see his name.

The test could be: Did he know or would he be reasonably been expected to know that his publicly funded authority could be used used to influence [inappropriately interfere?] with the operation of a  parliamentary committee?

1. True scholastic work is published in refereed professionally-recognized journals to ensure high quality (an editor and reviewing peers, correct methodology, usually a very, very narrow scope, transparent auditing, meets ethical and conflict of interests standards, vetted before publishing, etc.). There is a whole series of checks and balances to weed out biases [innocent and not so innocent].
2. Consulting work, no matter how many PhDs are piled up, has none of these centuries-old safeguards in place.

• Blurring these lines is not fair, especially during a time of a fairly controversial public lawmaking process.

Academic research is a credence good and as we have seen, is susceptible to cheating because “Joe Public” cannot determine if it is the appropriate quality or quantity.

I have read enough articles and progressed far enough in a good school to seriously question the validity and reliability of this work. I imagine any academic that values their reputation would not rely or quote this report in their submission to the Joint Committee.

Unfortunately, some scholars are more closely attuned to serving dominant commercial objectives rather than the pursuit of reality-based truth (as opposed to power-based truth) as is their duty as a tenured academic.

My qualifications only go so far to speak on behalf of academic rigour and the arguments not made [eg. sunk costs as the primary and unique source of franchisor opportunism] in the current Australian public hearing.

If a second opinion were to be sought, I believe Gillian K. Hadfield might be an appropriate candidate. pdf CV