Swoopo, one of the most brilliant money-making ideas that I had seen in execution – a pay-per-bid auction site, has apparently filed for bankruptcy.

It had a very innovative business model, in which the bidders in an auction paid for every bid, rather than the winner paying the final price of the item. On the surface, it seemed like you could get items for much less than their actual price (not accounting for the price of the bids), if you won. But those who lost the auction still had to pay for the bids. Once you started bidding, you were invested in it, and HAD to recover the price of the bids placed by bidding more, losing even more money in the process.

Every time someone bid, the purchase price and the timer were bumped up. The one who bid last won the item, which was quite easy as long as there weren’t many users. But Swoopo soon became very popular and attracted a lot of users, driving up prices of every item on auction, effectively printing money for the owners of Swoopo.

People even tried to game Swoopo by using custom bidding programs, but were no match against BidButler, the automated bidding program by Swoopo. If such a tool were available to just one bidder, he would definitely win, but since everyone could use it, the only winner was Swoopo. At its peak, it had millions in revenue and spawned many clones, most of which are already dead.

But it seems that finally its users realized that “The only winning move is not to play”.

R. I. P. Swoopo.

As anything I add to this will probably decrease the awesomeness quotient of it, here it is. Unedited.

“A few months ago two friends and I decided to do something interesting. We live in a relatively small town. Not tiny, but small. On OkCupid we saw about 30 women from here, but they would not respond often. So we decided to create 50 fake accounts, all of them beautiful women that would divert attention. We meticulously constructed the profiles to look authentic. Then came the day to set everything in motion. My two friends operated the 50 accounts while I found the prettiest (real) woman I could and after a while decided to hit on her.

It worked. With everyone, particularly the hunks, occupied with fake women I secured a date with a woman who was most certainly out of my league. Two dates. Sex. Still seeing her, but wouldn’t want her or anyone else to know about how I got her.

I’m planning on automating this with some coding in the future so it will scale for when I’m in a small city or something.”

Genius, I say, if real. John Nash would be proud.

via Reddit

—

Once there was a little island country. The land of this country was the tiny island itself. The total money in circulation was 2 dollars as there were only two pieces of 1 dollar coins circulating around.

1) There were 3 citizens living on this island country. A owned the land. B and C each owned 1 dollar.

2) B decided to purchase the land from A for 1 dollar. So, now A and C own 1 dollar each while B owned a piece of land that is worth 1 dollar.

- The net asset of the country now = 3 dollars.

3) Now C thought that since there is only one piece of land in the country, and land is non producible asset, its value must definitely go up. So, he borrowed 1 dollar from A, and together with his own 1 dollar, he bought the land from B for 2 dollars.

- A has a loan to C of 1 dollar, so his net asset is 1 dollar.
- B sold his land and got 2 dollars, so his net asset is 2 dollars.
- C owned the piece of land worth 2 dollars but with his 1 dollar debt to A, his net residual asset is 1 dollar.
- Thus, the net asset of the country = 4 dollars.

4) A saw that the land he once owned has risen in value. He regretted having sold it. Luckily, he has a 1 dollar loan to C. He then borrowed 2 dollars from B and acquired the land back from C for 3 dollars. The payment is by 2 dollars cash (which he borrowed) and cancellation of the 1 dollar loan to C. As a result, A now owned a piece of land that is worth 3 dollars. But since he owed B 2 dollars, his net asset is 1 dollar.

- B loaned 2 dollars to A. So his net asset is 2 dollars.
- C now has the 2 coins. His net asset is also 2 dollars.
- The net asset of the country = 5 dollars. A bubble is building up.

(5) B saw that the value of land kept rising. He also wanted to own the land. So he bought the land from A for 4 dollars. The payment is by borrowing 2 dollars from C, and cancellation of his 2 dollars loan to A.

- As a result, A has got his debt cleared and he got the 2 coins. His net asset is 2 dollars.
- B owned a piece of land that is worth 4 dollars, but since he has a debt of 2 dollars with C, his net Asset is 2 dollars.
- C loaned 2 dollars to B, so his net asset is 2 dollars.

- The net asset of the country = 6 dollars; even though, the country has only one piece of land and 2 Dollars in circulation.

(6) Everybody has made money and everybody felt happy and prosperous.

(7) One day an evil wind blew, and an evil thought came to C’s mind. “Hey, what if the land price stop going up, how could B repay my loan. There is only 2 dollars in circulation, and, I think after all the land that B owns is worth at most only 1 dollar, and no more.”

(8) A also thought the same way.

(9) Nobody wanted to buy land anymore.

- So, in the end, A owns the 2 dollar coins, his net asset is 2 dollars.
- B owed C 2 dollars and the land he owned which he thought worth 4 dollars is now 1 dollar. So his net asset is only 1 dollar.
- C has a loan of 2 dollars to B. But it is a bad debt. Although his net asset is still 2 dollars, his heart is palpitating.
- The net asset of the country = 3 dollars again.

(10) So, who has stolen the 3 dollars from the country? Of course, before the bubble burst B thought his land was worth 4 dollars. Actually, right before the collapse, the net asset of the country was 6 dollars on paper. B’s net asset is still 2 dollars, his heart is palpitating.

(11) B had no choice but to declare bankruptcy. C as to relinquish his 2 dollars bad debt to B, but in return he acquired the land which is worth 1 dollar now.

- A owns the 2 coins; his net asset is 2 dollars.
- B is bankrupt; his net asset is 0 dollar. (He lost everything)
- C got no choice but end up with a land worth only 1 dollar

- The net asset of the country is again = 3 dollars.

The story ends now, but —

There has been a redistribution of wealth.
A is the winner, B is the loser, C is lucky that he is spared.
A few points worth noting -

(1) When a bubble is building up, the debt of individuals to one another in a country is also building up.
(2) This story of the island is a closed system whereby there is no other country and hence no foreign debt. The worth of the asset can only be calculated using the island’s own currency. Hence, there is no net loss.
(3) An over-damped system is assumed when the bubble burst, meaning the land’s value did not go down to below 1 dollar.
(4) When the bubble burst, the fellow with cash is the winner. The fellows having the land or extending loan to others are the losers. The asset could shrink or in worst case, they go bankrupt.
(5) If there is another citizen D either holding a dollar or another piece of land but refrains from taking part in the game, he will neither win nor lose. But he will see the value of his money or land goes up and down like a see saw.
(6) When the bubble was in the growing phase, everybody made money.
(7) If you are smart and know that you are living in a growing bubble, it is worthwhile to borrow money (like A) and take part in the game. But you must know when you should change everything back to cash.
(8) As in the case of land, the above phenomenon applies to stocks as well.
(9) The actual worth of land or stocks depends largely on psychology (or speculation).

There is a scene in the movie where Jai Gopal (the Black Friday dude) asks Gobar (Atul Kulkarni), the village idiot to choose between two 1 rupee coins and a ten rupee note. Gobar always chooses the two 1 rupee coins and the Jai Gopal proceeds to ridicule him and walks away after handing him the two rupees.

Near the climax of the movie, the Jai Gopal again asks him to choose between two 1 rupee coins and a ten rupee note and Gobar chooses the two 1 rupee coins again. At this point, someone asks him why he takes the two 1 rupee coins instead of the ten rupee note. He replies: “The day I take the ten rupee note, the game would be over.”

BTW, it was pretty dumb of him to reveal his strategy to others in front of Jai Gopal, as it ended the game anyway.

Using the official currency as toilet paper has become so common in Zimbabve, that a hotel in Zimbabve had to put up this notice.

LOL!

Via Freakonomics