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This is very common. Lofty idea folks often see developers as a commodity, so why not just outsource to the cheapest bidder? You might luck out and get a smart person who doesn't know what they're worth yet... but, 9 out of 10 times, you get what you pay for.

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If you don't know the value of what you are buying you are most likely to get even less than what you payed for. In the story they basically got scammed by overseas shops who probably pocketed most of the money and farmed out the effort to minimally-skilled and minimally-paid developers who were in way over their heads.

Totally true. If you can't supervise the work, at least minimally, you're going to be taken advantage of.

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