A Byte of my 2.2-lb Brain

Just sharing stuff…

Doodling the Pyramid

Exasperating.

I received yet another news about a Filipino Community (of OFWs) losing a combined amount of around $1.8 million to a Ponzi scheme. Again.

It’s hard. It’s sad. These people, the victims, they are not wealthy people,” Casas said.

Sigh. We all should learn how to value and protect our hard-earned money. We have to be careful and prudent about our investments. I cannot stress this enough — we need to be extra meticulous about these things. Hard-earned money. We are not wealthy people.

Again. When it comes to money — “if it sounds too good to be true, then it probably is.” Last month, I wrote about MLMs and pyramiding scams in light of the Aman Futures Group fraudulence that “allegedly conned some 15,000 individuals across the Visayas and Mindanao regions out of P12-15 billion.” I am re-blogging here the article that was published in StarScience to hopefully educate and inform more of our kababayans about these things. Please feel free to share.

[…] it has to be understood that if certain networking schemes depend solely on network membership growth (recruitment process) as means to make money, they are inevitably bound to collapse; that is, you will run out of “friends” and “acquaintances” to recruit. Regrettably, people situated at the lower levels of these networks are the ones who are most affected. In fact, in our work, we also showed that the “earning potential of (certain MLM architectures obeys) the Pareto “80–20” rule, implying an earning opportunity that is strongly biased against the most recent members.” This basically says that 80 percent of the wealth of certain MLM companies is owned by only a measly 20 percent of its total members — the top 20 members.

To better understand the quoted statement, I am providing herewith a doodle/sketch of an arbitrary social network with some recruitment dynamics diagram as a guide.

Pyramiding

“Into the bargain, in small cities, communities and/or barangays, this clustering is especially expected to be higher, and the “world” becomes much “smaller”; that is, everyone seems to already know everyone else. What this fundamentally tells us is that people will eventually run out of friends, relatives, and/or acquaintances to recruit more quickly.”

It must be noted, however, that there are legitimate MLMs, which are quite different from pyramiding schemes (illegal ones). Notwithstanding the fact that they both have close operational and structural resemblance (“multiple levels’ of distributors and recruits”), authorized multilevel marketing companies have actual products and/or services of good value to sell.

To those who are interested in reading the StarScience article, follow this link. To those who are interested in the details of this research (technical), kindly follow this link.

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This entry was posted on April 1, 2013 by in Stock Trading and tagged , , , .
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