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May 27, 2008

How To Predict the Future Without Knowing Anything

Jim: I have come to learn from the master. How do you sell so much stock? I know that you aren't studying those reports. So, give.

Mike: Uh, I'd rather not divulge my secrets.

Jim: In this case, you will tell me, or the boss is going to find out who took his cigars.

Mike: (smiling) I suppose it won't hurt to tell a man of your integrity.

Cold-call 20 prospects, and maybe 16 will listen to you. Tell them that they are wise to be skeptical of a new broker, but that you are willing to prove that you know what you are doing. No obligation.

Give each prospect the names of 4 stocks that have good analytical ratings. We know that they are just as likely to go up as go down. Use 4 different stocks for each person, so you can't be too unlucky. Don't sell them anything yet. Keep good records. Wait a while, call back the "winners", and then sell, sell, sell.

Jim: That doesn't seem like it is going to work.

Mike: So, you aren't too good with numbers. Here is the breakdown.

Each of your stocks has about equal chances of going up or down. After a few weeks, they will all change at least a little. There are 4 of them for each person, so on average the 16 results for 4 stocks work out like this:

 People      %  GoesUp  Reputation
 -----   -----  ------  ----------
   1      6.25    4     Wizard
   4     25.00    3     Analyst
   6     37.50    2     Who needs you?
   4     25.00    1     Idiot
   1      6.25    0     Jinx
One prospect out of 16 saw all the stock picks go up, and 4 out of 16 saw three stocks go up. There are 5 prospects who now think that you are a Wizard or Analyst. Sell them stocks with dividends, and it may take forever for them to catch on that your advice is only average. In a down market, show them that their stocks didn't go down as much as they could have. In an up market, you may get 11 converts instead of just 5.

Jim: That is beautiful! But, what if they catch on?

Mike: Our cold-call lists are wide and deep. There are always more fish in the sea.

Jim: OK, thanks, I'm not telling anyone else in our shop. You know (thinking) this would work pretty well in a lot of sales situations, even in politics.

Mike: (smiling) Yeah.

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