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I received a lot of feedback on my previous article, “Is EmGoldex a Scam?” both in the comments section, as well as via email. Of particular interest to me were the staunch defenders who proclaimed that my logic “sucks” and that I didn’t do the proper research, and they proceeded to explain how I wrongly described this or that specific detail in their payout scheme.

Truth to tell, I expected this because as I have already mentioned, I have seen this happen over and over again in the past. It’s like knowing the secret to a magic trick. Once you’ve seen it, then you know how it’s done and even if the magician does variations to the trick, you can still probably figure out how it’s done, because you know the basic principle.

In other words, I don’t need to fully understand the marketing plan of EmGoldex or whatever other company out there. All I need to know is the gist of it, as well as some knowledge of its products, and it’s easy to tell if it’s a scam or not. Perhaps it’s my critics who should recheck their logic and do their proper research on pyramid schemes. I was, after all, a teacher of algebra, geometry, physics and computer programming. So I have every reason to be very confident with the soundness of my logic.

The bottom line is this: How is the company earning money?

If it earns money mainly via recruitment, then it is a pyramid scheme BY DEFINITION. It may even be registered with SEC (it’s not that hard to register a corporation and make it sound legal at first). Many past scams were registered with SEC so that’s not really a guarantee — although a company that isn’t registered ought to make you really doubtful.

It also doesn’t matter whether this celebrity or that politician endorsed it. Come on, these people are human too and they can make mistakes, or they can be scammers as well. What? You don’t believe that politicians or celebrities can be scammers? Then you might be interested in buying a 2.5 billion peso parking building in Makati that I happen to be selling.

So what if it’s a pyramid scheme? If people know what they’re getting into and are willing to take the risk, why shouldn’t they be free to do so?

Well, the problem is that sponsors or uplines are RARELY transparent about the risk. They will always focus on the upside and downplay the downside. They will show you how easy it is to double, triple, quadruple or quintuple your money. And all you have to do is to “invite two, only two.” They don’t tell you that majority of those who invested have not yet earned anything. In fact, they spend a lot of time trying to convince you that the company is legitimate, and that it is not a scam, and so on and so forth.

But as I have shown in the last article, for every person who exits, there are 14 other people who are waiting — in other words, they haven’t earned anything yet. What they don’t know is that the money they invested was used to pay out the exiting person and the rest goes to the pocket of the owners.

Ah, but they will say that it doesn’t really go into their pockets because they have to pay out the next exiting person. True, but remember that the next person can’t exit unless there are new people coming in (or old people who “reinvested”) so there’s always fresh cash coming in and only a fraction of that is used to pay out the exiting person.

Now, experienced schemers will rarely admit that they make money from recruitment (because they know that they will be trapped by the definition of a pyramid scheme). Therefore, they will try to persuade you that they are really in the business of buying and selling gold, and that is how the company makes money.

Again, that is patently false and is relatively easy to demonstrate. The historical price per gram of gold can be found in the goldpriceoz.com website, which uses the London gold fixing price as its reference. If we look at a 6-month window on the price of gold (from Dec 2014 to June 2015), we can see that the highest point is at $41.66. and the lowest point at $36.88. That means even if I bought at the lowest point and sold at the highest point, I would have earned $4.78 which is roughly 13% return on my original investment.

Let’s look at a one year window (from June 2014 to June 2015). The highest point is at $43.09. and the lowest point at $36.72. Following the previous analogy, I would have earned $6.37 or 17% return on my original investment.

(Note that in both these scenarios, I am presenting the BEST CASE — buying at lowest and selling at highest — but we know this RARELY happens in reality. In fact, if you had bought gold in June 2014 at around 40.50 and held on to it, your portfolio would have a  NEGATIVE net value today because gold in June 2015 is only 37.80.)

But going back to the analogy, we have seen that in even the best case for one year, we only got a 17% return by buying and selling gold. In contrast, EmGoldex promises to turn your PHP35,000 into PHP180,000. That’s a whopping 514% return on investment. So tell me, how did they earn that much money in such a short time? By buying and selling gold? But we have already shown that’s not possible.

Therefore, they earn from recruitment, and therefore, it’s a pyramid scheme.

Originally published in Sunstar Davao.

Send me your thoughts at andy@freethinking.me. View previous articles at www.freethinking.me.

For the people who misread last week’s article, please note that I am not and have never been a pastor, nor have I been kidnapped. Please read the first paragraph of that article again and you will know who the author of that piece really is. All I wrote was the first paragraph.

I have been seeing numerous posts of EmGoldex on my online newsfeed for the past few months. And then someone I knew asked me for my advice about it. So I asked him to tell me briefly how it works. After he gave me an overview, my gut feel was that it was indeed a scam — more specifically, a pyramid scheme.

I am not saying this as a layman. I was a legitimate high-level multi-level marketer many years back. I was a speaker and a trainer. I have devoted considerable time studying many different marketing plans from different companies, and I have also studied how unscrupulous people use these techniques to perpetuate pyramid and ponzi schemes. It was very important in my previous line of work for me to know how to explain these things because I usually got many objections and questions at the end of a presentation. Also, a considerable number of people have the mistaken notion that ALL networking companies are scams.

(For those who are interested, I wrote a three-part series a few months back entitled “Truth and Lies of Network Marketing.”)

Like Liam Neeson in the movie, Taken, I can say that I “have a very special set of skills” when it comes to smelling out what is legitimate and what is not.

However, to truly understand EmGoldex and to give it a fair chance, I decided to browse through their company website as well as watch a couple of presentation videos (one in English and one in Filipino) made by actual distributors.

These are the facts I gathered about their company and marketing plan:

1. The company sells gold. You may purchase these gold bars directly from the online retail store.
2. The company has a marketing program that you can enroll in that allows you to order the gold bars, and then make money (eventually) by getting two other people to enroll in the program as well. Enrollment costs 540 euros or roughly PHP35,000.
3. The two other people you recruit have to recruit two more each (four people) and those four people have to recruit two more each (eight people), and then you will “exit” with PHP180,000. In other words, in order for you to earn your PHP180,000, fourteen other people must have also invested PHP35,000 each into the system.*
4. Recruit more, or reinvest your earned income into the system to earn more.

The US Securities and Exchange Commission (SEC) has come out with clear guidelines over what constitutes a pyramid scheme:

• No genuine product or service. Unlike many legitimate MLMs, EmGoldex does not even have a unique product. There is no reason why one might prefer to buy or sell gold at EmGoldex except for the opportunity to participate in its recruitment system. This is a huge red flag.
• Promises of high returns in a short time period. Promises of easy money or passive income. If there were really such a thing as easy money, don’t you think the business tycoons in our country would already be building businesses such as this? Why don’t we ever hear of the Henry Sys and the Ayalas in our country going into this business if it is indeed that lucrative? Why don’t major banks and investment companies do this? Let that sink in for a moment.
• No demonstrated revenue from retail sales. Emphasis on recruiting. Does EmGoldex really make money from buying or selling gold? Or does it make money because people are buying in to the recruitment program? Think about this. Fifteen people paying PHP35,000 each is PHP525,000. The company pays out PHP180,000 to the “exiting” distributor, where does the remaining PHP345,000 go?*

So it is quite clear that the company earns its money mainly from recruitment, and that is a hallmark of pyramid schemes. The money used to pay the “exiting” distributors comes from the money paid in by new distributors. This will eventually lead to a collapse because there will come a point when there will simply not be enough new distributors to pay out all the existing ones.

Think about it. In order to pay out 1 person, the company needs 14 more people to join. So in order to pay out all 15 of them, they would need 225 more people (15×15). In order to pay out those people, they would need 3,375 more people (225×15). The more people who join, the more people they will need in order to pay out everyone who joined before them. Is that realistic and achievable? No, in due time, they will run out of new distributors coming in to support the existing user base, and if you are one of those who come in at that unfortunate time, you will lose your money, pure and simple. This is the time when the scammers pack up and run, when bonus checks bounce or no longer come in. I have seen too many of these kinds of schemes to know that it won’t last, and I can even prove to you mathematically why it is not sustainable.

I am not saying, however, that ALL those involved in this are scammers. No, I believe a lot of the distributors doing this sincerely believe that it is a legitimate enterprise and that they are helping other people in the process. What I am saying is that the people behind EmGoldex themselves are the scammers and they have fooled all these people who have joined them. Oh, but don’t take my word for it. Please do your research into “pyramid schemes,” “ponzi schemes,” and look for old news articles about Multitel, Aman Futures, and the like. Please, learn from history and do not get enticed by all the rosy visions these scammers paint.

In the heyday of Multitel and Aman Futures, people also earned from those and their participants staunchly defended the company, the founders and so on. But when they came down, they came down hard. I personally know someone who lost millions in one of those scams. Life for him and his family wasn’t pretty for the next few years as he struggled to recover.

If you are one of those who were still able to cash out, consider yourself fortunate. But I would strongly advise you against reinvesting or perpetuating this scam because there will come a time when you are either going to get hurt or you will hurt a lot of people in the process.

And some things just aren’t worth their weight in gold.

Here is another article I wrote more recently answering some objections from defenders of Emgoldex and showing why this is indeed a pyramid scheme: https://freethinking.me/essays/defending-emgoldex-and-failing-miserably/

See the following video and links for your further information and education:

http://www.thephilippinepride.com/more-ofw-victims-emerges-as-emgoldex-continues-to-scam-investors/

http://www.thephilippinepride.com/government-warns-massive-online-gold-investment-fraud-could-hit-ofws-badly/

http://www.sec.gov/investor/alerts/ia_pyramid.htm

 

* Some corrections have been made to the figures in the article because of minor computational errors. The analysis and conclusion remains the same.

Originally published in Sunstar Davao.

Send me your thoughts at andy@freethinking.me. View previous articles at www.freethinking.me.

Sometimes, I still miss being in a classroom with angsty teenagers, challenging their young minds to think beyond the conventional and ordinary. But there are also times that I don’t miss it — when I think of checking endless mounds of papers, for example, or fighting ridiculous policies from the administration or DepEd.

Teaching can be a very colorful and trying experience. I remember a time in my second year of teaching when I walked into the classroom, and I saw something strange at the back. I went nearer and saw that there were several CD’s and cassette tapes arranged on a desk with a couple of lighted candles. It was a makeshift altar to Kurt Cobain, lead singer, guitarist and primary songwriter of the rock band, Nirvana — whose death anniversary some of the boys at the back were commemorating.

Needless to say, that was a very strange physics class I had that day.

I still get a good laugh when I think about that now, and I also get a kick out of reading other teachers’ weird experiences with their kids. I recently came across a list of detention slips compiled by Mark Pygas and Jake Heppner. It was interesting reading through the various reasons why some students were sent out of their classrooms (with my comments):

1. Marissa was “disrupting class – claiming to be the reborn Jesus and hitting another student with a Bible.” (Send her to me. I have some water I need turned into wine.)
2. Another kid was found “drawing Justin Bieber in lessons, singing ‘That Should Be Me’ and hitting a non-’Belieber.’” (If he meets Marissa-Jesus up there, are they going to hit each other?)
3. Raymond “threw a lamp at another student and told him to ‘Lighten the f*** up.'” (This is actually pretty clever.)
4. Anthony was caught “unbuttoning his shirt to reveal a Superman T-shirt and announcing he was Superman.” (Did he wear red briefs outside his pants as well?)
5. Casey was caught “leaping with intent to fly.” (He should take flying lessons from Anthony.)
6. Joe “started with excessive chair squeaking and ended with farting in a student’s face.” (That’s called building up to a climactic finish.)
7. Someone “volunteered to be a target for a paper spear and was hit in the face with it.” (Someone wasn’t very bright. Someone should throw a lamp at him.)
8. Mason “looked up the dress of another student,” which he readily admitted in his own words: “I looked up her dress (I had my eyes closed).” (Yeah, Mason, sure…)
9. A defiant student “used the F-word in the hall multiple times. When I said to him I should not hear that word, he told me to plug my ears and walked away.” (Well, that is a valid solution, you know.)
10. But probably the most unjust case was that of Alex. His teacher wrote his parents saying, “Alex consistently defied me. During class he contradicted me numerous times when I insisted that the length of one kilometer was greater than that of one mile. Every other student…accepted my lesson without argument, but your son refused to believe what I told him, offering such rebuttals as, ‘You’re lying to the class,’ and commanding other students to challenge my curriculum.Although he was correct, Alex’s actions show a blatant disregard for authority, and a complete lack of respect for his school. In the future, Alex would be better off simply accepting my teachings without resistance.” (After teaching him something so clearly wrong? I don’t think so. If I were the principal of that school, the teacher, and not Alex, would be the one in detention, or worse, out of a job.)

Originally published in Sunstar Davao.

Send me your thoughts at andy@freethinking.me. View previous articles at www.freethinking.me.

Bai Fang Who?

You have probably never heard of him, given the media’s obsession with the rich, famous, racy and popular. He wouldn’t warrant a headline, the way two boxers recently hogged the headlines weeks before, during and after their multi-million dollar fight. His photo would not grace the cover of a magazine the way an actor’s polished smile or a sexy bikini-clad starlet could. His story would be buried beneath the pile of entertainment gossip and scandals — who slept with whom and in what position, who broke up with who, who slapped who, and so on.

After all, Bai Fang Li was an old man, a poor man, and a pedicab driver. He was born poor and he died poor, which is hardly interesting or inspiring, or so I thought when I first encountered his story. That impression would be shattered as I read more about this remarkable man.

For most of his life, he ferried people back and forth as a rickshaw and pedicab driver in Tianjin, China. In 1987, he decided to retire and go back to his hometown. He was 75 years old. When he arrived at the small, rural village where he grew up, he saw children hard at work in the fields. He asked why these children were not in school and was told that they had no money to pay for tuition.

He was so distressed by this that he donated 5,000 yuan (roughly PHP35,000) to the schools in his village. His daughter, Bai Jinfeng said that money was “all he owned,” so he practically gave away his entire life savings.

But Bai Fang Li wasn’t done yet.

He came out of retirement and returned to Tianjin to once again ferry passengers on his pedicab. But this time, he used his earnings to continue supporting needy children from his village. He would only wear old clothes, mismatched socks and shoes and a hat that other people discarded. He would even eat food that other people threw away. When his children confronted him about this, he picked up a bun and said,  “What is so hard about this? This bun is the product of a farmers’ hard work. People throw it away; I pick it up and eat it; isn’t this a way to reduce wastage?”

Every day, he would wait for passengers near the railway. His daughter recalls, “He went out at dawn and wouldn’t return until darkness fell. He earned 20 to 30 yuan each day (around PHP150 to PHP200). After returning home, he put his earnings in a place carefully.”

He continued driving his pedicab until 2001, when he was 90 years old. He drove to the Tianjin Yaohua Middle School, to deliver one last payment and to tell the students and teachers that he couldn’t work anymore. By this time, he had donated 350,000 yuan (around PHP2.5 million) and had helped 300 students go to school. He asked for nothing in return save that these students “study hard and get a good job, and then make contributions to our country.”

But he still wasn’t done yet.

He was no longer strong enough to drive a pedicab, but he offered to watch over people’s cars that were parked in the station. He was able to save 500 yuan (around PHP3,500) from that and still he gave that away.

Bai Fang Li passed away in 2005 shortly after being diagnosed with lung cancer, but not before he had been recognized as a “virtuous man” and selected as one of 20 candidates of the “People Who Moved China” award.

Today, I share his story because it deserves to be heard by more people. It deserves a bigger audience than those funny cat videos or dance fails or sex scandals.

In a world dominated by the glitz and glamour of superficiality, we need to remember that there are people like Bai Fang Li who are selfless, humble and full of love and compassion for humanity. The world would be a better place with more people like him.

Originally published in Sunstar Davao.

Send me your thoughts at andy@freethinking.me. View previous articles at www.freethinking.me.

I have never really been a boxing fan.

Last Sunday was the first time I watched a Manny Pacquiao fight in full and on live telecast. Before, I just relied on spoilers that people would text or post on Facebook. I watched only the highlights and replays on Youtube. But my wife and I got free tickets to the fight (Thank you Eastwest Bank!) so instead of sleeping in my Sunday morning, I found myself sitting and watching not just the Pacquiao fight but the two pre-fights as well, trying to get a feel of a boxing match.

Days before, I had listened to many people echoing the general sentiment of the Filipinos, how they wanted Manny to beat up Floyd. I observed the hype building up — replays of the Pacman’s previous fights, Bob Arum declaring Pacquiao’s future presidency (which, if there really is a God who loves the Philippines, shouldn’t happen), and jeers of “Gayweather.” I found the last quite telling of people’s lack of maturity and sensitivity in relating to our fellow humans in the LGBT community — equating “gay” with cowardice — which is so off the mark. I have gay friends who are anything but cowards.

I also heard from around five people (who were either boxing enthusiasts or martial arts experts) who went against the common grain, and said Mayweather was “too intelligent” and too much of a defensive expert for Pacquiao and the only way Manny would win was if Mayweather was having an off-night.

I must admit that I went into the match expecting Mayweather to win — a few expert opinions weighed more than a thousand emotional ones, I suppose. And I must admit to being more than slightly irritated that Pacquiao was using the God card too much — saying “I believe, God will deliver him into my hands. His defeat would make him realize that fame, money and material possessions are nothing without God in our life.” So 7,000 people died in Nepal a week before the big match and God’s going to sit in your corner and give you magic powers to win? Trainer Freddie Roach had more sense when he declared “Manny, God doesn’t give a (expletive) who wins. He’s got bigger things to do.”

But after the match was when things got really out of hand. The “Gayweather” jeers intensified, along with “Kentucky Floyd Chicken” and remarks of “I thought this was boxing, not dancing,” and so on. Yes, I get “Filipino pride” and that this was a way for people to deal with their hero losing the match. It was a way for those believing “God was on their side” to somehow rationalize the defeat. It was hero worship to the extreme and that is dangerous, because if you start idolizing your heroes too much, you tend to expect they can do no wrong and that everything they do should come out right.

Aside from his abuse to women, people tend to criticize Mayweather because of his materialism and love for money, as if Pacquiao is some some poor underdog who isn’t materialistic as well. The guy now owns several properties including a US$9 million (around PHP400 million) house in Forbes Park and another house in Los Angeles. He owns a fleet of luxury cars including a Porsche, Ferrari, etc. And he stood to make US120 million (PHP5.4 billion) from that one fight alone. Sure, Mayweather stood to make more, but someone better do some hard convincing to me that Manny wasn’t in it “for the money” as well. Now, if Manny had donated 100% (or even 90%) of his winnings to the country, I would be more inclined to believe him. But until then, all this talk of “fighting for the country” and “fighting for God’s glory” is just that — talk. Yes, Mayweather is materialistic (and quite vocal and obnoxious about it), but that doesn’t mean Pacquiao is not. He has just mastered the glory-to-god-talk (incidentally utilized by many dirty politicians as well) that makes him seem oh so humble, and plays so well  to the emotional and religious nature of Filipinos. We have to rid ourselves of binary thinking (good vs. evil, rich vs. poor) and start looking at things from a wider perspective.

Now, I am not bad-mouthing Pacquiao or saying he doesn’t deserve his money, not at all. As a boxer, he is up there in the upper-echelons, a hall-of-famer, and certainly a champion many times over. He is no less an inspiration to many who look up to him, who draw strength from his amazing rags-to-riches story. This latest defeat does not take any of those away from him. He deserves every accolade and every cent he has ever made because of his hard work and dedication to the sport, and he has every right to spend his money as he wishes.

That being said, we should avoid the tendency to worship our heroes too much and to think they can do no wrong. I admire Pacquiao as an excellent boxer, and an inspiring human being, but that doesn’t mean I should be blind to his faults. He lost that match because he didn’t have a clear plan to defeat Mayweather’s strategy (one he has employed all throughout his career), and he is being a sore loser about it by using his injured shoulder as an excuse. Manny failed to penetrate it, therefore he lost. Pacquiao is an excellent boxer but he is also a mediocre singer, a laughable basketball player and a lousy, absentee congressman.

It is good to have heroes, but always remember they are as human as we are. It is never a good idea to always put them on a pedestal, lest they think themselves capable of doing everything right, and lead themselves (and us) to ruin.

And if that’s not obvious enough, please, Manny, don’t run for president.

Originally published in Sunstar Davao.

Send me your thoughts at andy@freethinking.me. View previous articles at www.freethinking.me. Join our next Filipino Freethinkers Davao Meetup on May 9, 2015 (Saturday) 730pm to 1030pm, Coffee at Yellow Hauz, V. Mapa St., Davao City.