
See the attached about infinite product convergence proof from Stein & Shakarchi, Complex Analysis Lectures (p 141)
As per the proof, if $ \sum | a_n | $ converges, then $ \prod (1 + a_n) $ will also converge to a non zero number as long as none of the terms are zero.
Consider $ a_n = - \frac{1}{2^n} $
Now we have $ \sum | a_n | $ converging to -1. So as per the proof, the corresponding $ \prod (1 + a_n) $ must converge.
On the other hand, all the terms of the product are less than 1. Such infinite product should diverge to zero. (Think $ \frac{9}{10} \cdot \frac{9}{10} \cdot \frac{9}{10} \cdot \frac{9}{10} \cdots $ )
Which one wins?
The infinite $\prod ( 1 - \frac{1}{2^n} )$ is convergent to a non-zero value because the series $\sum \frac{1}{2^n}$ converges and none of the factors is zero.
Your argument
would only apply to a product $\prod ( 1 + a_n )$ where all factors are uniformly less than one, i.e. $$ 1 + a_n \le k $$ for some constant $k < 1$. But then $\sum | a_n|$ diverges, so there is no contradiction.