Saturday, 19 October 2013

The Twisted Mathematics of The £30 iPad

That I didn’t blog yesterday makes me feel lousy today. I had so many jobs to do that by the time I’d finished I didn’t have the energy or motivation to write. The most interesting job I tackled was fitting castors to a table that didn’t have means of attaching castors. I am not one of the world’s natural handymen. I’m not at home fixing things in the shed and only go there as a last resort to save a few pounds or escape the world. Yesterday I did both and, in the process, manage to make the castors fit and even swivel, after a fashion. I also used a metal angle grinder for the first time in my life and it was every bit as thrilling and dangerous as that sounds. The sparks were spectacular as I cut off the pins to the new castors I’d bought from Wilkinson’s (£2.50 for four). Less spectacular was the moment I thought I’d set the shed on fire or the moment I realised that freshly ground metal is somewhat hot to touch or the moment I dropped the aforementioned metal onto a plastic bucket which it proceeded to melt...

I’ve also been cartooning. I worked on three new cartoons yesterday but I’m not sure they’re worth finishing. A fresh start today and I’m hoping for better ideas…

Trawling the web in search of ideas this morning, I did come across a site which was offering crazy deals on consumer goods. I enjoy these bargain websites because I always enjoy the sport of spotting ‘the catch’. You can always guarantee that there’s a catch when people start offering free money, free holidays, cheap technology… I like the challenge of figuring out the clever wrinkle that makes the seemingly magical offer quite possible in the real world.

This particular website is called Quibids and they have a very clever scheme. Go see if for yourself but, please, don’t be tempted to bid until you’ve spotted the catch, figured out the logic and then consulted a trained mental health professional.

I hadn’t heard of these so called ‘penny auctions’ before this morning but Quibids basically advertises itself as an internet auction where users can buy high class technology for next to nothing. Want a brand new iPad for £30? Then Quibids say that you can. And the remarkable thing is that they’re right. You can. However, as always, the devil lurks at the door to Detail’s bedroom.

Just like eBay, Quibids has a clock counting down on each item but unlike eBay who encourage you to put your bid in at the last moment before the clock stops, putting in a bid on Quibids adds seconds to the clock. You also pay 40p every time you bid on an item and a bid increases the sale price by a penny. I’ve been watching people bidding on a 32gb Google Nexus 10 this morning (currently £8.71) and the clock keeps counting down to one second before a new bid comes in and the clock goes back up to 10 or 15 seconds. This will keep happening until nobody bids in those final seconds and one lucky person gets the item.

It sounds fiendishly simple and it is. However, the really fiendish part (aka ‘the catch’) is that everybody who bids on that item has also paid something towards it.

Consider the famous £30 iPad: the headline is that one person has paid £30 for an iPad but that’s 3000 penny bids at 40p each. That’s £1200 of bids for something that, depending on the model, might cost £350-700. There’s no mention of the countless other people who contributed money but walked away empty handed. I suppose, because the winner’s total bids are knocked off the final price of the item, it encourages you to keep pumping more money into the system so you don’t lose your investment. The more you’ve bid, the more you’re locked into a cycle of bidding, especially since they also allow you to buy the same item at full retail price minus the cost of your bids.

It’s interesting business model because it allows the company to advertise that a person bought an iPad for £30 but they don’t mention the countless other people who contributed the other £1170 in that bidding war. How often does the average Quibid user lose a bid? I don’t know but the economics of the system are fascinating because it relies on a basic human instinct shared by every bad poker player: the inability to get out when you’re only ankle deep in the quicksand.

Theoretically speaking, the only way this system makes sense is if I were going to buy a Samsung Google Nexus 10 32Gb tablet anyway. Then I might be tempted to buy hundreds of bids to stand a change of getting it substantially cheaper but knowing that anything I bid would still go towards the item should I lose. Take this further: I would then need a strategy to win. So, I don’t bet early. Only suckers bid for this Samsung tablet when it’s at £8. I should wait until the product is in the range I expect it to go for. £30 for a tablet? So we start betting at £25. Discounting concurrent bidding which can knock our figures off a little, I establish a pattern of making alternate bids, meaning I don’t outbid myself on every price £25.01, £25.02… So that means for every £10 the price rises, that’s 1000 penny bids, of which I must contribute 500 to be fairly certain of winning in the £25-£35 price range. That’s 500x40p or £200… If the price rises beyond that, things begin to get seriously ugly. It will cost me £100 in bids for every £5 the price rise. But here we’re also getting into gambler’s logic and that’s why I find myself thinking that the morality of this operation is so questionable.

The whole thing is a gamble and tantamount to gambling. I recognise addiction in other people because I recognise it in myself. It stems from a psychological bias towards repetition and seemingly achievable wealth just held slightly beyond our grasp. Gambling addiction stems from the poor addict’s belief in greater things than statistics. ‘My luck has got to change’ or ‘one more bid and I know I’ll win this…’ I can see how bidding would quickly become alluring. Letting go is difficult for anybody with compulsive behaviour. Do you know how long I keep sweaters beyond their reasonable lifespan? It can take a NATO intervention to get me to part with favourite jeans… Do you know how long I've tried to write and cartoon for a living?

Of course, others will shout ‘consumer choice’ and ‘free will’ but I guess this is how the rich get rich and why I’m destined to be poor. I have too much moral backbone. I couldn’t fleece a person even if I tried. Instead I sit here watching the clocks turn red, new bids arrive, and the clocks turn black again. I look at all the names and wonder what kind of lives these people live. Are they addicts, marks, players or punters? The tablet is now going for £14.94. Quibids have taken £597.60 of bids for a product that I see currently selling online for as little as £292.95 including free delivery. That’s a frightening thought and a hell of a business to be in. I’m tempted to wait to see the final result but I have things to do, compulsive behaviours to avoid, more metal to grind.

[Update: the Nexus still hasn't gone and it's nearly £19 (1900 bids at 40p a bid, or £760) but a memory stick just sold. I'm trying to work out the maths of that. Perhaps somebody can tell me if this is correct. A ‘PNY Micro Sleek Attache 16GB USB Flash Drive – Red’ costs £6.32 on Amazon. The bids on Quibids hit £2.22 before it was sold. That’s a saving of £4.10 - £0.40 (£3.70) for the winning bidder, assuming they only made one bid. However, the bidding process would have been approximately 2.22 x 100 penny bids. That's 222 penny bids at £0.4 each, bringing the website an astonishing £88.8 for a product worth £6.32. A profit of £82.48!]

[Update 2: It eventually sold for £26.61, which means I should have perhaps backed my calculations. I said I would have started bidding at £25 and bid every other time. £1.61 over my starting point would have meant there were approximately 161 bids. I think my calculation that you’d have to bid every other value might have been wrong since each bid raises the price by £0.006. However, even 161 bids would have cost £64, a lot cheaper than the store android. Perhaps you can beat the system but had I been bidding, perhaps the price would have gone much higher or I might have missed one. Makes little difference to me. There's no way of predicting these things and the whole thing smacks of gambling...]

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