Some ways to make money cross the line ethically, but each of us draws our line in different places.
For example, I wouldn’t lie to make money, but on the other hand I don’t mind getting credit card signup bonuses (almost $1,000 so far this year) even when I don’t intend to use the cards after I receive the cash. I figure the card companies at least get a chance to convince me to become a regular user, even if I know their odds of success are low.
Since we all have our own ideas about ethics, you’ll probably have your own opinions on these five “questionable” ways to make a buck. Which of these ways to make money do you think are okay, and which cross the line?
1. Making High-Interest Loans
Years ago, I loaned money to friends, family, and coworkers at very high interest rates. I didn’t feel I was “taking advantage” of them because I made the loans for worthy purposes. For example, I loaned a friend $250 to buy the tools he needed to land a construction job, and charged $7 in weekly interest. That’s an annual rate of 145%, but as a result he got a good job, so it was worth it to him to pay $42 in interest over six weeks.
On the other hand, payday loan operators don’t monitor how borrowers use the money or the effects the loans have. The Pew Charitable Trusts’ Payday Lending in America report says that “lender practices often have serious detrimental effects on consumers.” The online lenders are the worst; the report notes that with fees, a 650% annual interest rate is typical for loans.
If you decide to lend to friends and family, keep the loans small enough that you can afford to lose the money, and/or hold collateral that you can sell. Don’t loan the money if it will just get the borrower into worse trouble. Also, if you do it often enough that it might be considered a business, read up on the usury laws in your state.
So is it okay to make money with high-interest loans? How high an interest rate is acceptable, and under what circumstances?
2. Profiting From Misspelled Domain Names
When you misspell the URL of a website as you type it into your browser, you often get a page with ads. People buy these misspelled domains in order to profit from mistakes. For example, years ago I bought www1040.com (note the lack of a “dot” after the “www”), for $100. I set up a page of tax tips that generated $15 or so monthly from clicks (more during tax season), and eventually sold the domain for $700.
This practice adds little to no value to the Internet. I let visitors know they had made a mistake and linked to the official IRS website, and some of my tips might have been useful, but mostly I just profited from other people’s errors. Of course, people are going to make spelling or typing errors anyhow, and someone has to own the domain names that capitalize on these errors, so it doesn’t seem that any harm is done unless the page they arrive at is set up to deceive.
To try this strategy, use Alexa to identify websites that have a lot of traffic. Then make a list of likely misspellings and typing errors (look at the keyboard to see which letters people might hit by accident). Use a domain search tool like R4L.com to determine if any of those domains are available. You can monetize them by setting up a page with ads, or keep it simple and let a domain parking service like Sedo handle that for you.
But would you feel good about doing this?
3. Using Law for Profit
A real estate investor bought several billboards in a city, renting them out for a nice profit. As he proudly explained in a seminar I attended, he then joined a group seeking to ban billboards because they were unattractive.
Why? He knew that existing billboards would be left alone, and that preventing new ones from being built would drive up rental rates for the ones he already owned. Brilliant perhaps, but was it fair?
In economics, using politics to obtain financial advantages is referred to as “rent seeking.” Other examples include getting subsidies from local governments to locate a company in a town, or demanding regulations that will bankrupt smaller businesses in order to reduce the competition.
Such practices may seem unethical to many of us (myself included), but one could argue that the intent of business owners and lobbyists isn’t as important as the effects of the laws and governmental actions. For example, taxing workers to subsidize a baseball stadium makes the team owner wealthier at the expense of taxpayers, but could that be justified if there is enough economic benefit to the community?
To use government for your own profit, you generally aim for one or more of the following:
- Direct subsidies (grants, low-interest loans)
- Indirect subsidies (for example, get a road built for you)
- Laws to destroy competition (target something they do, or get laws that add too much expense for them to handle)
- Regulations that limit new competition (for example, a carpet cleaner lobbies for licensing in order to make it harder for new cleaners to start)
- Regulations that benefit your industry or business specifically (for example, a house-number painter gets a law forcing everyone to put their house number on the curb)
What do you think? When is it okay to use the political process to make money at the expense of taxpayers, consumers, or competitors?
4. Writing Fake Reviews
Todd Rutherford made as much as $28,000 a month hiring writers to create and post reviews on Amazon for his clients, according to an article in the New York Times. In fact, John Locke, who is famous for selling more than a million self-published books on Kindle, wasn’t selling very many until he bought 300 reviews from Rutherford. Rutherford didn’t necessarily tell reviewers to make their reviews favorable, but it’s suspected that they did so to maximize their chances of being hired again.
The Times article notes that Bing Liu, who is an expert in “data-mining” at the University of Illinois, estimates one-third of online consumer reviews are faked. Those paid reviews mean it’s tougher for consumers to make a rational decision about what to buy.
Amazon and others try to stop this, but the jobs are out there if you’re interested. As an editor at Melville House, Ellie Robbins discovered an ad on Craigslist offering review writers $15 for “50 to 100 words of high praise with some specifics about the book that will appeal to potential readers.”
Would you take this job, or is the work too unethical?
5. Domain Name Poaching
Back when most people didn’t know what a domain name was, a friend registered the name of a billion-dollar company (which I will not mention, but think “Ford.com”). He might have made a nice profit reselling it, but when the company had their lawyers contact him, he gave them the domain for the cost of his registration. Companies and individuals without the money to hire legal help often just pay whatever is asked.
Known as “domain name poaching” or “cybersquatting,” this practice is regulated in some ways. For example, you can’t register a trademarked name. And in any case, there is the question of ethics; as a poacher you essentially profit from the name and reputation of a person or company, rather than by anything you create.
Many cases, though, fall into a legal gray area. For example, search “Oak Tree Apartments” online and you’ll discover many places with that name all across the country — and the name is too generic to be trademarked. Suppose you could register oaktreeapartments.com or buy it at auction for $50 (although it’s probably too late to get that one so cheap). You might someday be able to sell it to one of the places with that name — for a lot more than what you paid.
Another cybersquatting niche involves registering movie names before the studios get around to it. For example, at the moment a movie called “The Revenant” is in production (Leonardo DiCaprio will be in it), and it appears that 20th Century Fox isn’t the current owner of therevenant.com. The owner, whoever it is, might sell the name to the studio for a nice profit. Of course, if you register the name of a movie and the studio’s lawyers call, you might just want to take whatever they offer.
Is domain name poaching ever OK? Or is it another distasteful way to make money?
Your Turn: Are these particular ways to make money unethical, or are they sometimes OK?