Edited image. Original Photo by: Skley via Compfight cc
Edited image. Original Photo by: Skley via Compfight cc

I learned a lot about love when I was in my senior year of high school. I had fallen in love with a girl. That in itself would have been unremarkable. I have had crushes since second grade. As early as third grade, I even imagined my crush in a wedding gown, and for a while, that became my standard for evaluating my crushes — whether they looked good in a wedding gown or not. Anyway, falling in love was nothing new to me.

What made it different this time was that I had actually gathered up enough courage to tell her about it.

It was around this time, in English class, that we were discussing a short story called The Chaser by John Collier, about a young man in search of a love potion that he wanted to give to his lady love and buying it for a dollar.

In the middle of the lecture, our teacher asked, “Is love a will or an emotion?” A lively debate ensued. On the one hand, there were people who thought that love is an emotion — a fleeting thing given that people fall in and out of love all the time. If hashtags had been invented then, these would be the people saying #WalangForever (there is no “forever”).

On the other hand, there were people who thought that love is a will — that one makes a conscious decision to love another in spite of his or her shortcomings, in spite of the original rush and thrill being gone — like when couples grow old together and still love each other despite the wrinkles, the falling hair and missing teeth. This is the kind of love that says #MayForeverNga (“forever” exists indeed).

At that time, I heavily defended the second answer. Today, I tend to think it’s a bit of both, but still more of a decision than a feeling. The emotion is necessary for the initial spark, but it is the will and commitment that keeps the fire burning through the years.

Before I got married, a colleague of mine gave me a rather obscure but marvelously insightful book called The Mystery of Marriage by Mike Mason. It was a “pirated” version, meaning she photocopied her copy and gave me a bound version (though I don’t think she did it to save cash but more likely she couldn’t find an original version anywhere).

Of course, I would probably not agree with most of the book now but I still remember it fondly for the chapter on vows. It asserted that the vows were the be-all and end-all of marriage. When the attraction has faded, and things turn sour, and the shortcomings of your partner have been laid bare before you — when you at last stop seeing through love-tinted glasses — you are left with nothing holding your marriage together but your vow.

That is the essence of saying that love is both an emotion and a will.

Moreover, Mike offers this little gem: “To keep a vow, means not to keep from breaking it, but rather to devote the rest of one’s life to discovering what the vow means, and to be willing to change and to grow accordingly.”

By now you are probably wondering what happened to that girl to whom I had declared my love. Well, let me just reiterate what I said at the beginning — that I learned a lot about love that year, and that includes learning about how to deal with a broken heart.

Advanced Happy Valentine’s Day!

Email me at andy@freethinking.me. View previous articles at www.freethinking.me.

How To Analyze A Scam (Part 2)

Edited image - Original photo by: theloushe via Compfight cc
Edited image – Original photo by: theloushe via Compfight cc

Last week, we discussed some often-used arguments in Ponzi-type scams like the recently closed Jacama Sales and Marketing. We dealt with the first two arguments in the previous article — that nobody is complaining, and that the company offered certain products for sale, thus proving it is legitimate. Today we’ll talk about the next two arguments often brought up, namely:

  1. That they have the necessary government permits, and that the Securities and Exchange Commission (SEC) had no business meddling in their affairs because the company is registered as a sole proprietorship, and thus is under the jurisdiction of the Department of Trade and Industry (DTI).
  2. That they have a detailed analysis showing how the company is sustainable.

First point, just because I can wave around  a piece of paper with a seal from a government office, does not guarantee that I am operating legally. The reason is quite simple. At the time of registration, I can make everything appear to be legal and above-board, but during actual operation, when I ALREADY have the necessary permits, I can perform certain actions which are actually illegal.

The business permit of Jacama allowed it to operate as a “retailer of general merchandise such as grocery items, food supplements and other dry goods and wholesaler of appliances (booking office).” Did it offer such products? Yes, however, it also offered something else — it offered a promise, in the form of dated vouchers that you could exchange for cash from the company, guaranteeing you a 150% return on your initial cash outlay in 3 months — and that, is what is called a security.

Republic Act 8799 (otherwise known as the Securities Regulations Code), defines securities as “shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture and evidenced by a certificate, contract, instrument, whether written or electronic in character.“

The vouchers that Jacama offers in exchange for your “investment” are as good as “contracts” between you and the company. This is the reason why you are willing to pay four times the market value of a product that you would not otherwise buy from them in the first place. You are not just buying a bunch of gift certificates, or a cellphone, or a bottle of pills, or a grocery basket, you are really after the security — the contract or promise that Jacama will pay you a certain amount over the next 90 days.

Now, since it is in the business of selling such securities, the company should secure the necessary permits to do so. Section 8 of RA 8799 says, “Securities shall not be sold or offered for sale or distribution within the Philippines, without a registration statement duly filed with and approved by the Commission.”

Whether or not the company is a corporation, partnership or sole-proprietorship, the moment it engages in the sale of securities, it automatically falls under the jurisdiction of the Securities and Exchange Commission (Sec. 5 of RA 8799).

The closure order thus has a very strong legal basis, and is not just a government conspiracy to prevent the poor from getting rich (as many protesting the closure are claiming). No, this is government actually doing its job to protect the general public from an illegal operation.

Now, answering the second point, just because I can show you some formulas or write some numbers on a board showing you that my investment is sound and secure, does not necessarily make it so. You have to actually understand what is going on and see if it makes sense.

There is a Youtube video of someone explaining why Jacama is supposedly sustainable. That video is still available as of this writing. You can search “youtube jacama safety net” to see this video for yourself. To a layperson, that video may seem sensible but if you analyze it carefully, it is damning evidence that this is indeed a scam.

Just over a minute into the presentation, you will see that the company earnings is dependent on the person who buys AFTER you do. The presenter assumes that there is a line of people waiting behind you to also buy into the scheme. He assumes it as a fact, and then uses that to conjure his magic trick. He shows you that the company can pay you back 150% of your investment and still make money (making it appear sustainable).

But here is the trick, in order to pay you your 150% and still be sustainable, there MUST be 3 other people who also buy into the scheme. Following this line of logic, when those 3 people join, there must be 9 other people who join after them so that they can be paid. To pay those 9, you need 27 more people. To pay those 27, you need 81 more people, and so on and so forth. This will go on and people will be happy investing and reinvesting until it comes to a point where it is impossible to sustain anymore simply because there are not enough investors (or re-investors) in the next round to sustain the current one. For example, if 30 million people join in one day, that means the company needs to find 90 million other investors in order to pay out those 30 million people. That number alone is already more than the population of the entire country.

When it reaches that point, that is when the perpetrator takes all the money he has acquired and disappears, and leaves a multitude of “investors” suddenly holding worthless pieces of paper that they cannot encash anywhere. As I stressed last week, this has been the story of such investment scams for close to a hundred years since Charles Ponzi first thought of it in 1920.

Please study your history. It ALWAYS ends the same sad way. I hope you learn from this and not have the same sad ending that thousands before you had to endure and agonize over. Do not succumb to the lure of easy or quick money. It’s not worth it.

Originally published in Sunstar Davao.

Email me at andy@freethinking.me. View previous articles at www.freethinking.me.

How To Analyze A Scam (Part 1)

Edited Image - Original Photo by: roujo via Compfight cc
Edited Image – Original Photo by: roujo via Compfight cc

As I scanned the internet about news of the closure of Jacama Sales and Marketing, which I wrote about last week, I noticed that there were a number of comments from those involved in it arguing the following:

  1. That they were perfectly happy with the system and that no one was complaining — and that all this was some sort of conspiracy by the government who didn’t want people to rise from their poverty.
  2. That they bought and sold products and were “partnered” with several establishments, such as some well-known retailers. That made them legitimate (or so they think).
  3. That they had the necessary government permits, and that the Securities and Exchange Commission (SEC) had no business meddling in their affairs because the company is registered as a sole proprietorship, and thus was under the jurisdiction of the Department of Trade and Industry (DTI).
  4. That they had a detailed analysis showing how the company is sustainable.

As I looked at these comments, I realized that a lot of people still don’t understand how these scams work. In fact, there are reportedly three other scams that are under investigation at the moment. Someone also asked what would the SEC do about this company since there are rumors that they just went under the radar for the moment but will reopen in a different location with a different name.

I do not know what the government will do about this, although I do laud them for nipping this in the bud before it blew out of proportion. For my part, I am doing my best to educate the public about this. Hopefully this article and similar ones I have written before will help you analyze “opportunities” that people offer to you, or will help you explain to your friends or relatives why or how their particular offering sounds dubious.

So let’s look at how to counter the objections I mentioned above:

  1. Every scam has happy people. There is always someone profiting from a scam, otherwise, what is the point? Just because there are happy people and no one is complaining doesn’t mean that it is a legitimate business. No one is complaining YET because the scam hasn’t reached the critical mass for it to break down. If you do a little research, the complaints come in after the scammers have already fleeced hundreds of millions and run off with the money.

    My accountant tells of a small group of investors who put in 70 million pesos in Aman Futures (which victimized around 15,000 people last 2012 with an estimated 12 BILLION pesos). They were given an iPhone each and the owner brought them on an all-expense paid trip to China where he supposedly showed off his businesses and investments. The scam broke wide open a short time later and these investors lost their hard-earned money and were left only with the most expensive iPhones in the world.

    So as much as I complain from time to time about the inefficiency of government and the stupidity of some of its policies and procedures, this is one time that I am reasonably satisfied with their actions. This is no conspiracy. This is government actually doing its job in preventing the general public from falling prey to another multi-million scam.
  2. Just because a company has products doesn’t automatically make them legitimate. You should also look at what the products are, if they are reasonably priced, and how they are sold. Since many investment scams have been reported in the news, scammers have also wised up and added “products” to their schemes in order to make their business look legitimate.

    So what products are being offered by Jacama? They are products which can be bought anywhere else for one-fourth of the market value. This is a fact they openly admit. When you fork over the minimum “investment” of P1,800, you get P450 worth of products. For example, you can “buy” gift cheques from a well-known supermarket chain worth P450.

    Now I will ask you, who in their right mind will pay P1,800 for P450 worth of gift cheques? I might as well go to the supermarket directly and buy P450 worth of gift cheques for, well, 450 pesos (though they might charge a small fee on top of that for services or something to that effect, which is perfectly acceptable).

    Clearly, I am not buying the product for the sake of the product. The product is merely an excuse for me to enroll in the scheme which will allow me to make money. In the words of the SEC Advisory against Jacama, “The sale of the product is merely a RUSE to make it appear that the said entity is engaged in the marketing and distribution of products.”

    A counter-point that can be made here is that people are willing to buy overpriced or high-priced products like designer bags or clothes, expensive supplements from networking companies, and so on. However, the difference is that people buy these products because of their unique benefits that the owners perceive they can enjoy, and they would be unable to get these products anywhere else. For example, a wealthy person may buy a designer bag from a boutique worth 1 million pesos because of the perceived quality and stature it may bring. That person buys the product for its own sake, and will be unable to buy the product anywhere else for 1/4 of the price — unless it were fake or had defects.

    I still buy some products from a legitimate networking company I joined more than a decade ago, like toothpaste, soap, and other toiletries even if they are high priced because I like the quality, and I cannot get these products anywhere else so I am willing to pay that price. The point is, I am buying the product for the sake of the product and not for the sake of recruiting others (I stopped actively networking around 15 years ago) or to double my money.

    Now, back to Jacama, why would someone pay 4 times the price of a product that he can get anywhere else for its true value? Clearly, there is another motive there and that makes it highly suspect.

Click here to read Part 2.

Originally published in Sunstar Davao.

Email me at andy@freethinking.me. View previous articles at www.freethinking.me.

Is Jacama a Scam?

Photo Credit: igracek.efko via Compfight cc
Photo Credit: igracek.efko via Compfight cc

A few weeks back, one of my readers asked me if Jacama was for real. At that time, I was still unaware of what it was, so I asked her to elaborate a bit on what they offer. She answered that they offer 32% return in 15 days. All sorts of warning bells rang in my head at this statement because that is too fantastic a return. For comparison, legitimate businesses would be very happy to generate a 20% return in ONE YEAR.

After a little digging online, I found out more details about the company’s “cash back program” which operates like this:

  1. You buy product packages from them starting at P1,800 (up to P1.8M).
  2. Your product package is actually worth only around P450. One of the packages worth P1,800 is a gift cheque from a local store worth P450.
  3. You get a 6 vouchers from the company worth P450 each. The first one is dated 15 days after your original purchase and the subsequent ones are all dated 15 days after the previous one. In other words, you can claim P450 from the company every 15 days until you reach the 90th day after your purchase.
  4. That means after 90 days, you would have “earned” a total of P2,700. So in 3 months, you have effectively gained back what you originally paid for plus 50% of that (150% return in 3 months). And we are not even including the value of the product itself yet.

To appreciate how incredible this all seems, imagine that you’re strolling around SM and a saleslady approaches you to tell you of their special promo. You buy a stove for P10,000 and in 3 months, they will refund your P10,000 and give you an additional P5,000 on top of that. Plus, you get to keep your stove. Is this a realistic and believable scenario? I don’t think so.

The obvious question here is, how does Jacama make money by selling you a product and then paying you back more than the amount you paid them? How is this a sustainable business model? It is not sustainable at all. In fact, the way I see it, this operation is very much like a Ponzi scheme (quite similar to the Aman Futures scam which victimized many people just over 2 years ago).

The US Securities and Exchange Commission defines a Ponzi scheme as “an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors…In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors to create the false appearance that investors are profiting from a legitimate business.”

In other words, the operator of such a scheme uses the money put in by later investors to pay off earlier investors. So as long as more and more people join the program, or as long as people keep re-investing their earnings, the party goes on. But there will inevitably come a time when the number of new investors will no longer be able to sustain the existing ones. When that happens, the operator knows it’s time to pack up and run. Checks and vouchers start bouncing. People who invested their life savings into the program find themselves on the verge of bankruptcy. There will be ugly fights and broken relationships as people start blaming and pointing fingers at those who recruited them into the program.

This is not conjecture. This is historical fact. Just google Multitel scam, or Aman Futures, or Legacy scam, or Mateo Management. All of these companies operated “legitimately” for a while and their investors were all happy, until everything came crashing down in the end. It is also a historical fact that even after almost 100 years (Ponzi schemes started as early as 1920), many people still fall for them. The lure of easy money is just too difficult to resist, but regret always comes too late.

The Davao City Business Bureau recently shut down and padlocked Jacama for not having the necessary business permits for offering investments. It took its cue from an advisory by the Securities and Exchange Commission (SEC) dated January 11, 2016 which strongly advised the public to “stop investing and recruiting other people.” The SEC also warned those who recruit others into such schemes that they can be held “criminally liable, or accordingly sanctioned, or penalized.”

Amidst all these, there are rumors that the business plans to open again elsewhere. Its followers are of course decrying the closure as being motivated by envy and crab mentality. But I urge these people to listen to reason. The government is not trying to stop you from earning. Rather, it is trying to stop a fraudulent practice that has ZERO historical records of success and 100% worldwide rate of imminent failure. There is not a single record of a Ponzi scheme that ended on a happy note. They all ended with despair, bankruptcy, depression, and even suicide.

Save yourselves the grief. There is no such thing as easy money.

Originally published in Sunstar Davao.

Email me at andy@freethinking.me. View previous articles at www.freethinking.me.

Systems Thinking and Why Federalism Will Work

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Photo Credit: kenteegardin via Compfight cc

I discovered Systems Thinking a few years ago thanks to some lectures based on a book by Peter Senge entitled The Fifth Discipline. It is the process of seeing things as part of a bigger picture, an overarching ecosystem of interdependence where a small change in one part can cause massive changes in another.

We live in a culture where self-help articles and books abound. There is always some new-fangled diet around the corner which promises to shed off x-pounds of fat in x-weeks. There are new ways of organizing your messy desk, or new techniques to manage your time, and so on and so forth. The focus is on YOU to change YOUR behavior by sheer force of willpower.

The number of overweight people, messy desks and messy schedules attest to how ineffective those methods really are.

Systems-thinking trains one to think about the STRUCTURES which affect behavior, and aims to change those structures in order to influence and change behavior.

Let me give an example. In the past, firecracker-related injuries during the holiday season have been a problem all over the Philippines. No matter matter how many infomercials and ad campaigns the government release showing mutilated and bloody hands or other body parts, January 1’s headlines would always tell you how many hundreds of people suffered from firecracker-related injuries yet again.

The campaigns were ineffective because they focused on people to change themselves, but no changes were made in the the bigger system or environment in which they lived to encourage that change. The thinking was, “Why should I not celebrate with firecrackers when all my friends and neighbors are doing so? I’m missing out on all the fun.” Since the system did not encourage change, nothing happened.

As far back as the year 2000, Duterte and the local government of Davao showed they understood systems thinking when they enacted a local ordinance banning firecrackers in the city. The result of that change is palpable as Davao just celebrated 15 years of ZERO firecracker-related injuries in the city. But aside from merely being an impressive statistic, it has also resulted in changing people’s opinions about firecrackers. When the law was first enacted, many thought that new year would be boring. After all, how could one celebrate new year without noisy explosions? But today, many are appreciative of the ordinance, and we have learned to celebrate new year in more meaningful ways, perhaps in family gatherings where there is more focus on conversation, or reflection and gratitude for the past year.

The same can be said for the No Smoking ordinance, the speed limits, the 1/3-2/3 sidewalk rule, and so on and so forth which makes Davao what it is.

At present, one of Duterte’s major platforms in his presidential bid is the shift to federalism. A lot of opponents have brought up objections about it, saying that local governments aren’t ready for it. Writers such as Michael Henry Yusingco say that “the overdependence of local government executives on the Internal Revenue Allotment and the continued existence of central-government largesse, or pork barrel funds, signify the stark reality that the development perspective of local leaders has not reached the level of sophistication necessary to sustain a federal government structure.” Moreover they cite the prevalence of political dynasties as proof that the country is not yet ready or mature enough for a federal structure.

What these people fail to understand is that it is the current over-centralized government system which bred all these problems in the first place. Why are local government executives over-dependent on revenue allotments or pork barrel funds? It is not because they “have not reached” a certain level of sophistication. It is because the current system REWARDS them for doing so.

Why are political dynasties prevalent? The same thing, the current system REWARDS them, not for developing their local economy, but for sucking up to Malacañang so they can get a slice of the “countrywide development fund” which is hardly used to develop the country but to fatten their own pockets.

Systems-thinking shows that if you want to develop lasting change, you must tweak the system in order to do so. How can our local executives ever be ready or mature enough for a federal system if you do not first CHANGE the system such that persisting in their old behavior will no longer bring the rewards they are used to receiving?

I am not saying that federalism is a cure-all as it brings its own problems and the leadership has to work hard to implement the system and educate the people about it.

It is, however, a step in the right direction and we must be willing to take that step. As the old Chinese saying by Lao Tzu goes, “the journey of a thousand miles begins with a single step.”

Originally published in Sunstar Davao.

Email me at andy@freethinking.me. View previous articles at www.freethinking.me.

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