Wednesday, February 18, 2015

Penny auctions

Imagine they didn't exist and I came up with the idea. You'd laugh at me and perhaps tell me they'd be illegal. Think about how they work. Every bid cost 60 cents to raise the bid one penny. Let's say you won an auction for $20 on an item worth $100, good deal right? Yeah, for the company that got 2000 x 0.60 + 20 or $1220 for a $100 item (and free shipping!!!)

I just saw a commercial for LMT. Last Minute Travel offers advanced purchase rates for last minute purchases. How do they do that? Probably by buying blocks of tickets in advance and reselling them. If so, that's a nutty idea too, but they seem to make it work, since they can afford late night TV commercials?

Each would seem to have failure modes which they usually avoid (a single penny bid that wins, the travel ticket you choose didn't have a bulk purchase) that they would still have to honor.

Well my latest nutty idea is to sell mars by the hectare. Ridiculous, right? The first problem is liquidity (if you think I haven't considered other problems as well including legality, you'd be wrong.). If I set up an exchange starting with a sell order for 10 billion hectares, in a normal bid/ask nobody that buys hectares could sell them until all 10 billion were first sold. So we fix that with a market maker. We buy some of those hectares at a higher unit cost, bypassing the 10b sell order.

That introduces other problems such as gaming the system and fairness. But I have solutions for that as well that include visibility of the issue so nobody is treated unfairly. In part by published execution order rules that work the same for everybody. First order executed is by lowest unit price (excluding $1 for liquidity buys), then lowest unit quantity, then first order timestamp. Along with that is liquidity buys are random throughout the month so nobody can take advantage over anybody else.

So the first timestamped sell 1 unit @ $2 goes first. Each person can only have one order at a time. Double your money guaranteed if your sell order is unchanged long enough. That's better than some lottery ticket that guarantees you nothing.

Obviously, if only one person used the system they'd get all the liquidity buy profits, but competition would be the norm so those profits would be fairly distributed among everyone that participated. Over time those liquidity purchases would grow as more people participated and I would no longer need to prime the pump at my own personal loss.

Taking a personal loss is a crazy idea, right? Hey, if I could avoid it and still make this work I would. It's not the only personal cost either... not even close to the biggest. But my goal is to make colonization possible even at a significant personal cost. I would not go forward with this if my lawyer had said it can't work. Now all I have to do is get a lawyer to work for me on the details.

Some may be thinking the SEC would get involved and shut me down, but think about this... they don't shut down game sites that sell virtual coins and this isn't really any different (except the players of this game actually profit.)

So laugh all you like... then wonder why you didn't do this? Seven more days and counting...

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