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Super-Short Guide to Critical Thinking and Logic for Income Opportunity Seekers

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Welcome to super-short guide to critical thinking and logic for income opportunity seekers. You need to learn this to see through disguises, lies, omissions, and logical fallacies so you are more resistant to being tricked or defrauded. It simply involves thinking about your thinking, instead of accepting everything exactly as shown.

When you learn information, you go through three stages:

stored but inert knowledge -- you remembered it, but you don't really understand it, and you just kept it somewhere in your mind and did nothing with it

activated ignorance -- you act upon the information you have learned, without checking whether you understood it correctly or even if it's true or false.

activated knowledge -- you actively verified and understood the information you learned and actively use it in your life, which leads you to more and better knowledge.

Critical thinking is what you use to make sure you get activated knowledge, instead of activated ignorance.

What is Critical Thinking?

Critical thinking is best described as "thinking about thinking", though that doesn't tell us much. The general idea is identify the thought (concept, premise, hypothesis, etc.) then consider its various angles through logic, evidence, and reason.

Why? Because our mind is honed by evolution to take shortcuts for survival (you can't take long time to consider whether to flee or not). Thoughts are often uninformed, partial, biased, prejudiced, and os on and so forth. Critical thinking is an examination of the thoughts and identify the extraneous factors.

Different people have slightly different explanations about critical thinking. One school states that there are eight elements to critical thinking:

  • generates purposes
  • raises questions
  • uses information
  • utilizes concepts
  • makes inferences
  • makes assumptions
  • generates implications
  • embodies a point of view

Critical thinking can be applied to ALL areas, including school study, scam avoidance, general research, science, and much more.

Critical thinkers have three major characteristics:

Critical thinkers are skeptical. They approach all information with the reasonable skepticism, and evaluate the source and possible intent of such information for accuracy.

Critical thinkers are active. They ask questions and analyze information. They consciously apply research strategies to uncover meaning and/or update their understanding.

Critical thinkers are open to new ideas and perspectives. They are willing to challenge their beliefs and investigate competing evidence.

Start with a Purpose

All thoughts have a purpose. To start with critical thinking, you must identify the purpose of the thought, raise questions, and form hypotheses, and continue the eight steps identified above.

In any sort of income opportunity, your purpose is to "earn legitimate and preferably long-term income". The question is "Should I join?"

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To answer the main question, you then need to ask a lot more questions, to correctly identify the three factors: risk, cost, and reward.

  • Is this opportunity legal? Is it operating legally? (not the same!) (RISK)
  • Can I trust this company to deliver what they promise? (RISK)
  • How fast can I learn what I need to know to exploit this opportunity? (COST)
  • Do I have the resources to exploit this opportunity? (money, time, etc.) (COST)
  • How much will I continue to spend to exploit this opportunity? (money, time, etc.) (COST)
  • How much income can I expect In a month? 3 months? 6 months? 1 year? 3 years? (REWARD)

It is very important to identify the purpose (or hypothesis) and the question, which also leads to the "null hypothesis", which is the null state that the supporting information is supposed to reject (or fail to reject). See the next section for details. Often, mistakes are made when the purpose was misidentified, which lead to the wrong questions being asked or answered.

A scam often ask the wrong questions, then answer them logically, hoping you would never notice that those are the wrong questions. If they don't answer the questions above, they may be asking the wrong questions to start with.

Once the hypothesis (and null hypothesis), along with the purpose, has been identified, all related information and logic can be gathered and evaluated. This is where false positive and false negative mistakes come on. The specific logic errors are known as logical fallacies.

A scam would often use logical fallacies trying to convince you that something is true when it is not, or vice versa.

Thus, to truly realize whether a business opportunity is good for you, you need to learn at least SOME critical thinking, in order to ask the right questions and spot logical fallacies and lies.

What is a Null Hypothesis?

The null hypothesis is the status quo, the "default" condition. It is a difficult concept to grasp merely by discussion, so I'll give you an example.

Start with a question: Does Drug X cure cancer?

The null hypothesis then would be "Drug X does nothing."

The test or alternative hypothesis based on the question is "Drug X cures cancer"

Once you have determined the two hypotheses, a "control group" would be created for the null hypothesis, while the test group would be created for the test hypothesis. If there are significant differences between the results, then the cause would likely caused by Drug X.

The key concepts to take away:

1) A null hypothesis never exists alone, but always as a counterpart to the "alternative hypothesis", which is the hypothesis you're trying to test.

2) A null hypothesis can NEVER be proven.

This is a little difficult to grasp, but basically, the data can reject the null hypothesis, or fail to reject, but it does NOT PROVE the null hypothesis.

In the above example, if the experimental results shows no significant difference between the control group and the test group, the data "failed to reject the null hypothesis" (i.e. it cannot disprove that the drug did nothing).

3) Null hypothesis can be ambiguous, neither here nor there.

It is mean to be that way. "The Drug doesn't seem to do anything" is ambiguous.

4) More than one hypotheses can have the SAME null hypothesis.

For example, "DrugX cures cancer" and "DrugX causes cancer" both have the same null hypothesis: DrugX has no significant effect.

Knowing the null hypothesis is important as it makes sure you are asking the right question. If you failed to get the right null hypothesis, you may be lead to reach the wrong results with the data you have.

To test whether an opportunity is legal and legitimate, let's form the question and the hypothesis.

Question: Is BizX legal and legitimate?

Null Hypothesis: BizX status is unknown, there is not enough evidence to know whether it is legal and legitimate or not.

Alternative Hypothesis: BizX is legal and legitimate.

Then the "proponent" will have to supply evidence to "disprove" the null hypothesis, and "prove" the alternative hypothesis. The "opponent" also disprove the null hypothesis, but instead is aiming to prove the opposite, that "BizX is illegal and illegitimate".

Four Types of Reasoning Errors

In general, there are four types of Reasoning Errors

Type I -- false positive

Type II -- false negative

Type I and II are usually some sort of a bias or logical fallacy (reasoning mistakes) are relatively simple to catch.

Type III -- answering the wrong question(s)

Type IV -- asking the wrong question(s)

Type III and IV are harder to spot as they start as a fundamental mistake of looking at the wrong purpose, thus asking the wrong questions, and/or arrive at the wrong null hypothesis.

The types are not set in stone, as a fallacy often works at multiple levels.

The False Positive Error

The False Positive Error occurs when you see something that's not there, or when you concluded something is true when it is in fact, false.

Or in other words, the data / evidence used to "support" the hypothesis does NOT disprove/reject the null hypothesis.

There could be a LOT of reasons to get a false positive. Bad experiment design, bad data, cherry-picking, wrong sampling method, bad analysis, math error, and so on are all possibilities.

In the DrugX example, if someone heard that DrugX worked on 5 patients, shrinking their tumor by 25% on the average, they may conclude that the drug works. However, if they didn't hear about that the 5 cases of success is accompanied by 95 patients who had no noticeable changes, then the conclusion may be very different. That would be a classic false positive.

In the BizX example, if the "proponent" (trying to prove BizX is legal), introduced "proof" that BizX paid him as evidence of legitimacy, he has committed a false positive error, as the evidence supplied does NOT disprove the the null hypothesis. Some illegal frauds, such as pyramid schemes and Ponzi schemes, also pay participants. Thus, being paid "failed to reject" the null hypothesis (the evidence does not rule out one or the other).

The False Negative Error

The false negative error is the opposite of the false positive, in that what is true was mistakenly rejected as false.

Basically, the data does indeed reject the null hypothesis (i.e. the data *does* disprove the null hypothesis) and the alternative hypothesis is proven. Cynics are often guilty of false negatives by rejecting too much data.

In the DrugX example, if a cynic looks at the claim "DrugX cures cancer" and immediately dismisses it as "wishful thinking" without examining the evidence that *does* prove DrugX cures cancer, he just committed a False Negative error.

In the BizX example, the hypothesis is "BizX is legal and legitimate", if a critic looks at the BizX, then immediately dismiss it by "BizX is MLM, and all MLMs are scams, therefore BizX is a scam", and evidence presented *does* prove BizX to be legal and legitimate, the critic is guilty of false negative (in this case, "hasty generalization" fallacy).

False Positive is NORMAL

Humans are trained from the first homo sapiens to prefer false positive over false negative. Consider this:

"Lucy", the first hominid walks in the wild, and she heard a rustle in the grass ahead. What should she do? Two choices: turn and run, or continue walking. As the rustle would be nothing, or dangerous predator, there are four possibilities.

a) predator / run = survive

b) nothing / run = survive, false positive

c) predator / continue = eaten, false negative

d) nothing / continue = survive

As you can see, the probability says it is safer to run when there's a rustle in the grass, as the "cost" of false positive is much less than that of a "false negative". All you are is a little tired if you commit a false positive error, while you won't survive the false negative error.

Humans had been "bred" to ASSUME danger and prudence (i.e. prefer false positive) ever since. It is literally "better safe than sorry." In other words, even when there's not enough evidence, you are more likely to believe something is true than it's not.

What are Logical Fallacies?

Fallacies are mistakes. Thus, logical fallacies are mistakes in reasoning. They are the logic equivalent of stating that 1+2=4.

Logical Fallacies comes in various forms, many of which have proper Latin names that makes absolutely no sense to modern users, such as "Cum Hoc Ergo Propter Hoc" (which means "correlation = causation") Many of the logical fallacies have morphed into modern forms. As a result, the exact number of fallacies vary depending on the source you cite, as the number can vary from 30 basic ones to well over 100 plus variants, and of course, new ones added every day.

Contemporary events often lead to new logical fallacies. Jenny McCarthy's pseudo-science Autism advocacy lead to the creation of a new fallacy tentatively named "Appeal to Mommy Instinct", where she claimed that mommy knows what's best for the child (and not the doctors and scientists and researchers). She created a new variant of "Appeal to nature" fallacy.

The list of fallacies is too long to include here, but here are several websites that would explain them:

False positive and false negative errors can probably be classified into one of the fallacies.

Answering the Wrong Question

Answering the wrong question happens because the hypothesis tester has made some assumptions, and thus, skipped a step ahead and answered the wrong question. This type of error is difficult to detect sometimes, and requires careful examination of the alleged "evidence" and the logic chain, to make sure nothing had been "assumed".

Usually answering the wrong question is caused by an innocent mistake, as the tester simply had some sort of a bias that s/he did not realize and had "assumed" certain things.

In the DrugX example, if proponent ("DrugX cures cancer") starts by noting that several patients have tumor size reduced therefore the drug works, he had likely committed a "Wrong Question" error as he assumed that the DrugX must be the cause of shrinking tumors.

In the BizX example, if a proponent ("BizX is legal") starts by listing office address, legal business registration, and so on and so forth, to "prove" that the business is legal, he had likely committed a "wrong question" error as he assumed that legality of a business only lies with registration and physical presence, when it involves so much more, such as adhere to rules and regulations.

Asking the Wrong Question

Asking the wrong question basically is red herring fallacy, but usually, it is deployed on a massive scale, as the questions "suggest" that their hypothesis is true, but is actually irrelevant. Conspiracy theorists love to ask the wrong questions as it is the only way to "build up the case" to prove something that doesn't exist. What's more, asking the wrong question requires some deliberate thought to think of the red herrings, and thus hard to justify as "honest mistake".

In the DrugX example, if the proponents started asking questions such as "Is Big Pharma earning a ton of money?" "Are scientists paid with lots of grant money from big pharma?" "Does Ingredient Y in Drug X have known anti-cancer properties?" and so on, they are probably guilty of asking the wrong questions, as none of those are actually answering the question, "Does DrugX cure cancer?"

In the BizX example, if the proponents started asking questions like "Who are you to criticize BizX?" "Do you agree that we all need a bit of extra income?" "Does Industry Y (which BizX says it's in) have a great future?" and so on, they are probably guilty of asking the wrong questions, as none of those are actually answering the question, "Is BizX legal?"


You need to learn critical thinking so you can evaluate any sort of income opportunity. I hope I have introduced you to some aspects of critical thinking, and I wish you good luck finding your additional income, and not get taken by scams.


Tim Mitchell from Escondido, CA on November 08, 2012:

Great information, KSChang. Sharing. Now, I must ponder. That is, two elements are apparent. Time and purpose. Yet, a third comes to mind, although no lie was told. And, that is I'm hungry . . .

Note: Will read again.


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