Multilevel Marketing Models

["Lane,DC"]

The provenance of the doubling Lotus story extends well beyond
HPS and McKinsey.

It is probably best known to the world via Lester Browns
1978 book The Twenty Ninth Day: Accommodating human needs and numbers
to the earths resources.
However, it derives from a French riddle that is used with
schoolchildren.

From: "Lane,DC" <D.C.Lane@lse.ac.uk>

[Jeff Anderson]

Hi

Does anyone know of any multilevel marketing like Amway (aka pyramid
marketing) models out there?

Thanks


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Jeff Anderson 703.707.6420 - Direct
Senior Product Manager 703.481.1270 - Main
jefan@powersim.com 703.481.1271 - Fax
Powersim Corporation http://www.powersim.com
1175 Herndon Parkway
Suite 600
Herndon, VA 20170
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

["Pedro M. Mendes"]

I recently talked to a couple of Amwayers about issues like saturation. I
presented a) the duplicating bacteria example and b) the logistics curve.

In case youre not familiar with the duplicating bacteria example (they
werent) the story goes like this: A biologist developed a bacteria that
reproduced by splitting in two every minute. He put a tiny little sample
in a closed jar and after 37 hours the jar was half-filled with bacteria.
How long would it take to completely fill the jar? (Answer in the end of
this message.)

The first thing my audience did was to argue that this example was not
applicable because, unlike the jar, the world doesnt have finite capacity.
Being an SDer, you know how to handle this: whenever your input rate is
higher than the output rate, you have saturation. In the case of the
bacteria, it simply turned out that the output rate was 0.

You can always model the number of potential clients as a growth rate,
which in turn is a function of other variables. My audience recognized
that not everybody are potential clients, and also that some people drop
out for different reasons. We can dig into those reasons for a more
complete model, but simply using a constant turnover rate was okay for me.
And they had a figure for that.

If this helps, and if youre interested in going any further, please let
me know. Id love to join in.

Regards,

Pedro
From: "Pedro M. Mendes" <pedro@ati.utexas.edu>

P.S. Answer: 1 minute.

[Phil Odence]

My friend, Usman Ghani, of McKinsey tells the bacteria story in the
context of a Lotus pond with the Lotuses doubling the surface area they
cover each day.

He actually runs the simulation for 29 days (or whatever), then has
people sketch in their projection of the future (using ithinks
sketchable graphs option). Its interesting to see how ingrained linear
extrapolation seems to be in our minds; participants always extend the
curve tangentially, and are surprised to see the subsequent sharp
acceleration of the growth.

He also makes the point that if you dont understand the underlying
structure, this "spike" in behavior looks an awful lot like an event,
probably triggered by an exogeneous cause. The groundskeeper is lead to
go looking for who dumped fertilizer in the pond rather than trying to
understand the system.

To me this is a great illustration of the way in which (if presented
well, with simple, comprehensible models) computer simulation is an
extremely powerful way to break people out of firmly affixed thinking
habits.

***************************************************************************

Phil Odence
High Performance Systems
45 Lyme Road, Suite 200
Hanover, NH 03755-1221
voice- 603 643 9636 x107, fx- 603 643 9502, web- http://www.hps-inc.com
From: Phil Odence <podence@hps-inc.com>