Recently I'd come across a discussion about a certain brand using vending machines. I'd seen a few of these machines around Brisbane and the Gold Coast, along with other novelty machines, but I've never seen anyone actually use any of them. The discussion was around a scheme offered to "investors" for a 100% passive income stream. The scheme was simple: Front up $25,000 for the machine, and they provide a guaranteed flat 12% per annum return. The company takes care of maintenance, stocking, etc. 12% p.a. from a machine that I have never seen anyone actually use after expenses? How?
Schemes like this amount to a fairly simple variant of a Ponzi. By definition a Ponzi scheme takes your investment funds and guarantees a return. It pays that return regularly using the money you initially invested, and money invested by the people that follow. Many Ponzi schemes start off as a legitimate investment scheme that want to attract enough capital to achieve an optimistic scenario that will actually have the potential to earn more than the incentive. They implode when that scenario does not materialize and the scheme starves itself of capital. The people that got in early essentially got most of their money back, or possibly a profit from the scheme, provided they didn't reinvest those earnings back in the scheme. The people that got in late will get virtually nothing.
So, how does a scheme like this potentially work? First we look at the investment amount: $25,000 per machine. Now, there is absolutely no way these machines cost $25,000. The real figure for the machine is probably South of $2,500, but we'll use $2,500 as an example. The company gets investors to invest $25,000 for each machine, guaranteeing a 12% p.a. return, or $250/mo. Their cost for the machine is $2,500, so they now have $22,500 per machine in the bank. Now, starting off there will be people interested, but skeptical. They might only get 10 initial investors. They need to combat the skepticism so they pay their investors back their $250/mo. like clockwork. Investors can sign up for a 2 year or 5 year investment agreement. After 2 years they will have been paid back $6,000, after 5 years, $15,000. What most don't realize is that this money is just coming back from the $25,000 that they originally invested. Still, on paper it looks like the scheme is delivering exactly what the investors signed up for. Positive reviews and testimonials start flowing in and skepticism in the scheme is dispelled.
At the end of their investment term, the scheme is quite careful to indicate that they will have that $6/15k plus their initial investment available to "reinvest". They want to keep the initial $25,000 in the scheme towards new, additional machines. Some of the early investors may request a buy-out to get back all or most of their initial $25,000 and provided the scheme hasn't gotten sloppy yet, it will reluctantly oblige to pay these people out. At least some of these people are testing the waters and when they get their payout, they will reinvest, satisfied the scheme is sound. At minimum it provides absolute confidence that the 12% guaranteed return is potentially real. However, their real goal is to keep what remains of the initial investment in the scheme, and draw back in that payout, plus more capital from the original investors.
The purpose of the scheme is to build up market share, to saturate the new market with their brand before competitors. The machines are essentially billboards that are capable of displaying advertisements. Once their machines are everywhere their objective is to be able to negotiate advertising agreements for an additional revenue stream to their product sales. The first question any skeptic has when presented with a scheme that looks too good to be true is: "If the return is so great, why aren't they using their own money?" The answer is pretty simple, they are, but to grow fast they need more capital and why go through the effort to convince a bank (and pay interest/provide collateral) when you can convince the public?
How the scheme implodes: This depends a lot on a number of factors, largely what happens to the net difference between the initial investment and the operating costs. The above example is extremely simple. These machines do require maintenance due to whatever use they actually manage to attract, plus dealing with vandalism and the like. The operators of the scheme will undoubtedly be drawing down a salary, plus there are advertising costs to promote the scheme. Provided investors keep their money invested in the illusion of a 12% return the scheme can be sustained for quite some time while new machines are rolled out. For every $25k, the scheme operators could potentially choose to roll out 2, or maybe even 5 new locations, but they have to watch the cash flow carefully. Their goal is to get to a critical mass to get that new revenue stream, but there is no guarantee that the revenue will materialize. Ultimately they are working against the clock because while investors will be satisfied initially that they are getting their $15000 return after 5 years, they are going to be expecting their $25,000 capital outlay back, and the simple fact is that the scheme does *not* have enough cash to pay very many of these investors out.
Anyone considering a scheme like this should hopefully be quite wary of the possibility of getting their initial investment back at the end of the agreement and not blindsided by the fact that people currently in the scheme are getting their promised 12% payments each month without fail. If there is one thing to think about, it is depreciation. If a machine really cost $25,000, how much would it be worth after 5 years of use? The schemes will claim that the machines are effectively owned by you, where they take care of the maintenance etc. to re-assure you in case anything were to go wrong. When the scheme collapses you may very well find yourself the owner of one or more of these machines, with retail space rent owed, and a machine worth a few hundred dollars in used parts that you need to remove and find storage for. You invested $25,000, got back maybe $15,000 and a proprietary vending machine for a brand that no longer exists.
Is it illegal? The thing about Ponzi's is that they are like a market bubble. They're easy to spot after the fact, and while "Bears" might point fingers at them, authorities typically only act on them once something does go wrong. The perpetrators of these schemes are generally people with very eager ambitions that believe it's better to attempt something and ask forgiveness than forever seek permission. The 12% guarantee is an incentive to attempt to attract enough interest to hit critical mass. The questions you need to ask are:
- Is this criminally motivated or is it merely eager ambition?
- How realistic are their goals and possible revenue? is > 12% really achievable?
- Can I afford to lose some/most of this money to find out for sure?
Tuesday, February 25, 2020
Monday, February 17, 2020
Defogging windows, for Australians
Growing up in Canada you deal with freaking cold days and frosted windows.
Your car boot invariably holds a snow brush & scraper like this:
You don't want to get caught out without one because clearing snow and especially ice off windows without one involves a lot of pain. Ice on glass will chew down any library or credit cards that you might try to chip away enough space to see.
Even if your windows aren't covered in ice, and you can brush back the snow and use the wipers to keep the screen clear of snow, you have to deal with the considerably fogging that a warm, breathing body makes in a cold car with a windscreen that is being chilled considerably below the ambient (usually negative) temperatures outside.
Why do windows fog?
Fogging is simple condensation. Warm, humid air inside with a cold surface you want to look through. Water vapour condenses on cold surfaces, like when you take a cold drink in a glass and watch the water accumulate on the outside of the glass. In places like Canada, fogging is inevitable and easy to understand with temperatures involved. In Australia it doesn't get nearly as cold, but given the much higher humidity, when wind and rain strike the windscreen/windows this can cool the glass enough to cause water vapour in the car to condense on the glass. To prevent fogging you can do one of 3 things: Dry out the air, warm up the surface, or wipe the condensation.
A/C and defogging
Most people here know that A/C can defog windows, and it does a pretty good job at it. However, A/C is a short-term fix for fogging and can make fogging considerably worse if used incorrectly, and can make your trip considerably less comfortable on longer trips in cooler, wet weather. A/C is a good method to initially de-fog windows in a car, however it is important to use the right vent settings to avoid making the problem a lot worse.
Most cars will have controls to change the vent options, fan speed, temperature, plust a toggle for A/C, an option for "fresh" vs recycled air, and the infamously confusing upside down hotplate.
Looking at the left dial there are 5 settings, from left to right these are: Top Vents, Top + Bottom Vents, Bottom Vents, Bottom + Windscreen Vents, and Windscreen Vents.
When using A/C to defog windows, *DO NOT* use the Windscreen Vent options. Yes, initially this will clear your windscreen quickly, but especially in a moving car this will chill your windscreen, causing condensation to form up even faster if the A/C is turned off, and can eventually start to fog up even with the A/C on. Instead, you should use a top and/or bottom vent option with the Recycle Air setting turned on.
The Upside Down Hotplate Button
This button is for the rear window defogger. If you look at most cars rear window you will see a series of horizontal lines in the glass. These are heating element wires that turn on with this button. These warm up the glass and defog the glass or melt exterior ice formed on the glass in the winter.
Proper Defogging Settings
A/C defogs windows because one of the key features of A/C is that it dries out the air. This lowers the humidity considerably inside the car, especially when on Recycle. However, A/C also cools the interior of the car, which can become rather uncomfortable, and if directed at the windows, cooling the windows can compound the fogging problem. The best way to defog windows is instead to warm the windows.
Keeping a car comfortable and defogged when driving in raining can take a bit of adjusting the climate control settings, but isn't that difficult. If the windows are initially fogged up, a quick burst from the A/C on recycle can dry out the interior of the car to clear most of the windows. While the A/C is running you can turn up the heat. Car A/C are not reverse-cycle so you don't need to adjust the temperature down to turn on the A/C. The temp settings only control the separate heating elements, not the A/C so the A/C can be drying the air while the heaters are on. As the heat starts to warm up the car, turn off the A/C and switch the vent settings to blow it at the windscreen and turn up the fan speed, switching back to Fresh air rather than recycled. If the rear window is fogged you can switch on the rear defogger button. It's best to do this when the car is stationary as the windows may initially start to fog, especially if the A/C had been chilling the window surface. Once the windscreen is clear you can turn down the heat/fan speed to a more comfortable setting, keeping it on the windscreen vent. If the side windows are fogged and you want to reduce the overall fogging you can repeat a short A/C pulse but be sure to switch the vent away from the windscreen to avoid chilling the windscreen.
Hopefully this helps anyone annoyed by fogging windows in the rain and feeling like they have to freeze themselves to keep the windows clear, or worried about using heat at the same time as the A/C. :)
Your car boot invariably holds a snow brush & scraper like this:
You don't want to get caught out without one because clearing snow and especially ice off windows without one involves a lot of pain. Ice on glass will chew down any library or credit cards that you might try to chip away enough space to see.
Even if your windows aren't covered in ice, and you can brush back the snow and use the wipers to keep the screen clear of snow, you have to deal with the considerably fogging that a warm, breathing body makes in a cold car with a windscreen that is being chilled considerably below the ambient (usually negative) temperatures outside.
Why do windows fog?
Fogging is simple condensation. Warm, humid air inside with a cold surface you want to look through. Water vapour condenses on cold surfaces, like when you take a cold drink in a glass and watch the water accumulate on the outside of the glass. In places like Canada, fogging is inevitable and easy to understand with temperatures involved. In Australia it doesn't get nearly as cold, but given the much higher humidity, when wind and rain strike the windscreen/windows this can cool the glass enough to cause water vapour in the car to condense on the glass. To prevent fogging you can do one of 3 things: Dry out the air, warm up the surface, or wipe the condensation.
A/C and defogging
Most people here know that A/C can defog windows, and it does a pretty good job at it. However, A/C is a short-term fix for fogging and can make fogging considerably worse if used incorrectly, and can make your trip considerably less comfortable on longer trips in cooler, wet weather. A/C is a good method to initially de-fog windows in a car, however it is important to use the right vent settings to avoid making the problem a lot worse.
Most cars will have controls to change the vent options, fan speed, temperature, plust a toggle for A/C, an option for "fresh" vs recycled air, and the infamously confusing upside down hotplate.
Looking at the left dial there are 5 settings, from left to right these are: Top Vents, Top + Bottom Vents, Bottom Vents, Bottom + Windscreen Vents, and Windscreen Vents.
When using A/C to defog windows, *DO NOT* use the Windscreen Vent options. Yes, initially this will clear your windscreen quickly, but especially in a moving car this will chill your windscreen, causing condensation to form up even faster if the A/C is turned off, and can eventually start to fog up even with the A/C on. Instead, you should use a top and/or bottom vent option with the Recycle Air setting turned on.
The Upside Down Hotplate Button
This button is for the rear window defogger. If you look at most cars rear window you will see a series of horizontal lines in the glass. These are heating element wires that turn on with this button. These warm up the glass and defog the glass or melt exterior ice formed on the glass in the winter.
Proper Defogging Settings
A/C defogs windows because one of the key features of A/C is that it dries out the air. This lowers the humidity considerably inside the car, especially when on Recycle. However, A/C also cools the interior of the car, which can become rather uncomfortable, and if directed at the windows, cooling the windows can compound the fogging problem. The best way to defog windows is instead to warm the windows.
Keeping a car comfortable and defogged when driving in raining can take a bit of adjusting the climate control settings, but isn't that difficult. If the windows are initially fogged up, a quick burst from the A/C on recycle can dry out the interior of the car to clear most of the windows. While the A/C is running you can turn up the heat. Car A/C are not reverse-cycle so you don't need to adjust the temperature down to turn on the A/C. The temp settings only control the separate heating elements, not the A/C so the A/C can be drying the air while the heaters are on. As the heat starts to warm up the car, turn off the A/C and switch the vent settings to blow it at the windscreen and turn up the fan speed, switching back to Fresh air rather than recycled. If the rear window is fogged you can switch on the rear defogger button. It's best to do this when the car is stationary as the windows may initially start to fog, especially if the A/C had been chilling the window surface. Once the windscreen is clear you can turn down the heat/fan speed to a more comfortable setting, keeping it on the windscreen vent. If the side windows are fogged and you want to reduce the overall fogging you can repeat a short A/C pulse but be sure to switch the vent away from the windscreen to avoid chilling the windscreen.
Hopefully this helps anyone annoyed by fogging windows in the rain and feeling like they have to freeze themselves to keep the windows clear, or worried about using heat at the same time as the A/C. :)
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