Wednesday, January 30, 2013

Caffeine, and scams I wish were real.

There is a question, I think, about whether or not something is still a scam if you know it's a scam.  I was wondering about that a while back because there was an astrology site with a fake psychic offering me something that, while bullshit, seemed like it might be interesting.  In the end I decided I was going to see if I could haggle down the price and if I could get it within a certain threshold, I'd buy the bullshit.  As it turned out, taking no action did the haggling for me and I got an emails saying the planets are blah-blahing and this is really important so I'm going to drop the vast majority off of my usual price and give it to you for [below my chosen threshhold].

So I bought the bullshit, I haven't had enough free time to see if it's entertaining enough to justify the price paid.

That's one kind of a scam.  "I can see your future," fine print at bottom, "Note that I can't actually see your future."

That's not the kind of scam I'm talking about.

A while back there was a site called, as I recall,  It operated on a simple principle, that of exponential growth.  It seemed a sound business model to me.

The way it worked was this:
Join site, get a free penny on the site.
Play games (not really games of strategy, more games of chance) against other people at the site for a certain proportion of your money (up to you but has to be a power of two.)  If you run out of money you get another free penny.

Once you hit ten dollars you can, if you wish, get paid the ten dollars and get out, or you can keep going.

Before every game there's an ad you have no choice but to watch.  The ads pay for the free pennies.

So say you bet everything every time, and win every time (this is a stupid strategy, you'll only win 50% of the time the odds of winning 10 in a row are )
Win 1 game and you have .02
Win 2 games and you have .04

Win 3 games and you have .08
Win 4 games and you have .16

Win 5 games and you have .32
Win 6 games and you have .64

Win 7 games and you have 1.28
Win 8 games and you have 2.56

Win 9 games and you have 5.12
Win 10 games and you have 10.24
Now you can get a pay out.

Or, you can stay in, and get a pay out at any time after

Win 11 games and you have 20.48
Win 12 games and you have 40.96

Win 13 games and you have 81.92
Win 14 games and you have 163.84
Congratulations you've passed the $100 mark.

Win 15 games and you have 327.68
Win 16 games and you have 655.36
Win 17 games and you have 1,310.72
Congratulations, you've passed the $1,000 mark.

Win 18 games and you have 2621.44
Win 19 games and you have 5242.88
Win 20 games and you have 10485.76
Congratulations, you've passed the $10,000 mark.

27 games and you surpass a million dollars ($1,342,177.28)

But, of course, the odds of someone winning 27 games in a row are 1 in the exact same number, except the same as the number of pennies, not dollars.  (134,217,728)

And for someone to get very far you're going to have to grow your user base, which will mean more people watching ads, which means more money coming in to provide the complementary pennies.  It's going to take quite a while for anyone to get up to even the ten dollar threshold and until then you're just paying for the domain and the bandwidth.

So I don't see why it was a scam.  It didn't have to be as near as I could tell.

Switching toward games where skill mattered instead of the guaranteed 50-50 odds would make it more likely that someone could rise up the ranks faster (say you had people competitive Tetris and the best Tetris player in the world comes on) but they can only play at a given level if other people are there and willing to play the same game as them, so hopefully at higher levels people would know, "I suck at Tetris, I should not play this," and get a self sorting of difficulty level.

That could also make the games more fun and less rote.

But to reiterate, this is what has to happen for someone to get to the first ten dollar pay out:

The person would have to win at each level, beating someone who had also reached that level.  Beating the person would undo that level worth of progress for them.

Meaning that in order for someone to play and win the ten games necessary to get a pay out someone else had to play and win nine, the lose the tenth.  For both the winner and loser to get there someone else had to play eight and lose the ninth.

So on, so forth, there are, an equal number of games as there are pennies.  Almost.  The first penny was free, after all.  So to get there there are 1,023 games.  And I feel stupid for not realizing that until after I did the math to see how many games there are the hard way.

Each of those games has two players.  So the number we're looking at is 2046.  Now in addition to the ads that grace side bars and top bars and low bars and whatnot bars, to play a game you're forced to view unskippable video ads that are not unlike TV commercials.  Largely because they are TV commercials.  Just ported onto the internet.

I don't remember whether it was before or before and after, or before, after, and in the middle.  But that's the figure.  How many of those does it take to earn one penny?  That's the question.  I have no idea.  None at all, but it's easily scalable.  Have the showdowns be three rounds each commercial, round, commercial, round, commercial, round, commercial.  That's 8,184 in your face TV style commercial views which have to be worth more than the side bar top bar bottom bar ads that populate most of the internet.

That's the absolute minimum you have in those add views per ten dollar pay out.  The odds that you will ever have to pay out ten dollars on so few ad veiws? 1 in one thousand and twenty four (like I said, exponential growth.)

More likely the people who make it to the higher levels will do it not by relying on random chance which could wipe them out and set them back to square 1 at every stage but by accruing a certain amount and then dividing it so that each loss sets them back only so much*.  Which means that a good portion of the exchanges won't actually cost you anything but will get you your ad views.

Say person A and person B each have eight cents.  Neither one feels too keen on losing it all and going back to the start.  They know that if they put in everything there's a 50% chance they loose everything, a 50% chance they double their money, but if instead they do two rounds at four cents there is a 25% chance they lose everything, a 50% they neither lose nor win, and a 25% chance they make money.  Preferring a 25% chance of losing to a 50% chance they make bets at the 4 cent level.

Match one person A wins four cents from person B.  Match two person B wins four cents from person A.  Both end up where they started.  This happens 50% of the time such a division is made (of course there will be more than just two people in practice instead of theory.)  Neither of them is closer to winning anything, which means that neither of them has cost you anything (save bandwidth) but they have gotten you 2*N intrusive ad views for for each match they played (in this case two.)

So it seems like the business model should work without it being a scam, and yet it was a scam.


The other thing I recently came across was a penny auction site.  For those who don't know what a penny auction is, it's a brilliant spin on the auction idea, and is enough so that had I the start up capital I'd make such a site.

Penny auctions are pay to play auctions (you need to buy the right to bid) where each bid increases the going price by a fixed, and small, amount.  Usually a penny.  Hence the name.  So say you sell bids at a dollar a pop, and the item is an brand new iPad, something that retails for 500 dollars.

Say the iPad ends up selling for 12 dollars.  That's $1,200 worth of bids.  Enough to pay for the original iPad twice over and still have $200 left over.  And someone got a 12 dollar iPad.  Even if they used 100 bids to get it and they paid full price for them that's a brand new iPad for $112 which is a savings of $388.  Not a bad deal at all.  In fact, still assuming they used 100 full priced bids, the going price of iPad would have to reach $400 before they stopped saving money by getting it that way.

First off, it would never make it that far.  it would mean 40,000 bids placed overall and in that time days and nights would pass and at some point, even through random chance alone, at some point it has to stop.

Second, think of the money the pay to play place would get with all those bids.

Now, actually, it looks like the place I'm talking about charges slightly more than 50 cents a bid (how much more depends on how many you buy) and I've seen an iPad go for over $100.  Still a great deal for whoever won, but when you take into account all the non-winning bids as well that's 10,000 bids at a cost of something over 50 cents each which is equal to something over $5,000.  Or, in other words, more than ten times what it cost the company running the site to buy the iPad.

That's the kind of profits penny auction sites make.  And they produce a steady stream of, "Look at how many hundreds of dollars the winner saved," to give hope to people who haven't won.

This is money that people give away willingly, understanding how the game is played.  It's like the lottery, whether people realize it or not they're not paying for the chance to win so much as the hope that they'll win. Winning is just a happy accident that happens to some people.

The point here is that if you've got an active community of bidders, and the site I'm talking about did, you get your money with no need to trick or coerce anyone into anything.  Which is why it was disappointing they did just that.

To try to rope me in they gave 25 free bids, a common enough tactic.  And as it turned out such bids could only be used in the newbie area, which was a benefit because it meant I wasn't competing against as many people.

And, for a single penny, I won an eReader.  Then found out it was a 5.99 shipping.  Can't expect free shipping on a 1 penny ereader but I do find the time for mild pissed offnesss at the fact that the shipping costs weren't mentioned up front.  What if it had been 59.99 shipping?  Still...  Fine, not a single penny but a six dollar ereader, still a nice deal.  Then went to checkout and discovered that it wanted to know which bid package I'd be buying with my ereader, there were three to choose from and no option for none-of-the-above.  I don't remember this being in the find print.  I don't remember there being fine print.

I wanted the option for, "I've still got a bunch of my free bids left so I'll be buying none at the moment, thank you very much."  There wasn't.

So I had to think it over, finally decide that even with the holding hostage of the thing I'd already won unless I bought something I neither wanted nor needed it was still a good deal on the ereader.  Nothing like the 6 dollar ereader I thought I was getting, but a good deal none the less.  So now I'm left with a bunch of bids for a penny auction site.

But here's the thing: What.  The.  Fuck?  Did you not see the thing above where I pointed out that they made over five thousand dollars by selling something worth 500?  If memory serves it was high enough that if you subtract the 500 they had to pay for the iPad, assuming they paid retail and not wholesale, it was still over five thousand dollars in pure profits.

These are not people who need to be holding my damn ereader hostage to force me to buy bids, these are people who are making gobs of money legitimately so what's with the strong arm tactics?  What's with the sneaking a forced purchase in on the last page before you decide whether or not to pay after you've already gotten attached to the idea of getting the thing you won?  What's with the entire scamy aspect of it?

If you've got a working penny auction site, and they do, then you're making money by preying on people's hopes while being extremely inefficient middle men in a sale and doing it all legitimately and above board.  I respect that, I really do.  Whoever came up with the idea was brilliant and I hope they got rich before a bunch of other people jumped on the bandwagon.  To be able to say to people, "Give me your money for the right to bid on this thing which you almost certainly will not win," and have them willingly, happily even, fork over their money is downright amazing.

So a working penny auction site gives you the opportunity to be honest, legal, up front, extremely profitable, and also give a certain segment of your users (the winners) really good deals.  That's a nice place to be.

Why add the scammy aspects of, "Oh, here's a purchase we never mentioned before you need to make before we can give you that," "Oh, here's a heretofor unmentioned transaction fee," and the other bullshit they've stuck around the edges.

I point again to the more than five thousand dollars of pure profits made from a five hundred dollar investment.  And from what I've seen of the other auctions on the site, these results are typical.

So I wish they weren't ripping people, myself included (though as I said, still a good deal on the ereader) off because the theory behind it is, quite simply, brilliant.


And where does the caffeine come in?  Well, I noticed one of the auctions, one of the few on something I might actually want, ended at 3 AM local time.  Well, 3 AMish.

Anyway, since this seemed to be a US based site that seemed like a time most people might be asleep and one might stand a chance of winning the auction** trouble was that if I took my sleeping meds (that compensates for the sleeplessness caused by my antidepressants) I wasn't sure if an alarm would be able to wake me at 3 AM.  So I didn't take them.  Which let me know that my antidepressants haven't stopped causing sleeplessness.***  I did get some sleep (after 3 AM and it turned out that enough people did the same thing that it was never going to end.  It's night now and the damn thing's still going) but I don't know how much and I do know it wasn't much.

Thus, this morning, to make my way through a day of classes, I stopped by a local supermarket and bought a soda.  I know that Fred Clark makes a strong argument in favor of taking caffeine in pills rather than drinks but I wasn't up for wandering around looking for the pills while mostly asleep, and I'm not a coffee person,  and I know that if one is going to go the soda route Mountain Dew is the usual choice for caffeination but as I recall I don't like the taste, and if one is going to go the cola route Pepsi is the soda one should take because it is loaded up with caffeine like nobody's business (except perhaps Mt. Dew) but I cannot abide the taste of that stuff so...

It is by caffeine alone that I set my mind in motion. It is by the Coca-Cola that the thoughts acquire speed, the lips acquire stains, the stains become a warning. It is by caffeine alone that I set my mind in motion.

Spent the whole day walking around campus with a two liter of Coke attempting to use whatever amount of the drug it does have to keep me going.

Still don't know what I'm going to do with those damn bids I had to buy.  I could just ignore them but it seems like if I was forced to get them I should at least get something in return, which means that I should try to buy something.  At some point.  Maybe.


* And each win gains them only so much, when the odds are 50-50 there's only so much you can do to make things better on yourself because the odds of improvement will always be equal to your odds of things getting worse on a given game.

The big change you can make is to make it so, by slowing down the chance of advance you slow down the chance of fall back, which means that the times you lose, and you will lose, set you back less far.  So instead of needing ten in a row to get a pay off you need some combination in which there are enough more wins than losses.  And since the upside is essentially unbounded, while the downside is capped at 1 (whenever you lose your last cent you get it back) that's not an unreasonable thing.

Not something to bet your future on, which is why it would be good if the games are fun or, failing that, addictive.

** Like a normal irl auction, as opposed to ebay, every fresh bid comes with extra time to see if anyone will top the high bid, in this case how it works is the auction will be timed a la ebay, but any bid in the last ten seconds will add ten seconds for other people to bid, so no auction sniping by waiting to the last second.

*** This is actually valuable information.  I don't want to be taking medication I don't need so for things where making a quick test is possible (i.e. those where you don't need stuff to slowly build up in/filter out of your system) the occasional test that one still needs a medication can be a good thing.


  1. I know that Fred Clark makes a strong argument in favor of taking caffeine in pills rather than drinks

    Did he? I don't remember that. (Or, come to think of it, maybe the vague recollection of something along the lines of "caffeine should be taken in pills to remind you that it's a drug" is related.)

    My argument for pills being better than drinks is that you have to spend less time tasting the drug-medium. Carbonation's awful, the smell of coffee scares me off trying it, and while I don't think I've tried any caffeinated teas I've never met a cup of leaf-water I liked.

    (In practice, I use neither. I don't really see the appeal in taking stimulants recreationally, and I haven't had any practical reasons to take them.)

    (I did see some caffeinated chocolate bars in the store today. I wonder how they taste.)

    Still don't know what I'm going to do with those damn bids I had to buy. I could just ignore them but it seems like if I was forced to get them I should at least get something in return, which means that I should try to buy something. At some point. Maybe.

    Probably the reasonable thing would be to quit while you're ahead, run away, and never look back. Of course, people aren't always reasonable. (And that's how they get you.)

    Also, I hope you enjoy your eReader.

    1. Did he? I don't remember that.

      I meant to put a link in the main post, but after I forgot I just decided to do other things that needed doing and come back it later.

      Anyway here:

      Looks like you were right about it being more about the fact that taking it as non-pills masks the fact it's taking a drug.

      Financially I should have looked around for pills and taken them with water from the campus fountains.


      Also, I hope you enjoy your eReader.

      I do too, otherwise it makes the entire exercise worthless.

  2. The game-playing site is betting that people will get bored before they get to a payout level, or lose everything before cashing out. Which they probably will. It's not dishonest if it works as it's described as working, but it's probably not a good use of anyone's time either.

    I see that the penny auction people have dealt with last-minute sniping - something I know a lot of people wish eBay would do, in a similar manner. Makes sense - if it's a fixed cost per bid, you really only want to be placing the winning one.

    I think the ultimate answer may be that if you're the sort of person who is happy with making money by preying on people's hopes while being an extremely inefficient middle man in a sale then you're probably also the sort of person who's happy to rip people off.

    I seem to have desensitised myself to caffeine; I use energy drinks as a fast way of getting sugar into the system.

    1. It's not dishonest if it works as it's described as working, but it's probably not a good use of anyone's time either.

      That's the thing, it was dishonest. At least some people did reach the payout level, and they never paid anyone and eventually shut down without paying anyone, keeping all the ad revenue for themselves.

      I wish they had been honest instead of a scam.

      Also, I was one of the people who got bored pretty long before anything of value happened for me, I only found out they were a scam when I randomly remembered them, looked them up, and then had to read through their demise.

  3. Are you sure the "must buy bids" isn't a feature of the newbie area? If everyone in the newbie area is using their free bids, they're not making money on newbie auctions unless they convince you to come back and pay to play on other auctions later, which they clearly have -- you were forced to buy bids and now you're invested, so now you don't want to "waste" them, so you'll come back and bid more, and run out of bids and buy more...

    1. Particularly if every checkout forces you to buy another bid package.

      The bids feel like an asset - you've paid for them, they're worth money - so you want to get some use out of them. But in fact you can't, without ending up paying even more... has a fair bit to say about this.

    2. I poked around more than I said in the main post.

      The must buy bids is a function of the newbie section, but it's a function you're not warned about ahead of time so it reeks of assholicness anyway.

      The fact of the matter is that if they'd just let me keep those free bid and try them out on the main site if I'd gotten even the impression that I had a chance in hell of winning I might have bought bids on my own. Where as now even if every one of the bids I had to buy results in a win (statistically impossible, theoretically possible) I'm not going to be doing business with them again.

      The not letting you in on shipping costs unless you win is a constant throughout, which is a seriously big deal because almost anything you buy will need to be shipped and shipping costs can get well into the realm of outrageous so it becomes impossible to make rational decisions since you never know the full price.

      And the transaction fee I mentioned is an unwarned for fee that's sprung on you at the last moment like the bids in the newbie area that comes up on things without shipping. How do I know this? In my 3AM session of, "It was useless to wake up now, everyone else did too," I won one of the "almost"s. Something that didn't need to be shipped.

      The constant is that whatever area you're in, whatever you win, you won't be told the true price you have to pay until such time as you think you've already got the thing and all that's left is to cut a check. Which gets into what Firedrake was saying about sunk costs, except even more so. Because you're in a position of, "It's already mine," so it stops being, "I've paid this much already," and becomes more about how you can free your property from the people who are pulling a Spanish Prisoner confidence game on you.