There are always two sides of the story. Telling a student everything at the first day makes no sense. I am pretty sure that it makes sense to gradually improve techniques.
But - introducing a belt system in something that's called "self defense" makes no sense to me. Unless you can get a black belt in 3 months. That's my opinion: If your "self defense system" does not prepare you for basic street reality in 3 months - forget it.
On the other hand, belts make a lot of sense in business terms. Getting money for each exam, binding people to one organization because - of course - belts are only accredited by "the one and only krav maga association". Makes sense if your want to earn money. But I dislike that.
I always compare Google and Microsoft. Both hardcore business machines. But the Google is way friendlier than Microsoft. Good comparison? If you every have to choose your krav maga club (and at some point you will have to) - be sure that the trainers are great and that they are more running a Google like business.
Check out Moshe's blog. And - yes. Moshe leads IKI Krav Maga and thus has a running business, too. But it seems to be a nice one (I don't know Moshe personally):
