Saturday, July 07, 2018

A safer way to allow gambling

With the recent decision by the Supreme Court to allow states to legalize sports betting, states should think through possibly ways to legalize gambling. We should thinking through how to do it while reducing the negative consequences, such as, gambling addiction. I think one of the keys is separating as much as possible gambling from temptation. We should worry less about someone who has planned a gambling trip with a known monetary limit than we should about someone who is caught up in the excitement of gambling, looses too much, and tries irrationally to win it back by gambling more. I propose to do this by a mechanism that enforces planning and limits. Gambling regulation would create special-purpose gambling accounts where people could deposit money. Casinos and other gambling establishments would then not accept cash, but instead, could only accept money from these accounts. The key is that casinos could only take money that had been in the account for a certain minimum amount of time (e.g. five days). A mechanism would be needed to prevent people from giving each other chips in the casino in exchange for cash, but this is likely possible with cash cards, authentication, and oversight. There has been some attempts along these lines: several countries have instituted something similar for electronic gambling. More research would obviously be best.

Obviously, casinos prefer unrestricted gambling but they may support this type of regulation if it is the only way to operate in a state. Likely the biggest road-block would be entrenched interests, such as state lotteries and localities (e.g. Native American reservations) that have already legalized gambling. Overall, if we can drastically reduce the negative consequences of gambling in the legal/main market then we should be trying to move people away from worse areas, such as the black market, given that it appears many people don't always operate rationally.

Thursday, February 08, 2018

FinTech: Service to optimize credit card payments

Many people carry credit balances across multiple cards. The best general strategy to allocate a given amount towards monthly payments is to make the minimum payments on each card and then allocate the remainder to the card with the highest interest rates. Multiple studies have shown, however, that people do not do this, but instead follow simple heuristic such as dividing payments in proportion to each card's balance. This suggests that a FinTech startup could offer a service of managing payments in an optimal way. It could incorporate more complex concerns like not maxing out certain cards, being smart about card-specific rewards/changes, and managing a family portfolio. Also, consumers have high levels of anxiety about debt so a comforting intermediary might be preferred.