I created my guru-rating Web Page in April of 1997. It has been an interesting experience and I have a few observations to make after years of reader feedback.
Here is one email I received from a visitor to my Web site:
Several months ago I started my journey as a real estate investor. Like so many other people trying to figure out where to start, I surfed the internet looking for advice. The first time I stumbled upon your site I remember feeling completely infuriated. How could you bash some of the gurus who got me interested in this business? How could you make such valid negative statements about the people who I trusted so dearly? Needless to say, I didn't bother coming back to your site for some time because I thought that you were just a guy who loved to prove other people wrong. My guess is that many new people in this business have the exact same reaction.
So, I continued following the gurus' advice and got absolutely nowhere. Almost everything you said about their advice turned out to be true. I also noticed that the experienced investors in my area all expressed similar attitudes towards real estate that you do. Slowly, I began to realize who's advice I should take and who's I should not. I want to commend you for being a person of integrity and saying what you truly feel. Your advice is sound and realistic which is something that most new people cannot comprehend. In a business where it is very easy to prey upon the young and naive, you say what you believe is truly in the best interest of everyone. I applaud you for this. Although I am still young and not very experienced, I want to thank you for being a voice of reason that I am sure will help me well into the future. Keep up the good work! Sincerely, David Bradley
Many readers have commented that they got information from a few of the gurus in question, that they generally agree with my opinions on those gurus, and therefore they are inclined to believe me over the others. Even some of my harshest critics will, when pressed, admit that they agree with about 80% of my reviews. I suspect it would be hard for anyone to achieve higher than 80% agreement.
Other readers are rank newcomers, but are inclined to accept my opinions because the readers are suspicious of get-rich-quick claims in general and/or find my discussions of various aspects of real estate investment persuasive.
The dumb market segment
Many visitors to my Web page are just plain dumb. They cannot understand my explanations about why nothing-down and lease-option techniques usually hurt the people on the other end of the deal from the investor. Nor do they understand why they should not be getting financial advice from a guy whose books contain numerous serious inaccuracies or illegal advice.
I cannot help dumb people. My typical newsletter subscriber is generally successful ($1,000,000 net worth), mature (47.5 years old), experienced (12 years owning rental property), and highly educated (over 16 years, in other words, my average reader attended graduate school). I have never pursued the low-IQ market segment and do not plan to start. But the Internet now brings them to me for the first time in my career.
The hate mail I get is almost always anonymous. That is, the writer hides behind a handle or screen name and refuses to give his real name. I randomly investigate such hate mail using standard Web resources. For one thing, I suspect some are sent by opposing gurus or their associates. One recent hate mailer gave only his AOL screen name. When I asked him for his real name, he refused to give it. I then asked various Internet search engines what they knew about that screen name. Heres what I got:
His full name; city; state; marital status (married); parent status (has family); days of the week he works (Monday through Thursday); hours of the day he works (nights); his wages ($750 per week); the amount of sleep he gets per night (4 or 5 hours); his occupation (truck driver); the kind of guns he carries (.357 Magnum and 9mm with 13-round clip); the fact that he carries a concealed weapon without the necessary permit outside his home state; the type bullets he carries (hollow point); the fact that he secretly and illegally tape records phone conversations with his superiors; the fact that he lied to his bosses about whether he carries a gun on the job (he does); his favorite curse words and profane expressions (likes to use the word pork as a verb); the fact that he poses as a pious Christian on religious Web sites; the fact that he calls police pigs; the fact that he was denied a workers-comp claim, ultimately got money by hiring a contingency attorney, then had trouble getting jobs because he was marked as a workers-comp abuser; his X-rated masturbation session with a full body masseuse at a truck stop; and his refusal to do ------work where the hyphens represent what is commonly referred to as the "N word."
Did I hack into his computer? No, not at all. This information all comes from the mouth of the perpetrator himself, bragging about what a bad ass he is on the Net. He assumed no one would ever know who was behind the screen name he used. Assumption, of course, is the mother of all screw-ups. It took me about two minutes to learn his real name, city, and state. If I had been willing to spend a couple of bucks, I could have gotten much more legally. But what I found from the normal search engines like Ask Jeeves and Alta Vista was more than I wanted to know. I suspect this sordid soul is the typical customer for guys like Carleton Sheets or Robert Kiyosaki. Its also the typical guest on the Jerry Springer Show. This is not a market segment in which I am interested, or to which I appeal (Thank God).
The dishonest investor market segment
Many other guru customers are not dumb. They understand perfectly. But they are just as dishonest as the bad gurus. They have no qualms about taking advantage of seniors or young couples. They would love to trade stocks on inside information or collude with fellow buyers at foreclosure auctions. They may be in denial about their ethics. They long ago worked out their rationalizations about win-win deals and so forth. I have no interest in the unethical market segment, either. But again, the Internet now delivers them to my Web site, where they often rail at my stripping away their fig leaf of respectability. If they would spend as much time figuring out how to make an honest buck as they do rationalizing unethical behavior, they would succeed and sleep better.
Also, I have noticed that some people who are quite capable of making an honest dollar, deliberately choose to cheat people because they have some need for the extra charge that taking advantage of another person gives them. I have never understood that. And I do not want their business.
Disagreeing with me is no crime. I have often disagreed with and retracted my own previous opinions. I am sure I will again in the future. But a distressing number of readers denounce my opinion of their favorite guru for the wrong reasons. These folks are what author Eric Hoffer called true believers. They praise their favorite guru the way cult members praise their cult leaders. A powerful desire to find a strong leader combines with a modicum of public-speaking ability on the part of the guru to cause some people to switch off their normal objectivity and adopt a my-guru-can-do-no-wrong mind set. This is the dynamic that put Hitler in power.
Carleton Sheets seems like a real nice guy on TV. If he really was as nice as he seems, he would not be foisting off lousy books on his customers. But the majority of people cannot see past a good bedside manner. This is a phenomenon we often see in athletic coaching. Young coaches tend to conclude that players they like personally are good athletes and players they do not like are not good athletes. Experienced coaches know you have to look at the stats to see who is really performing and that often the kid you like is not getting the job done, while a kid you dislike is performing well on the field. Managers in business have to learn that same lesson.
People also mistake entertainment and charm for expertise or good advice. I am told that guys like Kiyosaki, Jimmy Napier, and Joe Land are very entertaining speakers. Lotta laughs. Thats fine as far as it goes, but entertainment is no substitute for the solid real-estate-investment information you were promised and seeking when you signed up for the seminar. I usually get some laughs when I speak. In some cases, humor is the best way to make a particular point. But humor is not what I am there for. Rather I am shooting for comments like I got after one National Apartment Association speech: I learned more from you in 45 minutes than I did at an entire Mark Haroldsen convention. I thanked him, but I was thinking, Thats not saying much.
Pleasing personalities, charisma, charm, good looks, and comedic talent are all beside the point when you are looking for good real-estate-investment advice. Indeed, they should cause you to become suspicious. People who have those qualities do not need to become expert in real-estate-investment to make a good living. They can sell anything. In fact, many a famous real-estate guru who once claimed to be a foremost expert on the subject, later moved on to selling some completely unrelated product. Examples include Tony Hoffman who later sold penny stocks, drape-cleaning brushes, and produced the OJ “I’m innocent” video, Robert Allen who sold some kind of multi-level marketing stuff for a while, Mark Haroldson who was selling direct-mail business advice, Joe Land who moved onto selling subliminal-message tapes, and Wade Cook who moved to the stock market.
The current crop of bad real-estate-gurus are not real estate guys, they are congenital salesmen like title character in The Music Man. I predict that many of todays famous real-estate gurus will, in future years, be selling something else.
A couple of true believers have denounced me for revealing that their guru lied to them. Their rationale is So what, everybody lies. I surmise that their guru does and they do and they have therefore assumed that everyone is like them and their guru. I do not expect such people to believe this, but just in caseEarth to Nutcakes: There are many honest people. They are the only ones you should be dealing with.
If you pay money to a guy who lies to you about who he is, what he has done, and the accuracy of the information he is selling you, and you still love him after the lies are revealed, you have a screw loose. Apparently the screw-loose market segment is big enough that many gurus are getting rich off it, or claim they are.
Taking advantage of followers
I do not blame the gurus for the existence of this dynamic. Many of my own readers have expressed similar blind faith in me at times. The problem arises when the guru exploits such groupies. When I encounter a reader who gives me too much credit for his success, I immediately straighten them out. You did it yourself with decades of hard work and good luck. I have given careful readers some specific suggestions that they applied to their investments profitably and I have provided helpful general suggestions as well. But neither I nor any other guru deserves more than a tiny portion of the credit for the overall success of their readers or seminar attendees. I would like to help the true believers, but I am just a writer, not a deprogrammer.
In recent years, many unscrupulous gurus have figured out that they can milk their true believers for tens of thousands of dollars. It used to be that a typical real-estate-investment guru got a little bit of money from a lot of people by selling relatively inexpensive books and tapes to them. The good ones still do it that way. But increasing numbers of unscrupulous real-estate gurus are extracting unconscionable amounts of money from a relatively few starstruck fans.
I sometimes feel like James (Amazing) Randi. He is a magician. He is proud of his magician skills and of most of his fellow magicians. But he is outraged at a few of his fellow magicians who claim that their magic is not a trick, rather it is a manifestation of some special powers that they have. Randi founded The James Randi Educational Foundation in Florida. The foundation claims it is getting into gear for the battle against misinformation, pseudo science, and fraud. Randi describes himself as an iconoclast, whistle-blower. I dont have a foundation (or want one), but I can relate to what he is doing.
My best friend and roommate from college is a top magician and mentalist who generally works for Fortune 500 clients, national politicians (Vice President Gore), and professional sports teams and leagues (Major League Baseball). Early in his career, he was startled by educated men and women who approached him with money after one of his mentalist performances. (Mentalists perform tricks which, among other things, make it look like they predicted future events before they happened.) These educated, affluent people wanted him to invest their money in the stock market. He explained that he did not do such things and that his performance had only been a trick.
The response? “We know you have to say that. Take the money, please. He continues to get that response. He never takes the money. (I suspect that most of the bad gurus I have criticized in this Web site will, upon reading about my friends experience, immediately run out and study mentalism so they can get the money my college roommate walks away from.)
Another group with whom I feel kinship are the occasional honest politicians. The vast majority of politicians are demagogues who just tell people what they want to hear. But every four years there seems to be one relatively honest presidential candidate who tells people what they need to hear rather than what they want to hear. He usually gets a lot of media attention and a few votes and drops out early in the primaries while the liars go on to become president.
In real estate investment, what people want to hear is that they can get rich quick in real estate with no cash, no credit, and with no fear that what they are doing is risky and that using techniques that take advantage of unsophisticated people is ethical. The truth is that real estate investment offers many exciting, ethical opportunities to become financially independent, but that each carries risks and requires hard work and expertise. High leverage is one of real estates advantages, but it is a double-edged sword which must be used very carefully.
I am in the tell-people-what-they-need-to-know business. Because most people are stupid and immature, I will always have a smaller market share than the liars who tell people what they want to hear. So be it.
The demanding teacher
Bob Knight used to be both basketball coach and a professor at Indiana University. In his class, he asked his students to list the best five teachers they ever had in the left-hand column of a piece of paper. Then he asked them to write the names of the most demanding five teachers they ever had on the right side. He said the two lists were usually identical.
In the 1/8/01 Time magazine, there was an article called Graded by my students. Author Ben Marcus is a Columbia University writing teacher. Its subtitle was Through some dubious teaching techniques, Ive learned to win good evaluations from my classes. After telling his students the sometimes harsh truth about writing, he got blasted in many of their evaluations. Dropping that approach he found, They loved me because I agreed that writing should be easy. Substitute real estate investing and you have the approach of the gurusas well as their motivation for saying that. They want to be lovedand sell their stuff. Its harder to sell when you admit real estate investing is not easy.
Marcus explained further, The deception involved telling the students what they wanted to hear and praising them however much they foundered. At evaluation time, they would be pleased enough by their success that they would return the praise. Submitting students to the rigors of learning seemed only to incur the wrath of many of them, which entered the record as my teacherly shortcomings.
I know other teachers who are doing the same thing: teach your heart out to the teachable but be sure to please the unteachable, to keep your ratings high, like a politician trying to improve his poll results.
I am a demanding, tell-it-like-it-is teacher. If you want that, buy my stuff. If you want to be told attractive lies, buy the stuff that is sold by gurus I do not recommend.
The medical profession cannot cure all ills. As a result, there is a large market for alternatives to medical therapies which have been proven safe and effective in scientific tests. The people who sell these unproven and disproven therapies are called quacks. They have always made a lot of money from stupid people, and they always will. Most of the gurus on my rating list are real-estate quacks. They know what you want. They cannot give it to you. But they figure they can make a lot of money by telling you they have what you want.
A 3/20/00 article in Forbes is pertinent. The author, David Frum, says that nowadays, Thoughtful, well-informed modern Americans will pay good money for tablets and treatments that are essentially magical, as homeopathy is, because they have come to regard science as harsh and cruel. My criticisms of alternative gurus are often characterized with words similar to harsh and cruel. I do not claim that real-estate investment is science, but that is certainly the model I try to approach and follow as much as possible. Science is not white coats and laboratories. It is any disciplined and objective search for the truth.
A large part of the popularity of no-money-down techniques and gurus who advocate them is that many people hate lenders. Many real estate gurus share that hatred or they play to it so they can part people from their money. The nothing-down techniques are mostly unethical or illegal, but people rationalize lying to lending institutions on the grounds that they are evil so they deserve to be lied to.
I am not real fond of lenders either. They often behave capriciously and have sometimes even given me the impression that they torment borrowers for their own amusement. But nothing justifies lying. The mature thing to do is to recognize that lenders are here to stay and that human nature combined with the power lenders have will lead to a certain amount of misbehavior on their part. Lending institutions are a tool and a resource to real estate investors and should be used whenever they make sense, which is most of the time. I have heard that some gurus brag that they never borrow from institutions, only from sellers or other individuals. That is, at best, childish and foolish. At worst, it is a phony cover story for a bad credit rating. You should borrow from the lender who gives you the best deal. I have borrowed from both institutions and sellers. In each case, I chose the loan that made the most sense.
A number of gurus who were not on my guru-rating page asked me to put them on it. All but one of those did not like what I said about them. A number have demanded that I take them off, included a couple who originally asked me to put them on. They generally accuse me of factual errors in my write-up about them. I then ask what the factual errors are so I can correct them. The most common response to that request is silence.
One guy said something to the effect of “I'm not going to play your game.” Another pointed out “errors” in which either he was incorrect and later admitted it, or he simply regarded it as an error when he disagreed with my recommendation on a particular guru or when I recommended against a popular guru. Before Russ Whitney sued me, I got the occasional threatening lawyer letter, but when I asked them to point out the incorrect thing I allegedly said about their client, I got no answer.
The power of the ‘Dark Side’
One interesting phenomenon I have observed is that some people call my guru-rating page a hit list or similar names, while others call it a recommendation list. It would appear then that those who characterize my rating page as a hit list are like the people who see the glass as half empty and those who characterize it as a recommendation list are like the people who see the glass as half full. The characterization reveals more about the commenter than it does about the list. If you thought my guru-rating page was a hit list, you should reflect on how you got on what Darth Vader called the Dark Side, and on how you might escape that mind set.
Evolution has done well by human brains for the sorts of things we needed to do when we were cave men: human relations, avoiding danger, finding food and water. However, that same evolution has ill served us for modern purposes like investment analysis. Behaviorial economists and behaviorial finance experts have recently identified a number of flaws in the way our brains analyze investment decisions. One of those flaws is the confirmation trap. Here’s a quote from the book More than You Know (which was named Best Business Book of the Year by BusinessWeek) by Michael J. Mauboussin:
You’re likely to succumb to the confirmation trap, where you will seek confirming evidence and dismiss or discount disconfirming evidence.
Many readers have fallen in love with the dream of easy riches peddled by the bad real estate gurus. The disconfirming evidence I provide in this Web site and my other writings clashes with their search for confirmation that the bad guru dream was real. So those who have fallen into the confirmation trap get mad at me. What they need to do instead is recognize that they should be looking for the truth, not confirmation of a pre-conceived notion.
For the record, I believe everything I have said is accurate, but I am not perfect. If any visitor to my site sees a factual error, I would appreciate it if they would apprise me of that fact so I can correct it as soon as possible.
John T. Reed