The more you try and explain - the more it becomes clear that you don't know what you're talking about. The rankings are no more "skewed" whether it's an 8 yr old 7v7 team or a U17 11v11 team, and whether they are playing flight 4, or fighting for a national championship. If you actually looked into it - you'd not only understand that, but you'd stop embarrassing yourself in threads like this. Two things can be true at the same time - a team can be bottom-ranked in their league, while also being highly ranked when compared to all teams of the age. But for the 2012 team you're screaming about, they are playing in the 2011 age group (U14) 1 year up in Flight1, and they are holding their own (
link). The team they have in DPL is actually 3 goals weaker (and is #211 in state). You'd have to ask them why their strongest team for the age by several goals is in flight 1 rather than DPL, but as another poster has mentioned, they have a ton of locations, so it's probably geographically related.
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All the ratings are calculated by how the team plays against another rated team. That's it. It will pick the right winner (a higher rated team will beat a lower rated team) 5 out of 6 times. Arguing against their accuracy is a fools errand - in that of course it can't predict the future, and of course any prediction is going to be wrong from time to time. But it's going to make a better guess than almost any random human, or just by looking at a standings bracket - no matter how stubborn someone wants to believe they know better. Every game that's played gives the model more recent data to adjust a team's rating accordingly.
Now an argument can be made that winning doesn't matter at all up to a certain age - and maybe to an extent that has some merit. SoCal blanks the score results on their scheduling sheets for the youngers, in support of that concept. But as long as soccer games are scored by one team getting more goals than the other - people keeping track of their team's results are going to end up using them. To your point - choosing a team at 8 years old only by how many wins they have is pretty silly. Ignoring the team's performance entirely is IMO equally silly, and isn't what happens in the real world either.