LSD Deals

Let’s get right to the point: LSD Deals.

What are they? And why are they so dangerous to your financial health –  and sanity.

I first heard the term “LSD deal” in a book by Robert Ringer. I don’t remember which one though I have a feeling it might have been “Looking Out for #1.” You can look it up.

The reason I’m writing this particular blog post is I wanted to point a friend to what Ringer had to say on the subject and much to my surprise when I googled the term nothing useful came up.

First of all, what is an LSD deal?

No, I don’t mean trade in illegal drugs.

I’m talking about deals that not only make no sense, but also waste incalculably large amounts of time, money, and energy. The folks pursuing them seem caught in the thrall of deep delusion.

It happens to everyone at least once at some point in their lives: young and old, male and female, rich and poor, intelligent and not so intelligent. As Ringer’s ingenious terminology implies, there’s something about these deals that cause folks to lose their connection with reality.

Let’s start out by looking at some obvious LSD deals.

How about paying $400 a share for an Internet startup that’s not only never made a profit, but also barely made a sale? That kind of insanity was very popular not all that long ago.

How about packaging real estate loans that were never signed, never recorded, and were made under terms that the borrowers could not possibly dream of meeting?

That’s the financial disaster the world economic system is currently trying to dig itself out from. Keep in mind less than five years ago these kind of transactions were considered absolutely “normal.”

Of course, neither the $400 per share Internet IPO or the $10 million package of loans made to people under highly dodgy circumstances made any sense at all, but the people flogging the stuff “believed” and the people buying it “believed” too.

Functionally, there is no practical difference between the people who got involved in these businesses and people tripping their brains out on a powerful hallucinogen, thus Ringer’s apt term the LSD deal.

I’m not picking on you

I mention these two examples first so that no one will think that I’m picking on them individually.

After all, both these MEGA LSD deals were endorsed by institutions like Harvard University, Columbia University, the Federal Reserve Bank, the White House, “leading economists”, and various captains of industry.

So if you find yourself caught up in an LSD deal, don’t beat yourself up, but do disengage and move on. LSD deals are quite possibly the most dangerous thing on earth when it comes to your wealth, health, and sanity.

How to know when you’re involved in an LSD deal:

1. You love talking about it, thinking about it, dreaming about it –  but not a whole lot of practical activity (i.e. money making) is going on.

2. You’re waiting for: a) the right partner, b) the right investor, and/or c) the right break before the “magic” can start happening.

3. You’ve done absolutely no market research, or your market research is months and sometimes years old, or your market research involves talking to yourself about how great your product, project or idea are.

The antidote to LSD deals

Remind yourself of how business works:

You take things off your shelf, pass them across the counter, and somebody gives you enough money in exchange so there is a clear profit in the transaction for you. You have a repeatable system in place for this to happen day in and day out.

That’s a business. Most everything else is a hallucination, an LSD deal.

It’s true that some deals and ventures take longer to bring together than others and there can be an extended waiting and ramp up period. Okay, that’s fine as long as what you’re working towards is going to look like the description of business in the paragraph above.

Another sure sign of an LSD deal is vagueness on the details.

Instead the process is: a) run around, b) talk a lot about what you’re doing, c) experience huge emotional highs (and lows), and d) at the end of the day avoid looking at your empty ledger book.

Here are the tell tale signs of being in a REAL business

Business happens when money changes hands.

Business happens when your total sales are more than your cost of goods, marketing, and operations costs.

Business happens when you can put your hands on your customer list and say “these are the people who buy from me.”

Business happens when there is a clear, definable, reachable market for what it is you have to sell.

I might be leaving a criteria or two out in this definition, but you get the idea.

It’s perfectly fine to pursue dreams and passions. The fact is a lot of what we consider humanity’s greatest achievements have come from people who pursued dreams and passions.

But in the meantime…

Keep your eye on the ball

If people aren’t giving you money you can bring to the bank –  not promises of money, or hopes of money –  in exchange for your goods and services, then you need to get that part right and get it right right now.

Not only will this “boring” approach to business make life more comfortable and pleasant for you, it will also increase the odds that you’ll reach some of your most ambitious goals and biggest visions.

Thoreau said it’s okay to build castles in the sky, just remember you also have to build them on the ground too. Good advice.

Now, at last, there is an article on the web which explaines one of the most important concepts in business: the LSD deal – What it is, why it’s so dangerous, how to recognize when you’re in one, and what to do to get out of one and onto a more productive track.

I hope you found it useful.

Optimism and positive thinking are essential tools for success. So is having your feet firmly on the ground and learning to avoid the quicksand.

Learning to analyze business ideas before you invest time, money and effort in them is one of the most useful skills you can learn as an entrepreneur and training in this skill has run through all our System programs over the last sixteen years.

It may be why so many of our students have been so successful over the years and why we have new success stories year in and year out.

Good luck!

Ken McCarthy

The System Seminar

P.S. The last public System Seminar will be held April 15 – 17th, 2011 in the New York City area.

Full details: The System Seminar

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13 Responses to LSD Deals

  1. Bill Covert The Accelerator November 10, 2010 at 8:49 am #

    Practical advice Ken that hopefully people will read over and over until they truly understand this concept of pie-in-the-sky deals V. true business transactions.

  2. Jon Dalrymple November 10, 2010 at 9:05 am #

    Hi Ken,

    Thanks you for this very insightful article. I’ve never heard of the term ‘LSD’ being used in this context before.

    As someone who has run a successful graphic design business for the last 10 years, I’ve seen a lot of young design start-up businesses who fail very soon after. And, I think I now know why – its because of the very issues you mention here.

    They’re more in love with the idea of talking about being a designer and being seen in the right bars (with other ‘designers’) than in actually getting on with the ‘business’ of designing and making money.

    Thanks for this thought provoking text.

    All the best

    Studio 9 (Scotland) Ltd.

  3. John Chancellor November 10, 2010 at 9:24 am #

    I found the article very useful. I believe we have far too many people chasing rainbows – looking for the pot of gold at the end – rather than engaging in the boring task of providing a real product/service and slowly building a business. We have become a nation that seeks instant gratification and have the mindset that success is an overnight occurrence.

    A great reality check. Thanks.

  4. Tim Birch November 10, 2010 at 9:56 am #

    Yep, Ringer has it right. We all fall for a pipe dream now and then. Ever buy Real Estate with No Money Down? I never did.

  5. Ken McCarthy November 10, 2010 at 10:05 am #

    Actually BUYING real estate with “no money down” is not that hard. On the other hand, PROFITING from a no money down deal is not at all guaranteed.

    All that “no money down” means is 100% financing. It doesn’t mean the property is acquired for free. Many a person bas blown themselves up financially with a “no money down” deal.

    Robert Allen and others of his ilk used the “no money down” ruse to sell real estate “education” to millions of naive amateurs.

    Ringer never dealt in such BS.

  6. Allen November 10, 2010 at 10:11 am #

    From now on this article and points will be the test I use on whether or not to go into something.

    And something to read again and again as I am doing business.

    Thanks to you for explaining Robert Ringer’s concept.

  7. Yvon November 10, 2010 at 10:17 am #

    I understand what you are getting at but both of the examples of the Real Estate Industry and the Dot Com there was alot of money being exchanged. The fundamentals of the businesses of the Dot Com had no sales but money way being exchanged. In your Real Estate example money was surely being changed.

    Good article none the less. I get what your saying. I guess most entrepreneurs never get to the point of having any kind of money exchange.

  8. Ken McCarthy November 10, 2010 at 10:24 am #

    “I guess most entrepreneurs never get to the point of having any kind of money exchange.”

    Good lord, I hope not!

    A business needs a tangible offer, it needs a lead generation program, its needs a sales system. If you don’t have those things (or are working towards them), you don’t have a business.

    It’s not rocket science and it’s certainly not hard to accomplish. The only real obstacle is unclear thinking and taking your eye off the ball.

    Look around you, the whole world and everything in it is operated on some level by entrepreneurs: people who make things happen.

  9. Van November 10, 2010 at 10:40 am #

    Aren’t daytraders (working from home) an exception for the need for customers? They have a system, they do make money, but don’t have clients.

  10. Global Hemp November 10, 2010 at 12:08 pm #

    I’ve never heard of the term “LSD Deal” … and assumed from the beginning that it had nothing to do with blotter paper and chemistry. However, I did think that LSD must be an acronym for something. A little sad to see that its not.

    Smoke & Mirrors, … deceptive business tactics are LSD Deals. Anyhow, good work!

  11. DuncanM November 10, 2010 at 1:18 pm #

    Great article Ken and Google got the message too, you’re No: 1 for LSD Deals.

  12. Ken McCarthy November 10, 2010 at 1:27 pm #

    Thanks Duncan.

    Note to the DEA…we’re talking metaphorically here guys.

  13. Kim Dushinski November 10, 2010 at 1:58 pm #


    Leave it to you to be the good friend that tells you when you have spinach in your teeth. This is a great article and one that I will refer people to for a long time. Thanks for writing it.

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