A No-Lose Lottery


The staff at the Freakonomics podcast does an amazing job of uncovering interesting business ideas.  Two weeks ago the episode was “A No-Lose Lottery“.

The idea is incredibly simple, but feels enough like a lottery that it is illegal in most countries.  It goes like this:

Create a savings account, where the savers are guaranteed to not lose their savings (if not earn a small interest rate), but where the bulk of the earnings from that capital is randomly given to one or more of the savers.

Or in other words, if implemented by a bank, rather than pay you $1 in interest for your $1,000 of savings (0.1% interest), pay 999 accounts $0 and 1 account $1,000.  Or of 1,000,000 accounts, pay 999,900 accounts $0, 100 accounts $1,000, and 1 account $1,000,000.

People like lotteries.  It adds a bit of excitement to the masses who are unlikely to ever earn $1,000,000.  This idea costs basically nothing to implement.  It takes basically nothing from anyone.  It’s an economically reasonable choice over a normal savings account, much more than today’s state-run lotteries.

The only downside is that lotteries earn a lot of money for governments, and as such most governments make private lotteries illegal.

Listing to the podcast, I can imagine some imaginative entrepreneurs and lawyers finding workarounds for those laws.  This is a win-win-win to create more savings, pull a few people out of poverty, and not hurt anyone in the process.

If you have ideas on how to implement this in the U.S., let me know @Lunarmobiscuit.  If you are implementing this outside the U.S., in a country that doesn’t yet run a lottery, let us know about that too.

[Image from Flickr]
By "Luni"


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