Forbes magazine just made a major admission of incompetence recently. A few months back, they assessed entrepreneur Elizabeth Holmes’ value at 4.5 billion dollars, but in the past few days they dropped that rating to zero. The reason was very simple: the amazing technology she claimed to have developed was simply not real.
The scam wasn’t particularly hard to notice, either. Holmes claimed she had developed a comprehensive blood test which required only a drop of blood and could be performed at home in minutes. Considering that pre-existing tests require a full vial and can only test for one or two things at a time, that’s comparable to a jump from the horse-drawn cart directly to the 2016 Ferrari. Frankly, I wouldn’t expect that kind of advancement from a dedicated team of experts at MIT, much less a single woman in her early 30’s.
Still, for one reason or another, Forbes assessed her product at a ridiculous value. Considering how easily some people can be fooled, I’ve put together a quick list of red flags.
- The new product is more expensive than existing technologies, but functionally identical. Recall that the Gillette Mark 5 razor blade doesn’t give a demonstrably improved shave over a simple safety razor blade, but is far more costly. The same is largely true for Apple computers over non-restrictive PC’s – the tech is the same, but the branding doubles the price.
- The new product is exceedingly cheaper than established products. It’s like the common eBay scam of selling just the box for a gaming console for $50 to an unobservant buyer – no one wants to lose money.
- The new product makes seemingly impossible claims. There’s a crowdfunded project promising a self-filling water bottle that can keep you hydrated when there’s almost no water around, and popular YouTuber Thunderf00t has produced a number of videos explaining why it’s physically and mathematically impossible.
- There’s an ideological message in the branding. Holmes was touted by Forbes as the female Steve Jobs, even before her product had actually been tested or sold. Anita Sarkeesian made hundreds of thousands of dollars to produce a set of videos on how politically wrong video games are, and after missing her deadline by years has promised to not make all the videos she promised. Invisible Children received millions of dollars to stop a guerrilla general from abducting children for his army, but never accomplished a single of their stated goals.
- People are ridiculed for questioning the product. If it works exactly as advertised, and if it’s worth the price, the product will sell on its merits. Every con is built on emotions, and every con is defended using emotional attacks.
- To maintain interest, developers promise radical adjustments to the product. Star Citizen (though not yet definitively proven to be a scam) appears to be nigh impossible to create in the promised form. While the original was entirely achievable, the escalation of promises as the project has many backers questioning whether a product will ever come forward.
Scams have existed for as long as humans have. However, with just a little bit of healthy skepticism, you can sniff out most of the obvious ones.