“Profitable until deemed illegal”

Dutch books and Venus fly traps abound:

I was fascinated to discover the auction hybrid site swoopo.com (previously known as telebid.com). It’s a strange combination of eBay, woot, and slot machine. Here’s how it works:

• You purchase bids in pre-packaged blocks of at least 30. Each bid costs you 75 cents, with no volume discount.
• Each bid raises the purchase price by 15 cents and increases the auction time by 15 seconds.
• Once the auction ends, you pay the final price.

I just watched an 8GB Apple iPod Touch sell on swoopo for $187.65. The final price means a total of 1,251 bids were placed for this item, costing bidders a grand total of $938.25.

So that $229 item ultimately sold for $1,125.90.

If traders are overconfident, as much as the finance literature alleges, there ought to be a way to exploit that tendency.  And so there is.  If you read the article you will see it is even worse than it sounds.  Jeff Atwood concludes:

In short, swoopo is about as close to pure, distilled evil in a business plan as I’ve ever seen.

Or are the overconfident people sharing in the evil as well?  For the pointer I thank Ambrose Wong, Kevin Markham, and Travis Allison.