Early 1993, Moscow. Our family apartment at Komsomolsky Avenue.
It was just a usual morning. I got up a little before Sergey and was already having my coffee in the kitchen. Sergey also got up and headed to the bathroom.
Having walked out of the bathroom, Sergey said,
— “Look, while shaving, I've had a brilliant idea!”
— We can use a SELF-QUOTING DOUBLE EXCHANGE RATE!!!
— Here, look...
This is how a unique mathematical financial algorithm materialized. In the regular course of work we used the name of “overlapping double exchange rate”. Later, the mass media dubbed it the “MMM Pyramid”. In the 1990's, Sergey still tried to publicly denounce this name, but he figured out later it was useless. In 2011, he started calling MMM a pyramid, guided by the principle of “Call me a pot, but heat me not”. The truth is the world has not seen a clear and unambiguous definition of a financial pyramid to this day. Apart from Russia, that is. We do have Article 172-2 in the Criminal Code of the Russian Federation — “Arrangement of activities aimed at soliciting funds and/or other property” which explains it all “clearly and unambiguously”...
The algorithm is so simple that anyone who has completed at least 8 grades of secondary school can use it for business purposes. It's astonishing that no one in the world has fully understood it in the last 24 years. Even though it was all publicly available and published! Marvelous are your works, Lord God.
Here's how this algorithm works “in layperson’s terms”.
Assume I've got two friends: Leonid (L) and Ivan (I). I've also got 2 blocks of 100 cheap old mini calendars (with the real price of a dime a dozen, maybe less).
Day 1 (block 1).
Sell/buy price (RUB): 1,000/1,000
Now I tell Leonid, “Leonid, if you buy this block of 100 mini calendars from me today for 1,000 rubles, I'll buy it back from you tomorrow for 1,100 rubles (+10% of the deposit amount).”
(L): I'm in. Give me the calendars, here's 1,000 rubles.
Results for block (pool) 1: I've got 1,000 rubles on my hands. However, tomorrow I have to give 1,100 rubles to Leonid. How do I do that?
It's simple. I've invited my other friend, Ivan, to come tomorrow.
Day 2 (block 2).
Sell/buy price (RUB): 1,200/1,100
When Ivan comes, I offer him the same deal, but the price (rate) is different. I set buy and sell rates at the level that allows me to use Ivan's money to pay back to Leonid and make profit. In other words, my today's sell price “overlaps” the buyout price.
(Me): Ivan, would you like to buy a block of 100 mini calendars from me for 1,200 rubles if tomorrow I'll buy it out from you for 1,320 rubles (+10% of the deposit amount)?
(I): I'm in. Give me the calendars, here's 1,200 rubles.
Now I've got 1,000+1,200=2,200 rubles on my hands.
Leonid comes by. He gives me my mini calendars back, and I give him 1,100 rubles, as promised.
Results for block (pool) 2: I've got 1,100 left. I've fully settled accounts with Leonid and I've got my block of mini calendars back. Tomorrow, I have to give Ivan 1,320 rubles, and I've got 1,100.
Day 3 (block 3).
Sell/buy price (RUB): 1,452/1,320
Leonid comes by.
(L): Look, here's what I figured... Why did I take my money back yesterday? Today I'd get more for my calendars! I've just been paid my wages; why waste it with no purpose? Can I buy those calendars from you again?
(Me): Sure you can, Leonid. Except today your block of calendars costs 1,452 rubles, but tomorrow I'll buy it back for 1,597 rubles.
(L): I'm in.
When Ivan comes by, I settle accounts with him, as promised. I use Leonid's money to do this.
Day 4 (block 4).
Sell/buy price (RUB): 1,757/1,597
When Ivan comes,
(I): Look, here's what I figured...
Basically, this algorithm is a way to distribute spare cash between members of a System. As you could have noticed, the System can start off with no initial investment. While the System operates, all members take turns to make profit. The number of members doesn't have to be too high, unlike the “pyramids”.
The System can be launched with ANY number of members if it's more than one: in a family; company; country; the world. The System may be seen as operating as soon as block 2 is sold. After this, it'll operate until there're people willing to earn the percentage of profit set by the System; or until SPARE cash is over in a family; company; country; the globe. ;)
The System can successfully grow in any place where money or its equivalent is used. Sell/buy prices are assigned. But it's not random — a strict mathematical algorithm is used instead. A wrong selection of price values will immediately send the System on a downward path. The System has a few variables: % of members' profit; % of System owner's profit; starting price of the System's standard unit (share / ticket / mini calendar / beer bottle cap / token, etc.); block size. These variables can be used to easily set up the System to solve a specific task set by the System owner.
Screenshot of MMM-94 table.xls
As always though, there's a small BUT. To preserve the maths behind it, the number of standard units in the System must remain the same in each new block. In other words, the new prices should be used to sell and buy out the same number of “mini calendars” as was sold/bought out at the previous price.
In 1994, we couldn't achieve it. We didn't have the right financial tools available. Anyway, practice has shown that the more evenly members invest and WITHDRAW their funds, the more stable the System will be. This is why, specifically, MMM-94 did not allow huge wire transfers.
After Sergey came up with this algorithm, we spent the entire 1993 to prepare the launch of the System. We had discussions, and arguments, and updates. We used SuperCalc software to make mathematical tables and emulate various options for future probabilistic behavior of members. We had endless consultations with lawyers, attorneys and professional accountants. As a result of all this brainstorming, we selected “share certificates” as “mini calendars” for the launch. They were totally useless, unsecured pieces of paper, but it was the only way for a legal entity to rapidly start working with cash on hand.
Thus, on Tuesday, February 1, 1994 the System was launched.
May 5, 1994. Sergey and I headed for our traditional once-a-year spring fishing trip to the Ugra river, 5 km upstream from the town of Yukhnov. The edge of the forest is 100 meters away from the notorious willow described at the beginning of S. Mavrodi's book “Lucifer’s Son”.
“How's it going on Varshavka anyway?” (I supervised operations of MMM's headquaters on 26 Varshavka at the time.)
— Mice are eating the money.
— What do you mean, mice?!
— Senior teller called me some time ago. They removed the nearest layer of wads (of notes) in one of the warehouses for payouts, and they saw some wads at the back were gnawed on the corners by mice. So she asks me what they should do, how they should handle these wads.
— Why didn't they take care of it before?
— The basement has several big rooms stuffed full with cash. Until you remove the top layer, how do you know what's inside?
— Humph... What did you tell her to do then?
— I told her to get a couple of cats, what else can we do?
— I see. But how's it going business-wise?
—It's [censored] business-wise. Real and serious. No one sells it; they just buy it.
—Like, no one at all?
— Well, not really. Some do sell. It's 2-3 percent of the receipts per day. Some of this 2% sell it in the morning, and come running back in the evening, shouting “I've changed my mind”, “My silly wife has talked me into doing this”, etc...
— What do they want then?
— They want the operators to pretend there was no exchange in the morning, “I'll just quietly give you the morning money back, and you'll give me my certificates.” They also offer operators huge bribes for this kind of “return”.
— Why do they do this?
— What do you mean why? They'll spend the entire amount to buy more certificates tomorrow. But tomorrow the price will be different. If they own a lot of certificates, they'll lose a bunch of money due to the price difference because they had this one-minute weakness today.
— I see. How many depositors do we have right now?
— We've got 15 mln unique ones in the database.
— In other words, if an average family has at least 3 persons, it's what, 45 mln?
— Well, if you want to count this way, yup. As for the real number — God only knows. There's also a bunch of “delegates” from entire plants, institutes, state agencies from all over the country. There's this single entry in the database, but how many people is behind it — how do you know?
— You're right though, if no one sells it, it's, like, [censored]! Jesus! Here's what human greed can do! I couldn't even imagine anything like this when we started off. What's the disbalance between selling and buying out per day, in monetary terms?
— Before we headed on the fishing trip, reports from all over Russia for the last Tuesday showed receipts exceeded payments by about 35 mln dollars per day. Over time, this excess will only grow.
— In other words, MMM's “net profit” was larger than any Arab sheik could dream of. In the future, this “profit” will only grow, all things considered... It's a dream for any, [censored], conman. [CENSORED]!!! [CENSORED]!!!
— Do you remember we were offered a building for MMM's printing house a short while ago? The seller of the building found out the buyer was related to MMM and now asks us to pay him in MMM certificates instead of dollars!
— Well, it's understandable. Why ask for dollars if the price of the certificates is rising 100 times faster and they can be exchanged for dollars at any time.
— What do we do next then? We want depositors to buy and sell certificates worth approximately the same amount every day. We don't want this “net profit”, or the System will transform into a “pyramid”, with our debt growing parabolically. Even now we won't be able to make payments to all of them if 100% of depositors come on the same day!
— [Thoughtful] 100% will never come on the same day. There's this mathematical thing, “Games Theory”. With uniform distribution, [ugh-ugh-ugh], the probability of even 40% coming together is negligibly small.
— Say what? Are you trying to be smart again with your maths?
— Never mind...
Back then, by that willow, Sergey told me we were able to get hands on something which was not a mere mathematical algorithm, but a financial nuclear weapon. If detonated in any country, like a giant vacuum cleaner, it would rapidly suck in all of this country's money. It would make banks go bankrupt, close down exchanges and other “investment funds”; shut down plants and factories; tear down industry and infrastructure. It would be a “financial apocalypse” — the old financial system would collapse.
Would people want to do anything if they could make profit all the time, doing nothing, and this profit could not be compared to any other business, be it legal or criminal?
— Shall we shut it all down, maybe? Let's pay them all back the nominal value they have invested. Let's stop it. We've got the money we earned in the old business of selling office equipment. Or we could pay them back 90%, maybe 80. We could count how much we could pay back... If it's, [censored], like that today, what will it be like tomorrow?
— “They told me that the road I took would lead me to the Ocean of Death”, Sergey quoted.
The Strugatsky brothers were our favorite novelists; we'd known all their books almost by heart. I continued the quotation in my mind, “... and from halfway along, I turned back. And ever since, all the paths I have roamed were entangled, and crooked, and forsaken.”
Then I asked,
— “What do we do then?”
— We need to go west as soon as possible. All cash in Russia and all our debts to MMM depositors are peanuts compared to THEIR cash. We'll turn on the “vacuum cleaner” over there, we'll accumulate all cash from all over the world in Russia and use it to pay back to everyone in Russia. Gradually, we'll shut down MMM in Russia — we live here, why destroy our own country? Where will we go fishing then? ;) Here's the plan.
We won't be able to stop now. With 15 mln in our database, at least 45 mln Russians are already involved with MMM, and the authorities could always find one or 2 dissatisfied depositors. Or they could make them up. In accordance with the law, it'll be enough to be charged with fraud, even if you make payouts to all 45 mln people, except these 2. That's the law.
Sergey Mavrodi once said, “You don't need to be afraid of the state. It's just a huge heavy bulldozer. Yes, you'd better avoid standing in its way. But due to its huge weight, it's also highly inert: you can simply make a step sideways, and it'll pass by.
The law is just a fence that separates common people from common wrongdoers. At elevated orbits, there's no law, there're only concepts and directions. You cannot break the law because in this case you'll be playing an away game. But if you find a loophole in the law, you have the time to use it until the state bulldozer notices you, comes to a halt, turns around and moves right at you. Then you need to look for another loophole in the law...”
MMM couldn't go west in 1994. Due to a betrayal by a very expensive and high-raking English “attorney and gentleman in the nth generation”, UK and US borders were sealed off for dozens of tons of MMM certificates using mere power methods (but that's, as they say, another story for another time). Soon after this, the Russian authorities suddenly “woke up” at the level of the President and the Prime Minister and destroyed MMM-94 using the same power methods. It might be a coincidence, of course...
In 1997, while analyzing lessons learned from MMM-94, I was thinking, “Could we improve the algorithm for overlapping double exchange rates to strike a balance between the volumes of sales and payouts of “mini calendars” in each block AUTOMATICALLY? In this case, the System would be able to make payouts to 100% of its members ACCORDING TO THE RULES and would become invincible!
I found a talented Candidate of Physical and Mathematical Sciences and together we spent 2 months trying to develop this miraculous algorithm in SuperCalc every evening. We pulled it off in the end! We created a MATHEMATICAL model that allowed all members to take turns to make a predefined profit (30, 50, 100 % per month, just like in MMM-94) under normal conditions. If the system shuts down its operations for any reason, no one is cheated: a half of members is left with their exorbitant profit while the other half only receives the predefined percentage of the real deposit (70%, for instance).
The system is then restarted as a new copy (with a new Cycle) starting with block 1 and continues its operations seamlessly. All of the system's liabilities from the previous cycle are PRESERVED. In the restarted system, those who weren't lucky last time will be able to compensate for their losses pretty fast. You might even give them a head start — a chance to re-invest the remainder of their funds from the old cycle into the first block of the new cycle. It's honest and transparent, declared in advance and validated mathematically. The system can also be set up for any target values and volumes using 6 control parameters.
Screenshot of kursDS.xls table
(algorithm for the System of Mutual Voluntary Donations-97)
In 1997, Sergey and I lived in different places, but we were still on excellent terms. I went to his place and showed him the algorithm. Mathematically, he approved of it, but the operational procedure did not impress him:
— It would be too complicated to explain to a regular depositor. No one would understand a thing.
However, he liked the bit about the system restart from scratch in case of operations shutdown.
— Restart? Yep... It's a good idea... — he said thoughtfully.
I decided to launch a brand new system based on this new algorithm on my own on 26 Varshavka: the System of Mutual Voluntary Donations “MMM-97”. It was soon clear Sergey had underestimated people: the members figured it out just fine. However, it ended the same way as MMM-94: the system was efficient, no one was cheated, but then people with guns came along and simple took all the cash.
Unfortunately, the initial mathematical table for the System of Mutual Voluntary Donations-97 got lost in the mists of time. However, in 2007 I used it, in collaboration with another mathematician, to develop a financial game "DoubleSpiral" which I launched in the "Second Life" MMORG. The maths behind this game (which is the same as behind the System of Mutual Voluntary Donations-97) has been preserved. You can find it in the kursDS.xls and DS_full.xls files within the archive.
For 24 years the authorities have been fighting against Sergey Mavrodi using lies, slander and kangaroo courts. For 24 years Sergey Mavrodi has been called a conman by “honest people”. He was silent...
He was convinced he couldn't hand over this algorithm to anyone else. He couldn't defend himself by mathematically proving that MMM had not been a mere pyramid scheme. He could only urge people to listen to reason by pointing out FACTS of the past. It didn't help.
For 24 years Sergey Mavrodi has been a guarantor of non-proliferation of this “financial nuclear weapon”. He was trying to use its power, alone, to reach his ultimate goal: that of destroying the existing financial system. He saw it as a predatory system that cashed in on common folk. He wanted to change the world for the better and was confident he could do it on his own, with no external help.* But history has shown yet again that one soldier does not make a battle.
* See file squid.mp4 from 03:50
After Sergey passed away, I'm the only person on this planet with the full knowledge of the real story and MMM's internal organization. It would be a pity if with me MMM algorithms vanished from the knowledge bank of the human race for good. This is why today I relay to the world all maths behind MMM algorithms and Sergey's and my thoughts about these algorithms. Sergey Mavrodi thought no one could have them. I believe the “progressively-minded people” will find a way to use them for a good cause.
For all his MMM systems, Sergey chose to use MMM-94 basic algorithm supplemented with a “restart”. I improved the MMM-94 basic algorithm and transformed it into the “invincible” System of Mutual Voluntary Donations-97 and used this new algorithms to develop the DoubleSpiral financial game. Sergey and I never had any significant funds when we launched our algorithms, and system members were given no guarantees. However, algorithm efficiency... well, you've seen it all.
After this publication, everyone will know the algorithm. Thousands of mathematicians, economists, financiers will probably come up with dozens of new tools based on this algorithm. If entire states start using it, with their significant assets acting as a guarantee (for instance, Venezuela just launched its national cryptocurrency, Petro, secured by the country's oil), MMM-94 will seem a sandbox for children in comparison with MMM-Petro. For that matter, the old MMM-94 will be outdone by any large Western firm that would launch its own MMM System secured by its assets. If you don't steal money from the system and only spend the mathematically calculated profit, there's virtually no risk for the firm.
Will we see emergence of hundreds and thousands of "MMM Systems" all over the world, their advocates having mathematical proof of reliability of the systems' owners? Will the existing financial system collapse once these systems start running? That remains to be seen. Maybe Sergey Mavrodi was wrong, and there will be no financial apocalypse. Anything is possible.
Anyway, I believe that publishing these algorithms now is an ideal choice for Russia.
Only Russia now has dozens of thousands of Sergey Mavrodi's assistants who have worked with him within MMM-2011 and his subsequent MMM systems in other countries. These people have helped him directly and know the internal organizationstructure of the System. The will make, at the very least, the best (and the world's only) consultants and technical experts for the future global "MMM Systems".
Only Russia has “vaccinated” its entire population against MMM for the last 24 years through the mass media. Only Russia has adopted a special anti-MMM law, and the authorities have practiced fighting against “pyramids” using power methods and the vertical of power. This is why an MMM System could not be launched in Russia. Sergey Mavrodi spent his entire life and worked hard to protect Russia (just as he wanted back in 1994) against potential future calamities. Other “world powers” are completely defenseless to MMM algorithms. Moreover, these “partners” have lately been treating Russia like dirt. Therefore, it'll serve them right.
They say Baba Vanga predicted, “Pyramid from Russia will travel the world.”
When Sergey Mavrodi passed away, many people thought this prediction wasn't going to come true. What if it's just started to materialize?
June 4, 2018