Freelancers are a strange professional class of designers, writers, copywriters, developers, and consultants that mostly sell output on a project-by-project basis. This project nature is what makes freelancing uniquely susceptible to economic disruption; there’s a natural endpoint for clients to make changes based on changing circumstances. Unlike employees, freelancers have to keep selling their work on a spot market.

Early evidence suggests the introduction of ChatGPT corresponded with a 2% decline in monthly contracts on Upwork and a 5% drop in earnings. Worse, the impact on earnings hit high-skill freelancers hardest. The causes go beyond ChatGPT adding competition — AI can create the facsimile of expertise, making it hard to tell who genuinely is an expert and who is just good at prompting.

“Form a union” some people might say. But freelancers lack protection under the National Labor Relations Act, which regulates union organizing. Even if they didn’t, unions need a unified counterparty to negotiate with, which freelancers definitionally do not have. That’s why the Freelancers Union is more of an advocacy/health care organization — that’s really the only part of the relationship they’re able to operate in.

Unions aren’t the only form of cooperation though. What if freelancers tried to increase their earnings by forming a cartel?

Cartel model 1: OPEC, or controlling supply

The purest example of raising prices through coordination is oil.

The post-WW2 oil industry was controlled by the “Seven Sisters,” a collection of the 7 largest oil companies that collectively controlled ~85% of the world’s production. The Seven Sisters were not shy about using their bargaining power to cut fees to the nations that hosted their oil wells.

Starting in the 1970s, OPEC emerged as a real counter-force. Their first real show of strength came in 1973, when OPEC was able to dramatically increase oil prices from $3 a barrel to $12 by coordinating production cuts. But when everyone else reduces supply and prices increase, any individual member has an incentive to overproduce and cash in.

The responsibility for enforcing discipline falls to the swing producer, an entity holding enough spare capacity that they can influence prices at will. For OPEC, this is Saudi Arabia. When other countries cheat — or new entrants threaten OPEC, like US shale producers in the 2010s — Saudi Arabia can punish them by ramping up production to crash oil prices.

Freelancing is basically millions of small, repeated auctions for output, at a new price each time. Imagine if freelancers adopted a similar model, intentionally withholding work for projects to constrict supply and drive up prices. With fewer alternatives, these freelancers would be able to wring higher payments in response to collapsing supply.

It probably wouldn’t work. Even with relatively niche functions, there are a LOT of people you’d need to coordinate, most of whom would be happy to defect. Any real organization would be broken by offshore freelancers that are willing to provide lots of output at lower rates. Given the fragmentation, the coordination problems are impossible to solve.

Even if they could, the modern freelance market has a swing producer that lives outside of the cartel: AI. An LLM is happy to produce unending good-enough output at a low price. With those economics, even an imperfect AI substitute can drive down prices significantly.

For a copywriter, ChatGPT is the equivalent of the swing producer operating at max capacity, always, forever. Any attempt to withhold services just accelerates their replacement by Saudi ArAIbia.

So while FOPEC — the Freelance Organization for Pricing Equity and Compensation — is a great acronym, it may not be the right model for a freelancer cartel.

Cartel model 2: Licensing, or controlling permission

If you can’t control supply, what about just making it illegal to buy from anyone else?

The decentralized and fragmented nature of the freelance market makes it hard to imagine the OPEC model succeeding. But there is a model that’s been highly successful in protecting professionals with unique skillsets: professional licensing.1

Limiting who is legally allowed to do a job is the ultimate hack for decentralized professional organizations. Professional organizations have already mobilized against AI competition in advanced knowledge work — the American Bar Association (ABA) is working on this for lawyers, pushing a bill in New York that would bar AI from practicing law. AI can’t act as a swing producer if they’re not legally allowed to produce.

Beyond strict bans, professionals can control access through market structure; the American Medical Association (AMA) has long lobbied to limit how many new doctors can enter the market, advocating for restrictions on medical schools, residency slots, and the scope of non-doctor care.

So is the path forward for freelance copywriters to make it illegal to write instruction manuals without a license? Licensing has crept downmarket from high-risk industries like medicine to lower-stakes professions like barbers and nail techs; I’d bet that some higher-skilled freelancers pull off lobbying for legal restrictions. I’m not sure what the copywriting equivalent of the bar exam is, but somebody will be able to develop it.

It’s a patchy solution, likely to (at best) exist at the state level with plenty of cheating using multi-state entities or just ignoring the rules. Most freelancers are remote anyway; at best you’ll see “freelancers from Colorado will not be considered without a license to do graphic design” on job postings.

Cartel model 3: A clearinghouse, or controlling trust

There’s another route that freelancers can take: capturing the platforms.

Platforms like Upwork, Toptal, and Fiverr need to manage a careful balancing act between keeping sufficient freelancers while bringing in businesses. Historically there’s been a love-hate relationship between platforms and freelancers; platforms want to ramp up fees, freelancers want access to work without paying a platform tax.

But if AI collapses freelancer earnings, the business model for two-sided marketplaces breaks down — you can’t collect meaningful fees on both sides if buyers are paying peanuts to an AI-augmented amateur. Preserving market value for verified human labor is the priority for both freelancers and platforms.

With a common enemy, it might be prudent to transform the market from atomized freelancers to a clearinghouse. As the sorting layer of the freelance market, platforms could become a trust clearinghouse: verifying freelancers, charging clients a premium for human-guaranteed work, and setting rating floors and quality standards across the market.

In exchange, clients get verified identity (this person is real), credentials and audits (this was made by a human), dispute resolutions (this person should get paid), and predictable rate norms (this person should get paid this much). The platform acts as both a licensing body and enforcement mechanism, controlling what work gets done and, to a lesser extent, how. Given increasing AI backlash, this kind of clearinghouse of labor might be genuinely valuable to some buyers.

A central certification agency to attest quality and self-regulate its members sounds sort of like an old historical idea: a guild.

Enforcing a guild

Once you build a guild-like system, the challenge becomes preventing defection among the participants. Freelance platforms actually have an ability to turn this into a more traditional cartel model; there aren’t that many freelancer platforms, and they can mutually agree to align standards to drive up fees (and their percentage cut).

What if the freelance platforms created a membership system that works across platforms to ensure enforcement: FOMO (Freelancer Organization for More Oversight)?

To get credentialed, freelancers would need to put up a meaningful bond: say, $1,000 to start alongside a share of future earnings. The fee both acts as a financial buy-in and a barrier to those that don’t intend to abide by the rules.

Certification through FOMO would give them membership, usable across platforms as a license to sell freelance work in their particular expertise. Members of the cartel would be required to adhere to specific rate guidelines, limit off-platform freelance work, and agree to AI use transparency. If a user breaks these rules, they receive a fine out of their bond that compensates everybody else in the network.

This still leaves the issue of off-platform transactions: what’s to stop somebody from doing extra hours somewhere else, or off-platform? Or worse, what if a new FOMO-free platform emerged to offer the cheapest freelancers to buyers?

Social enforcement is probably the key to stopping individual defection. A culture of distrust of outsiders, like any guild worth its salt, will help ostracize freelancers who work outside the guild. Updates to the LinkedIn project section become a trigger point for public shaming.

If that isn’t enough, the freelancer guild might start demanding increased surveillance of activity. Bank app monitoring and computer keylogs might need to become a standard part of the onboarding process for freelance marketplaces.

But that doesn’t stop new platforms from entering. And if new platforms show up, the response might be how lots of historical guilds reacted: direct action. FOMO-enrolled freelancers might start to resort to boycotts for businesses that use them, public shaming campaigns, and even mafia-esque threats. Much like the luddites, some graphic designers might be arrested for data center arson while fighting AI-augmented competition.

Once the cartel is formed, the economic logic starts to look less like an economic cartel and more like a criminal cartel, complete with muscle. Maybe it’s better if freelancers just have to deal with a fragmented market.

Official idea rating

1/5. While a cartel for freelancers would likely benefit the freelancers — especially since it’ll make low-wage, offshore competition much harder — it’s quite unfair for everyone else involved. Somebody trying to start freelancing will have new obstacles to entry. Enforcement is never going to be 100% fair, and the cultural changes seem unpleasant at best.

That said, with new technologies attacking both sides of the marketplace platforms will likely rethink their business models. It seems like there’s opportunity for platforms to find new ways to elevate freelancers as their incentives align. At a minimum, human-verified badges are almost certain to happen.

Freelancers will need to adapt to a world where impersonating their expertise will be easier than ever, and low cost competition will only become better and more available. But this probably looks more like specialization than coordination; the presence of AI splits the market too harshly to sustain real coordination.

Trying to build a cartel just feels like reinventing a guild with more steps.

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I think [French fries are] on the menu right now for twelve bucks an order. And I was looking at an old menu of mine from [2019], and…the same fries were on the menu for nine bucks in order…and realized that, like, if I wanted the same sort of margins on that nine dollars order fries that I have on my now twelve dollars order fries, they would actually be twenty five bucks

Restaurant prices have been increasing nonstop, driven in part by higher labor and food costs in a post-COVID world. But the restaurant model itself feels stuck in a spiral: menu prices tick up to cover higher costs, making dining out more and more expensive every year. Even with higher prices, restaurateurs have to fight to keep their establishments open despite what are often low single-digit net margins.

It got me thinking: A restaurant essentially bundles admission and food, which forces menu prices to cover everything from rent to credit card fees. Instead of putting everything on food, what if restaurants charged separately for the table?

A brief primer on restaurant economics

Restaurants are famously tough to run; 42% of operators in 2025 said that their restaurants were not profitable.

A typical restaurant P&L is roughly a third of revenue on ingredients, a third on labor, and another 25%-30% across rent, insurance, marketing, credit card fees, and everything else. High-margin alcohol ends up playing a critical role in keeping most restaurants solvent.

To understand how restaurants stay in business, you need to understand Revenue Per Available Seat Hour, or RevPASH. Coined in 1998 by Sheryl Kimes at Cornell University, RevPASH is calculated as:

RevPASH makes a subtle point explicit: restaurants aren’t just constrained by the amount of food served, or the average order value (although both are important). Seat-hours dictate everything at restaurants; if you can’t sit someone, it doesn’t matter how high menu prices are. Any unused seat hour has an explicit opportunity cost, because the rent, staff, lights, everything is still running whether anyone is sitting there or not.

With capped space at prime hours, this incentivizes fast service to turn over seats, crowded restaurants, higher F&B prices, and a heavy push for alcohol. But all of this lacks predictability. If a dinner party skips appetizers and drinks, a table’s revenue can drop by 50% or more.

We could try something different.

An unbundled restaurant

Imagine a restaurant that charges $25 for an entree, $15 for a drink, and $10 for an appetizer. For a two-person table, let’s call a standard bill $90 — $50 for two entrees, $30 for two drinks, and $10 for an appetizer.

At standard restaurant margins, only about $27 of that $90 is actual ingredient costs. Instead of capturing that remaining $63 in the price of the food, a restaurant could institute a two-part pricing scheme.

First, you would be charged $25 per seat per hour — this covers labor costs and fixed costs for the meal. In exchange, you’re treated to a menu that takes you back to 2009: entrees that are $12 each, appetizers for $8, desserts for $6, and cocktails for an unheard-of $8 each. If you stay past your hour, you can pay a small surcharge for 15 minute increments; enough to keep things fair, not enough to create too much anxiety.

The economics on a table looks totally different; if we assume ~60% labor and overhead costs on our $90 order, it requires multiple dishes and/or an alcohol order for the traditional model to match the profitability of the table fee order. The restaurant still wants you to order, but no longer needs you to buy four cocktails to make rent.

There’s a lot of logic to this. Behavioral economics research has demonstrated a pain of paying that comes from high prices — by the time you’ve mentally ordered $50 of food, a second drink feels extra indulgent. While an upfront payment hurts, each additional order feels particularly small and easy to justify.

Even better, the pricing structure creates a sunk-cost fallacy; if you’ve already paid $25 to be there, then it feels dumb not to take advantage of the cheap cocktails. Customers will try to amortize the upfront fee into lots of consumption in as little time as possible.

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This structure might legitimately increase RevPASH while feeling like a deal. Our hypothetical couple ordering the same meal would pay $50 for their seats, $32 for their food, and $16 for their drinks — a total of $98, almost 10% more than under a pure ordering situation. Even if you lowered the entry cost to $21 to keep the total bill flat, the lower variable prices would almost certainly drive up purchasing. I’d definitely grab a second drink, and maybe dessert.

There is one catch though: the servers’ tip base just collapsed. We already live in a world of complex tip norms; do you tip on the table or just marginal spend? A 20% gratuity on food means that tips decline nearly 50% if you exclude the table.

This dynamic probably limits the restaurant types this will work with; customers will resist tipping on a flat fee, but cutting tips 50% will make it impossible to retain talent. In practice, this model probably only works if you fold service into the table fee. This isn’t guaranteed to work — most no-tip experiments have failed — but perhaps a hybrid model with lower tips but higher table-supported wages can manage to operate.

You’d need to design a restaurant to leverage this

Today, restaurants have to optimize for turn time — how fast they get you in and out. A table needs to constantly add to their tab to keep RevPASH sustainable; at the same time, speed in the kitchen and bar is paramount. A busy restaurant runs like a well-oiled machine, with a rhythm that brings consistency and turnover. Restaurants fight to balance getting customers out with not making them feel rushed (a fast track to bad reviews).

Does that change if there’s a seating fee and lower prices? It’s mostly demand dependent; restaurants benefit from getting you out before your paid hour is up if they have someone waiting on the table, but don’t care if there isn’t. Either way, once you’re paying time surcharges, both the restaurant and the diner begin to internalize the cost of occupancy, a big improvement from today.

The menu probably needs to shift to adapt to a world of cheaper dishes. Driving impulsive buys becomes the game; lots of small plates and appetizers designed to trigger a “why not” reaction, sort of like an Izakaya or Tapas. This extends to the kitchen, where speed to output becomes increasingly important — you want your customers to finish their plate so they can order another.

To make this work operationally, the whole restaurant needs to be designed to facilitate ordering. QR codes are sort of lame, but why not put big menus on the walls? A way to place orders quickly is key — tablets won’t work for fine dining, but perhaps a table button that pings your waiter. It’s important to be transparent with customers and let them know how much they’re spending; a clock on the table seems justifiable, but might bring the mood down a bit.

This is essentially Costco as a restaurant. You’re not paying for food — you’re paying for access to high-quality goods at low prices. The fee is the business, the dishes are just a bonus to get you in. Go browse and enjoy the dopamine of bulk goods and low prices.

Table management opens some new possibilities

It’s critical to keep tables full to make the most out of this system. That’s where dynamic table pricing comes in; instead of giving happy hour discounts on specific dishes, the hourly table price shifts to maximize occupancy over the course of the day. As restaurants get more data, they can develop software to dynamically adjust daytime pricing to maximize profit.

This does more than keep tables full: it creates optionality. Restaurants have massive amounts of off-time that they struggle to monetize. What if during off-peak hours, they dropped the fee to $10/seat with a skeleton crew and a menu focused on coffee and snacks? Bam, you’ve just turned your empty dining room into a WeWork during the 2pm-5pm weekday lull.

Dynamic fees open up other opportunities. If there’s a long line, it only makes sense to turn the waiting list into an open auction. The people willing to pay higher table fees can go to the front and be seated sooner; with an active “next seat” price, people can make intelligent tradeoffs about deciding to wait, paying an extra $25 per person, or going somewhere else.

The signaling power of the open auction could build real buzz. High prices to be seated early show high demand for the restaurant, a flex for those who want to see and be seen. Given that the old “slip the host a $20 to get seated early” has evolved into complex reservation resale markets, the transparency could be a nice change of pace.

But timing could cause problems

The timing dynamics raise some game theory issues. Once you’re charging for time, the restaurant does have some incentive to slow-walk dinner. If a table is on the cusp of their time limit, maybe food runs slow down a little bit. If the kitchen slow-walks the dessert, you might be able to pitch an extra glass of wine. The bill comes one minute late and triggers a second surcharge. Every minute at the table after a certain point actually makes the restaurant money.

Would restaurants actually begin to slow down to monetize time? In some ways, it doesn’t matter if they do — customers will understand it’s a possibility, and a preemptive reaction will change the dining experience.

The possibility of being cheated is going to be in the back of everyone’s mind; the bartender taking a long time to get the drinks goes from a mild annoyance to paranoia fuel for a customer afraid of being ripped off. The waiter not acknowledging your little check please hand gesture is going to feel a little more malicious.

Given this risk, building trust is key. Items might start to come with delivery estimates, with time extensions if your cocktail doesn’t make it to you in the 8 minute SLA. Kitchen delays might correspond with credits for more food, a slightly more formal version of a “we’re sorry” free dessert. No matter what the incentives, speediness is paramount — especially when trying to pay. Please, don’t make me wait and do the awkward check please thing.

Official idea rating

4/5. I don’t think this can possibly be the answer for every restaurant out there; it’s a little too different from how the industry has worked for the last few decades, and it relies on being a reasonably desirable restaurant. But the economic logic makes sense; I’d happily pay a two-part tariff for a date night, and I’m sort of annoyed that I can’t after writing this.

One of the biggest barriers to restaurants trying novel pricing structures is fear of customer backlash; Sheryl Kimes found that charging for reservations was viewed in a positive light among people familiar with the practice, but those who aren’t found any version of it unfair. The hardest part is being the first mover; maybe a small-plates, alcohol-forward Izakaya with a chef that’s into economics.

If nothing else, the weird pricing structure is sure to generate its own PR when Bart Hutchins can go back to $8 for fries.

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It’s not cheap to buy one of these, with each plaque requiring a $10,000 donation. With over 7,000 plaques installed, this program has (presumably) raised around $70 million for Central Park operations. And if you happen to love a different NYC park, there are options for you too: most other city parks start at $5,000.

The practice of using charity to put a name on something goes back millennia. The earliest known iteration of the practice is Euergetism, the Greek and Roman custom of wealthy citizens funding public work such as baths, roads, or temples. In exchange for their patronage, donors received honors including inscriptions of their name on the infrastructure. This tradition continues today, with donors naming everything from hospital wings to college dorms.

There might be something for us to learn from here. New York City just announced a $2.2 billion dollar budget shortfall for 2026. That’s only 220,000 benches, and the city has all kinds of things just waiting to be named: street corners, lamp posts, traffic lights, trees. That’s potentially billions in naming rights just sitting around, unused and ready to solve the deficit. What if we had the courage to monetize it?

What does it mean to sell naming rights?

If this is going to solve New York City’s budget crisis, we need to understand what’s being sold. I’ll use the term naming rights to describe all versions of the practice.

The first version is corporate sponsorship: big buyers that put their names on buildings as a marketing and branding exercise. Over 90% of NFL stadiums and NBA arenas have sold their naming rights to one corporation or another. It’s a very sophisticated form of advertising, and it’s well tested.

The corporate sponsorship model has its limits — I don’t necessarily want my garbage can to have a big Geico label on it, and the aesthetics of putting a McDonald’s sign on every tree on Sixth Avenue are poor. But it doesn’t seem totally insane to sell naming rights for big pieces of infrastructure. Stadium naming rights can go for tens of millions a year; surely renaming DeKalb Avenue to State Farm DeKalb Avenue is worth something.

An alternative is the noncommercial model: Central Park benches, or the adopt-a-tree program. You give a donation, you get a plaque. These programs are both a way to demonstrate philanthropy towards the park and a way to meet an emotional need for users of the space. This comes with rules, including a standardized plaque design and (I assume) some review of content.

The philanthropic model feels more scalable. That doesn’t mean you can’t put your name on stuff — that’s the whole point! — but naming rights are more palatable when they’re not in your face. In the same way that every Central Park bench has the same plaque design, there could be a set of standardized forms that would be allowed on any individual item — a plaque, a QR code, or an online certificate of ownership you can share on LinkedIn.

The philanthropic model wouldn’t just be for the wealthy. All kinds of people have loved slapping their names on stuff for thousands of years; the ability to say that’s my storm grate triggers some primal feeling of ownership. Buyers will want to leave their mark on their neighborhood, by the fire hydrant they walk by every day, or outside the office where their boss can see.

The real question: is there enough here to get New York City to a budget surplus?

Sizing the market for naming rights

New York’s Open Data Law, signed in 2012, requires all city agencies to make “public” data available via an online portal. Using Claude Code, I pulled the latest figures for the city’s naming inventory, including traffic lights, trash cans, streetlamps, and trees. This gives us 1,475,606 namable objects.1

Now, if we charged the same for every one of these then we would need an average price of nearly $1,500 per year to close the $2.2 billion budget deficit. While I would love to have an official NDI tree, $1,500 is just too expensive.

But not all of this inventory is the same. In 2009, the MTA sold the naming rights to the Atlantic Avenue–Barclays Center subway station for $200,000 per year for 20 years. This was, frankly, outrageously cheap — in comparison, SEPTA in Philadelphia sold naming rights to a station for $1M a year in 2010.

It seems like there’s a lot of juice to be squeezed in transit. The SEPTA deal, inflation adjusted, would be worth $1.5M per year; if we average out the highly-frequented stations like Times Square with the smaller fringe stops, a conservative estimate of $2M per year on average seems fair.

We can do the same for bus shelters; while these are privatized, there’s no reason the MTA couldn’t officially name the bus stops next to them, as long as they respect their existing deals with the shelter. Let’s put these at a very conservative $100k a pop; it’s easy to imagine an aggressive buyer purchasing an entire line, turning the M15 line into the Uniqlo M15 line.

Finally, the city has over 2,000 playgrounds. It might be gauche to rename the Ancient Playground the Pampers LuxeSoft Swaddlers Playground, but sacrifices need to be made for the good of the city. At $50,000 per playground — very low for a company like P&G seeking to reach visiting parents — we can get another $100 million annually for NYC.

Just these three together would raise nearly $1.4 billion for New York City. Not bad! Unfortunately that still leaves an implied price of $555.92 per year for the rest of the inventory, far too high for every tree and manhole cover in the city.

There is one piece of high-value real estate that we haven’t monetized yet: street names. New York, famously, uses numbers for many streets and avenues. This is a great thing for wayfinding, but is not revenue maximizing for the city.2

With street names on the table, every direction, address, and signpost suddenly becomes an advertising opportunity. Sure, you might need long-term contracts to avoid changing people’s addresses too often. But it’s clear that there’d be demand for naming rights among a set of high-traffic, high-commercial-value streets. Obvious choices include Macy’s Fifth Avenue and JP Morgan Wall Street. After a few years, would anyone even notice?

The value of a street name is massive. Every time someone takes a left on the Pepsi-FDR drive, Google Maps is going to read out an advertising moment. Given the commercial value implicit in these naming deals, let’s assume we can sell 25 of these for $15 million each. That gets our total big-ticket revenue to $1.75 billion, and the price per remaining unit to $300. That’s only $25 a month to put your name on the storm grate near your house!

We did it. New York City’s deficit is solved.

Unfortunately, there’s more complexity

New York is, for better or worse, a city where economic value is concentrated in Manhattan. In general, higher property values indicate more foot traffic and wealthier neighborhoods; the Financial District probably has higher naming rights demand than suburban Staten Island.

I pulled NYC’s public data on every piece of public infrastructure and mapped it against property values. The results are, unfortunately, not great; it looks like the bulk of inventory is in the lowest property value areas.

Given poor location density, it seems unlikely that all 1.4 million things will find buyers. Only about 70% of Central Park’s benches have been adopted, and that’s the highest value location in the whole city. Lower value areas are going to come in at less than that; if the city averages 25% adoption, we’d need to charge $1,200 a year, or $100 per month, for every piece of inventory.

Even this might be too optimistic. We’re putting millions of things to name on the market all at the same time. Flooding the market in this way would collapse the price, a terrible outcome if trying to close an in-year budget gap.

The good news is, I don’t think we’d get that far.

People would absolutely hate this

While there may be an economic logic to this, it’d fall apart in every other way. Politically, the first politician to support selling naming rights en masse is going to be vilified as the ultimate corporate sellout. It’s easy to imagine vandalism of new signs and fights over content; I don’t want to have to adjudicate if a message on a tree is too political, and I don’t think Mayor Mamdani does either.

The quality of life impact would also be significant. There really is something special about public spaces; a few heartfelt (and aesthetic) plaques are fine, but if we actually cover the city in endless logos and signs, it sort of kills the vibe

The disruption would go beyond aesthetics. Imagine the constant partial street closures for installation, vandalism and subsequent lawsuits clogging up the New York court system.

Enforcement would also be a disaster. The city has a vested interest in making sure that the plaques aren’t a nuisance; you’d need to hire an army of enforcers, constantly reviewing the streets and responding to 311 complaints about “deez nuts” plaques that snuck through the review process. NIMBYs would complain that signs are destroying the neighborhood character of Greenwich Village. Harassment is impossible to manage; you don’t want revenge plaques going up after every breakup.

In the highest-value areas, name-squatters could start buying naming rights to flip. This is the real danger of a naming regime: scalping. Selling naming rights to a fire hydrant doesn’t do New York’s pre-K funding any good if a middleman is capturing thousands of dollars for a plaque spot they got in the initial sale. A clever entrepreneur could even buy out the entire inventory of a neighborhood and effectively re-create a billboard business, collecting rental income as a hyperlocal monopolist.

You could even begin to see bad actors using their inventory to hold buildings hostage. Does it hurt a restaurant if the tree in front of it says “don’t eat at Al’s?”

Official idea rating

1.5/5. While I would love to say that the No Dumb Ideas newsletter solved New York’s fiscal problems, the operational and social complexities are probably a little too high to make this work.

Still, this gets an extra half star for being a good way to fund nonprofit infrastructure. In a world of deepening budget cuts across the things that make a city nice to live in, it seems natural that we’ll see increasing reliance on donors. If someone wants to pay to keep a playground open, I’m ok giving them a little token of appreciation.

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It wasn’t always this way.

In the early streaming days, ad-free viewing was one of the most compelling value props. But a combination of increased competition, higher licensing fees, and market saturation squeezed profit margins while limiting price increases. In response, streaming platforms introduced lower-cost but ad-supported plans by the early 2020s. Very quickly, ad-supported plans became the default as a tool to keep headline prices down.

I don’t mind seeing ads sometimes, which is why I don’t pay for the ad-free plan. But it does drive me crazy when I get a totally irrelevant, annoying ad. It got me thinking: what if I could pay a nominal fee to skip the ads I hate?

The economic argument for pricing ads

Most modern streaming platforms have both ad-supported and ad-free tiers. This setup is actually a sophisticated form of price discrimination, letting streamers raise prices on their traditional plans while providing an ad-powered release valve for price-sensitive customers.

But it’s not just about stopping budget-conscious viewers from canceling or reaching new markets. Surprisingly, ad-supported plans can be more valuable per user than ad-free subscriptions. The reported CPM (cost per thousand impressions) for streaming ads can be $30 or more, meaning platforms earn $0.03+ each time they show an ad to a viewer.1

Given an average user watches a surprisingly high 60 hours of Netflix a month, adding ads in can be extremely lucrative. Assuming 10 ads per hour, an ad-supported user paying $7.99 per month generates $26 in revenue vs an ad-free premium price of $17. It makes total sense that ad-supported plans took over the market!

But no streamer, to my knowledge, is thinking about the “sometimes-ad” watchers. This viewer doesn’t mind ads overall, but they do get annoyed at particularly obnoxious or repetitive content. There’s probably a willingness to pay to avoid the marginal annoyance of watching that specific ad, but today nobody is capturing it.

Doing so would be simpler than it sounds.

How pay to skip works

A pay to skip system is relatively simple. If you’re on an ad-supported plan, you continue to get ads exactly as you always have been. The only difference is that alongside each ad, there’s a clear “pay to skip” button, with a dynamically set price listed alongside. Paying to skip doesn’t replace the ad: if you have 3 ads and skip the first one, you only have to watch two more.2

Pay to skip does more than monetize ad breaks. It provides valuable negative targeting data on what users don’t want to see. Platforms have attempted to get this — I sometimes get “did you like this ad” questions — but without the ability to skip it, there’s not much reason to engage. The combination of a skip and a price creates an extremely strong “I don’t want to see this” signal.

Not only does this give advertisers new targeting tools — i.e. excluding me after I spent $1.20 skipping the home-auto insurance ad for the 40th time — it gives platforms data they can’t directly get today. Better data for streamers means improved targeting, higher prices for impressions, and attracting more inventory and ad diversity.

It’s not quite the information density that Tiktok or Facebook can offer, but negative targeting would bring streamers a bit closer.

Allocating the skip fee

Netflix has roughly 190 million ad-tier viewers who watch at least 1 minute of ads a month. If we assume they skip 5% of ads, that’s an additional $2b in annual revenue for Netflix alone. Who gets the money?

One approach would be to treat it like a full refund: if someone opts to skip an ad, the impression is free for the advertiser. The price of skipping the ad would have to match the price the advertiser paid to show it to them, say $0.03 on average.

But arguably, streamers don’t have to give a full refund. Given somebody paid to skip the ad, the advertiser was probably not getting much value from showing it to them. At least they’ll save money not retargeting that person in the future.

Streamers have a decent case for keeping most of the skip fee. A mix of privacy regulations, tracking changes on mobile devices, and fragmented platforms means that targeting can be more difficult today than it was 10 years ago. Given that a pay-to-skip is meaningful data on consumer behavior, streamers could credibly claim that the transaction is a net-positive impact for the ad-buyer. If advertisers’ value per impression stays broadly the same, there’s not much downside for ad buyers.

Over time, this data would bifurcate ad-tier users between low signal (doesn’t skip) and high signal (skips strategically) users. The high signal group will get increasingly targeted ads, which can command a higher price from ad-buyers that know they’re a valuable impression. Worst case scenario, they’ll skip all of their ads, somehow spend more than just going ad free, and become cash cows for Netflix.

The opposite happens for the low-signal group. By selecting out the least targeted users, price per impression for this group would fall and bring in lower quality ads. The end result would be an unofficial garbage tier of advertising inventory, with online crypto casinos competing with whole life insurance plans for the least qualified viewers.

What does this mean for the streaming industry?

While I’d be happy to skip individual ads, this setup would create a huge amount of moral hazard. Netflix might, theoretically, collect a fee to show the ad and a few cents to skip it and the data for resale. In the short term, it could be more profitable to intentionally show low-quality ads that drive skips.

Of course, they’ll want to keep their advertisers happy, so anti-targeting is probably out. But it would be totally logical for Hulu to make 10% of ads actively annoying or irrelevant to generate skips dynamically. Some entrepreneur could even build a studio designed to annoy users as much as possible, collecting a small fee from Netflix for being so bad that people have to skip.

The biggest risk is that double monetization drives a proliferation of ads. Ad-free tiers will probably increase in price in an attempt to push more people to the increasingly profitable ad tier, supported by a variable payment for skipped ads. At an extreme, platforms have the option to make ad-free tiers outrageously expensive, moving towards a microtransaction model to avoid ads — think “watch the Game of Thrones finale ad-free for only $0.50.”

At least it’ll incentivize funding entertainment that’s high enough quality to justify the microtransactions. Sopranos revival here we come.

Or, the entire model could change

Implementing this model is easier to imagine for ads, but streaming platforms don’t HAVE to sell their ad inventory to brands. If they have a strong price based feedback mechanism, why couldn’t they pivot fully into data collection?

This already exists in small doses — some platforms will ask you whether you want to watch a Geico or Jeep ad, or whether you’d recommend Google Search to a friend. But we all know this is relatively low quality data; most people will just skip or choose the default choice to get through the interruption.

Instead, streamers could show content at various price points and see what sparks somebody to pay to skip it. Show videos of people eating gratuitously to find out who’s on a diet. Show aggressive political spots to find out partisan affiliation. Find out people’s phobias for some reason.

Collecting the right datasets could become more valuable than selling the ad space. Not only would streamers capture the cost to skip, they’d be able to sell the outputs to a range of market research, academic, and big data buyers.

While it might be profitable, there’s an open question whether data collection can coexist with traditional ads: is Kellogg ok with a Quaker Oats commercial next to an attempt to understand the psychology of The Pitt viewers? I’m not sure psychological interrogation as a service is the future of television, but given competitive pressures it might be worth a shot.

Official idea rating

3.5/5. There is a really strong logic in giving users high-signal ways to share whether an ad is relevant, and negative targeting is probably underused in entertainment. It seems almost inevitable that some platform will adopt a version of limited ad skips in the next few years. The big jump is being the first one to charge for it; the first adopter will get some negative press, but if they lived through the introduction of ads they can probably live through this.

But the moral hazard will probably keep more aggressive implementation at bay. Ad buyers would have concerns over when their ads are shown, streamers risk devaluing ad prices for some of their users, and end-users are likely to see it as exploitative. Even in the streaming era, entertainment distribution can be a conservative industry.

Still, I’m holding out hope that I’ll be able to give feedback on my ad targeting sooner rather than later. My dream is that one day I can directly tell HBO that I do not have psoriasis, am not buying a car, and haven’t been “back to school” in quite some time.

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It seems like resolutions should work. Adjacent ideas like Dry January work by creating a social permission structure for alcohol-less activities. The solidarity and excitement of doing something hard together is a great motivator and social bond.

So why the annual resolution failure articles? I think they’re actually about gyms. Per Statista, the most common resolutions this year included wanting to exercise more (48%), followed closely by eating healthier (45%), and losing weight (31%).

Unlike our other examples, gyms are a congestible good; after reaching capacity, every new member makes the experience worse. Classes fill up, equipment gets lines, and the experience degrades for a few miserable weeks until February, when things get back to normal.

This is totally backwards. Concentrating all of that New Year energy into January makes the gym worse at the exact moment most new joiners are trying to build a habit. There has to be a better way to utilize this limited pool of motivation.

The evolution of resolutions

The concept of a New Year’s resolution goes back to the ancient Babylonian tradition of Akitu, taking place during their New Year in April. During the 12-day festival, farmers made promises to the gods to repay their debts and returned borrowed farming equipment. If they kept their promises, it was believed they’d be rewarded and vice versa.

The festival was adapted by the Romans, who made offerings to the god Janus while promising good behavior. The festival was moved to January in 46 BC, when Roman calendar reforms created the New Year date we know today. Over the centuries the tradition has evolved to be increasingly secular, with resolutions looking more like “start recycling” than “improve my spiritual fortitude.”

But far from the lofty ideals of Babylon and Rome, today’s New Year’s resolutions are — arguably — just an ad for the fitness industry. It’s common for new signups to increase as much as 30% in January, driven by an advertising campaign demanding that you pick up a new habit and get rolling right away.

Unfortunately, around 80% of those joiners quit within 5 months.1 This is sometimes treated as a moral failing, as if the people who get a boost of motivation on January 1st are too ill-disciplined to actually become fit. But it seems to me that the congestion that comes with the resolution rush is an underdiscussed contributor — you’re not going to build a habit if you have to wait 20 minutes for a treadmill!

January is really a coordination failure masked as a personal failure. What if we could solve it by getting people to start their resolutions later in the year?

A solution for overcrowding

Typically, an increase in demand like we see in January would imply an increase in prices given a fixed capacity. Instead, gyms all lower their prices in January to compete with each other. I don’t blame the gyms — they have high fixed costs and low marginal costs, so obviously they want to lock in long-term members while they’re looking — but it’s an inefficient equilibrium for everyone involved.

Instead of offering a January discount, gyms could offer a discount to delay starting a membership until later in the year. Need to start in January? Full price. Patient enough to wait for a slow month like March? 15% off, and initiation fees are waived.

The gym gets your commitment — and your first month prepaid — but doesn’t face a capacity crunch. This could even be dynamically adjusted based on demand; if October becomes a particularly low-uptake month, the discount could automatically increase to smooth out utilization.

Part of what gyms are selling during the New Year is the feeling of commitment and movement towards a goal. The delay might not be for everyone, but for the right person the act of buying a membership might be enough to feel progress. And when they do start (one to eleven months later), they’re entering a much better environment.

A delayed start date changes the entire experience for new joiners by giving them a clearer sense of what being a regular goer feels like. Gyms might begin to offer onboarding classes for each start date, creating a stronger structure to stick to the habit (and retain the membership). In contrast to someone selling you a membership on the expectation you’ll churn, making you wait so you’re successful signals they want you to succeed.

The finances are appealing too. Back of the envelope math implies there are around 3 million New Year’s joiners per year.2 If we assume a conservative average membership fee of $55 per month, January joiners alone would spend $330 million more per year if the average joiner stuck around for just two additional months.

Actual results could be even bigger. Industry roundups commonly cite an average membership tenure of 4.7 years, or around $3,102 in total dues. Just 10% of a year’s January sign-ups becoming like an average joiner is worth around $825 million in incremental lifetime dues per year.

Spreading out memberships implies other changes to the gym business

There are a few issues to address with delayed start dates, but the biggest one is that life happens. People move, get injured, or lose their motivation. If they simply cancel before their start date, a gym loses a customer that otherwise would have paid for a few months.

There are a number of solutions that gyms could try: cancellation fees, start date swaps, or membership freezes until a later date. But all of these add risk to the gym’s ledger; delayed starts will fall apart if there’s any risk of losing that customer. The only lever gyms really have is to make cancellations functionally impossible. If a $55/mo membership is sold, it needs to be ironclad for a delayed start to work.

Making cancellations hard isn’t a new idea — gyms are famous for it — but it infuriates customers. If there’s no cancellation, there needs to be an escape hatch: make memberships fully resellable.

Imagine a platform — let’s call it GymEx — that lets users buy and sell their memberships. Each membership, when issued, would be given an unique ID that ties to your deposit, a set monthly fee, and a specific start date. Ownership of the ID can be transferred, integrating with whatever identity verification system is used by the respective gym.

The ability to resell means that gyms can confidently predict their total member count and revenue for the year, even if the actual owners of those memberships change. For customers, it makes cancellation easy, straightforward, and potentially lucrative. Of course, it’s always possible that you’ll have to sell a low-demand membership at a loss — or even pay someone else to take it.3

The ability to see market-clearing prices for memberships totally reinvents gym economics. Sophisticated clubs can develop a model of the relationship between membership levels, monthly fees, and initiation fees. By better balancing these three levers, gyms that adopt dynamic pricing will be able to maximize their revenue and make tradeoffs throughout the year.

Gyms could even begin to experiment with other variables for memberships beyond start date. Some memberships could have built in fee increases over time, or limited-time memberships (e.g. a 3 month plan for the summer) that let them capture increased demand without committing to long-term supply increases. Indefinite memberships could be issued to early joiners, although this perhaps risks some inheritance issues if it’s a true perpetuity.

Gym memberships as an asset

The ability to resell implies a right to ownership, essentially making gym memberships into assets. Given the second most common resolution after fitness is saving money, this is a slam dunk. Joiners in January can knock out two resolutions for the price of one: they get the dopamine hit of starting their fitness and they made an investment. For gyms that rely on exclusivity, like Equinox, creating an appreciating asset actually adds to the status of being a member.

This dynamic shifts gyms from being sales organizations to being market makers. When capacity is high, gyms can issue new memberships. When demand outstrips capacity, gyms can buy back memberships, driving the price up and making them available for resale. Customer acquisition is decentralized as existing members promote the gym, substituting for the expensive sales staff.

With a vibrant trade in gym memberships rolling, speculators are sure to come in. Professional membership-flippers could emerge from fitness influencers who buy up memberships before using their platforms to drive demand for their fitness clubs. Shortages of memberships at peak times of the year could drive massive price appreciation, before crashing as members cash in on bubble prices.

As the financial ecosystem develops, there could be more creative outcomes. People with injuries might opt to rent out their memberships; if they have a particularly attractive monthly rate, they might be able to find arbitrages and actually make money out of the deal. This sort of implies the evolution of a taxi-medallion type structure with magnates collecting rent on people going to their weekly yoga class.

If gym owners keep watching other people get rich off their memberships, they’ll want to fight for a bigger piece of the pie. This might start through a commission structure for resold memberships — 15% of the sale price seems reasonable — but could expand to active market manipulation and the creation of in-house trading arms. I don’t know if gym memberships are legally a security today, but the SEC certainly is going to get involved if New York Sports Club is regularly manipulating the market for their memberships before issuing new stock.

Official idea rating

3/5. January congestion is the graveyard of motivation. It seems better for everyone involved if we really can distribute gym start dates throughout the year, even if it requires a discount.

But the existing culture of gym management is probably going to struggle to adapt to not closing a member immediately. It’d take a forward thinking gym to try it and an even more forward thinking gym to accept decentralized ownership of membership, especially if they see other people making money off of it. This is likely the domain of a quirky, high end, and exclusive gym owned by someone that loves publicity. If that’s you, reach out — I’ll be first in line to buy a membership as part of a diversified portfolio.

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A lot of this pain was removed with the introduction of OpenTable and Resy. Suddenly, you could see every open spot and make adjustments on the fly. If your first choice of restaurant is full, the platform suggests another one. There’s no need to talk to anybody on the phone, opening up restaurant reservations to a new class of socially anxious people that had presumably been eating at home.

But this improved experience came at a cost. The number of no-shows at restaurants have skyrocketed; according to OpenTable 28% of Americans said they no-showed at least once in the last year. This isn’t just careless people: restaurant reservations are valuable, and scalpers have begun hoarding the most in demand tables for resale. In response, restaurants have begun to implement deposits and cancellation fees.

Why did this happen? Technology removed the friction that separated the signal from the noise. Friction isn’t just an annoyance: as the reservation process simplified, the cost of a reservation you’re not sure you’ll use falls. Eventually, making a reservation goes from a signal of high intent to eat there to a medium intent to eat there — and the whole system breaks down.

The same thing is happening everywhere. Concert tickets are picked up en masse by scalpers, causing platforms to add superfan waitlists. Rental car dealers add stricter cancellation policies. Tinder punishes you if you swipe right too often.

AI is accelerating this process by reducing friction across every platform with a digital access point. And that’s making the issues of a frictionless world worse.

A theory of friction

Obviously to some extent, friction is bad – removing it increases access to customers and cuts the cost of doing things, making people richer and generating economic growth. But it’s not a free lunch because of the law of conservation of friction: friction is never fully removed, just reallocated.

Take job applications as an example:

1. A party removes friction: LinkedIn introduced Easy Apply, making it much simpler to apply for a new job. This removed friction, bringing in marginal applicants.

2. Removing friction increases use: Many more people applied to Easy Apply jobs, even those they might not be particularly excited about.

3. Lack of friction introduces new costs: With more applicants for each job, it becomes harder to be seen. Candidates get frustrated as recruiters struggle to manage hundreds of resumes.

4. Abuse vectors enter: New AI apps emerge to mass-apply for jobs automatically, expanding the deluge of applicants for every job.

5. Behavior changes: Those that don’t adopt the mass application start to lose out to those who do, causing them to either adopt new tools or apply to even more jobs.

6. New bottleneck emerges: The number of applicants drives recruiters to use AI screening tools, rely on referrals, or extend the hiring process to interview an endless supply of miserable candidates.

Maybe for the first time, we’re starting to confront a downside of too much access and ease of use. This is a pretty radical departure — the purpose of innovation for almost all of human history has been to make things easier!

What if there was a simple way to add some friction back across all kinds of digital services? Imagine a Universal Friction Interface (UFI): a plugin that lets platforms seamlessly make themselves slightly harder to use.

Ways to create intentional friction

A UFI would simplify the process of adding friction back into digital life. When submitting anything — an application, a purchase, a reservation, or a swipe — the UFI dynamically adds in a barrier to completion. In the same way Stripe lets anybody set up payment infrastructure, UFI lets anybody set up friction infrastructure.

To help companies find the right solution, a set of small annoyance functions (SAFs) need to be developed. What might these look like?

Attention meters

Before the submit button can be used, the user turns on their webcam. The applicant is required to stare into the camera for an adjustable period of time — say, 2 minutes. Eye tracking software will pause the timer if the person looks away.

On its own, 2 minutes is not particularly long to wait to do something you’re really interested in, but it’s just annoying enough to stop you if you’re meh on it. By requiring a human time investment, the attention meter short circuits AI-driven automation.

This is ideal for any high-intent use-cases: job applications, house tour requests, or even sending an email to in-demand recipients. As a bonus, this gets UFI into the digital detox market.

A cooling off period

After submission, applications enter a 24-hour hold. No reminders are sent. Users must return the next day and resubmit, proving they care enough to follow through.

This might be suited for things that suffer from impulse actions. Think items with high return rates, exclusive membership groups, or in-demand jobs. A cooling off period can filter out those that would have backed out anyway.

Probabilistic Resets

After finishing some process — a checkout flow, an application, etc. — users need to hit submit. A dynamically adjusted percentage of attempts automatically fail. Unlucky users are logged out of their account and all of the information they’ve entered is reset.

This is a pretty annoying experience, but is theoretically fair: everybody has an equal chance of having their process reset. To avoid bad luck driving some users insane, there could be an increasing success rate after N attempts.

Why would we do this? There’s some optimal mix of high and low intent people; by making it random, you can control the rough ratio of users that fall into each category. The sunk cost fallacy will hit high intent users, keeping them retrying until they go through.

Just charge them $1

We’ve covered this elsewhere, but monetary impacts don’t just have to be draconian charges for no-shows. A small upfront fee — even if paid to a third party like a charity — can bring more friction than the sum of its parts. In addition to being a little bit of money, the pain of adding a credit card is enough to scare off low-intent users.

You could even skip charging the $1, and just add the pain of entering credit card details. This isn’t a new idea; some free online games charge a nominal amount to deter cheaters, since you eventually run out of unique credit cards to use.

Physical mail confirmation

Print out a QR code and mail it into a service. Dealing with printing and mailing something physical shows the type of conviction that makes you pretty confident someone will show up to their restaurant reservation.

Now, I can acknowledge that users will hate any of these options — you’re explicitly making the product more annoying to use! But this might be a case where revealed preferences outweigh the initial reaction. It’ll be annoying, but the services that adopt intentional friction are going to have some advantages over the ones that are plagued with scalpers or rely on charging outrageous fees.

Is there a real business here?

Possibly! Average restaurant no-show rates are 15%-20%, but let’s be generous and use Resy’s reported no-show rate of 3.5%. Applied to Opentable’s 1.8b diners per year, that implies 63 million people don’t show up for a reservation every year.

Opentable charges $1 per seated diner; if friction can reduce that by 50%, that’s $32M in revenue created. Apply that to every dating app, job application, and reservation system in the world and there starts to be a meaningful amount of value created. It may not be enough to be the next Stripe in size, but it’s probably enough to build a sustainable business.

Sure, some of this could be done in-house by existing product teams. But I don’t think it’s going to be particularly popular to have a team work on making products harder to use; the internal politics of companies might serve to stop them from creating a dedicated friction team. Nobody creates their own CAPTCHA system; it’s not that crazy to outsource bits of a submission process.

Beyond the effort, specializing in friction has other advantages. It’s hard to imagine that making products harder to use wouldn’t prompt lawsuits in the US and regulation from the EU. Being the only company that makes things hard to use compliantly is a pretty fair moat.

The impact of adding friction

Getting UFI adoption would be a slow process. Most companies have an issue with not enough interaction, not too much.

The first stages would be for markets with high demand and low supply. That could be job applications for entry level roles, in-demand concert tickets, or hotel reservations on big event weekends.

If adding friction is successful, it might have an unexpected effect. With more friction, high intent users will get first dibs at the services that adopt it, which are likely to also be the most in-demand. With high intent users moving to a limited set of items, the remaining pool of people will be lower-intent on average.

That means the no-showers, cancellers, and mass sign-uppers will concentrate on the laggards at adopting friction. With more and more issues, mid-market businesses might begin to add friction to better filter.

Eventually, social norms could begin to shift; reservations without friction will look suspicious: “why don’t they value a reservation enough to make me stare at the screen for 30 seconds? The food is probably bad there!”

Of course, all of the same trends that have erased friction up to this point will work against attempts to reinstate it. Tools will emerge to work around the new, artificially frictitious regime, requiring ever increasing complexity to maintain the effect. Stubborn people might begin to adopt eye spoofing software or pay somebody to stare at the webcam on their behalf from a foreign country. Although the effort to set this up is, in some ways, a friction in itself.

This back and forth between added friction and its workarounds is likely to continue indefinitely, but it’s a fight worth having. If we can’t nail it digitally, the future might be a bit more physical — mailed in job applications, oral exams, and in-person merch drops.

Official idea rating

4.5/5. The mass removal of friction that AI drives is going to bring a counterreaction, and someone will need to develop methods to bring signal back in a world where more and more of what you see is AI-driven noise.

Without intervention, pay-for-play and tight networks of people seem likely to become the de facto filter, perpetuating existing networks and status as a method to pare down neverending information. Or it could go the other way, with AI regulating endless slop in a black box that individuals can’t understand.

Against these alternatives, adding in artificial difficulty might be the least-bad option. It just remains to be seen whether someone can build a company on friction, hostile UX becomes a new PM specialty, or we all just pay more fees.

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I can’t speak for other cases, but my experience struck me as pretty close to the idealized vision for a jury system. The jury took it seriously, thought critically about the evidence, and debated vigorously on what we thought it meant. If the system is supposed to facilitate fair debate and thinking among strangers, it seems to be pretty effective.

It got me thinking: are there other areas where there’s value in delegating from experts to a body of normal people? What if we applied the jury system to pension funds, endowments, and municipal money management — major investors whose returns dramatically affect the life of their beneficiaries?

A quick overview of investment management

Most institutional investment offices operate with the same broad structure:

• A chief investment officer (CIO) oversees the day to day work: sourcing managers, rebalancing, writing memos, and executing investments.

• An investment committee of some kind sets broad parameters on what can be invested in, from asset classes to risk tolerance.

• A board of trustees sets the broad policies and asks why the line is not going up and to the right sufficiently.

This is…maybe fine, considering essentially every pension fund, municipal fund, and endowment looks something like this. But despite the oversight, in practice a huge amount of discretion lives in the CIO office. And that has some issues.

There’s academic evidence that CIOs are career-oriented, and that can misalign their incentives with the beneficiaries of the money. Younger managers disproportionately hug benchmarks and copy each others’ trades to minimize their career risk — being opinionated and wrong is the worst thing that can happen to them. The wonderful book The Counting House is a window into the agony of a fund manager that underperforms relative to his peers.

Maybe diffusing authority can help

On top of the existing system, what if we brought in an investment jury? This group of 12 randomly-selected laypeople would be the final decisionmakers on any investment for the fund, with full authority to deploy capital in line with the fund goals.

Over the course of their 6 month term, jurors meet weekly and are compensated enough to justify taking the time from work — let’s say $500 per meeting. During these meetings they hear from fund managers, read analyses by the fund staff, and make the final call on new investments.

Any new investment requires a supermajority of 10 — paralysis just means more T-bills in the portfolio and an angry investment committee. At the end of their session, the next jury hears about the state of the portfolio and decides if a rebalancing is necessary.

Of course, there still need to be guardrails in place. The investment committee and trustees would still be responsible for deciding what asset classes are allowed, how much risk the fund can take, liquidity requirements and other boring-but-important macro-decisions.

CIOs could also continue to play a role. In addition to executing the investments, they’d sort of play the role of the lawyers in a court case. After soliciting RFPs, meeting fund managers, and running due diligence, they’d be responsible for explaining to the jury what the investments are, the relative risks, and advise on how to interpret the facts. The CIO can act as a brake on poor decision-making, giving insight into why the jury might want or not want to invest in Uzbek oil fields.

Is it crazy to randomly select 12 people in Boston to decide whether Harvard’s $57 billion endowment fund pivots from private credit to real estate? Well, we literally do something like that for crimes that might put someone in prison. Juries award millions of dollars in lawsuits all of the time. They have to understand complex financial concepts for white collar prosecutions. I’m sure we can explain the time value of money and whether two and twenty compensation is reassuring or alarming.

Selecting a jury

Of course, there needs to be some process for making sure the right people are selected. Like jury selection, people in the area would receive a summons by mail. Groups of potential jurors would have to be questioned by the CIO and the board to look for conflicts of interest. There’d be an opportunity to strike jurors who can’t be fair and impartial. Which raises the question: who is the ideal juror?

A sovereign citizen who avoids the banking system probably gets struck. Hedge fund managers and venture capitalists probably need to go too — too much expertise, and the possibility of a conflict of interest. Large crypto holders feel similar, to avoid adding memecoin risk to the teachers’ pension plan.

But finance has become increasingly accessible to everyday people, which may drive stronger perspectives than the old-school “put your money with an RIA” crowd had. Meme stocks, Wall Street Bets, Crypto, and the popularity of shows like Billions and Industry have made opinions on finance and investing more common. Things like GameStop mania become cultural touchstones, separating the idea of investment for money from investment for fun. That might taint the pool a bit.

It’s not totally clear that’s a problem. There’s an idea in criminal justice called the CSI Effect: the idea that the popularity of courtroom dramas has changed jury expectations in a way that’s unreasonable. True crime has given random people strong opinions on the system, with mixed evidence that it impacts jury behavior. The justice system seems to chug on, and I’m sure the Bureau of Asset Management in New York City can survive a term of a Robinhood day trader.

At the end of the process, you might have 12 people who know enough to be dangerous. The guy who read Rich Dad, Poor Dad once. A fan of The Big Short. Someone who set up their 401(k) but never updated the default investments. The perfect brain trust to deploy billions into emerging market debt.

So, would a jury outperform traditional investment managers?

There’s plenty of research that groups of people working together outperform individual decisionmakers. MIT’s Center for Collective Intelligence has found that group performance is only moderately correlated with individual members’ intelligence; a group of normal people can potentially compete with top talent.

And investment managers have a complicated record. College endowments have largely underperformed the S&P500 since 2011 despite relatively aggressive asset allocation. While there are probably reasons for this — I assume the cash needs are different than just holding $SPY — herding might mute some of the skill benefit of professional managers. The same applies to pension funds, who have apparently performed worse than a 60/40 indexed portfolio since 2007.

Does that mean that a jury of investors would make better decisions? We don’t know — I couldn’t find any pension funds who thought it’d be fun to try something like this. But adding oversight might serve a few purposes: experts tend to be overconfident, and there’s some value in forcing an outside perspective.

Fundamentally, the bet is that there’s value in people who come in with a fresh perspective, take things seriously, and try to make the best decision they can. Based on my jury experience I think this might happen more than people expect — even if it’s not their money, knowing it impacts students, pensioners, and city officials means real stakes. Maybe they’d step up.

Things might get strange if juries decide

I have never been on an investment committee, but I imagine that pitches are designed for people with finance experience — lots of IRR waterfalls and portfolio theory. Part of the job of lawyers is to make sometimes-complex legal issues understandable for a group of laypeople. Fund managers will need to totally reinvent their approach, simplifying concepts and providing a clear roadmap to the ROI that jurors can expect.

Maybe this will de-jargon pitches and make them clearer, preventing complexity from overwhelming quality. But you could also imagine it going the other way, with managers appealing to emotion and pushing for an over-emphasis on familiar investments. Jury-friendly investments would become the new hot asset class, focusing on familiar names that will get rubber stamped quickly.

This desire to understand what plays for the jury would naturally bring a new career path: the jury consultant. These investment jury whisperers would be able to charge millions to fund managers to help them win over the random citizens their performance bonuses depend on.

This could be a massive market. The 50 largest institutional investors are collectively worth $41 trillion; if they can grab one basis point, that’s a $4 billion industry. Better yet, jury consultants can sell to both sides. After all, the CIOs also need help making their case to the jury.

The skills of a CIO would have to change in light of this. Rather than focusing entirely on relationships with fund managers, the best CIOs will look more like marketing or sales professionals — able to persuade random citizens to follow their advice on the right asset allocations.

The best CIOs might compete less on their return above benchmark and more on how well they can spin the jury. An unsuccessful CIO’s annual report might have to grapple with the memecoins in their university endowment.

Official idea rating

1.5/5. Even if it’s fun, I think getting a board of trustees to approve something like this will be impossible. If there’s one truism in endowment investment, it’s that nobody wants to do something different and look stupid. This is pretty different.

Still, it’d be interesting to see a fund allocate some share — maybe 5% — of their assets to experiment with something like this. Plenty of research finds that groups make better decisions, but nobody (to my knowledge) has really tested whether 12 random people can beat the best investment managers in the business.

Maybe there’s a brave fund out there willing to try. And if their endowment loses billions on GameStop, they can at least say it was a democratic decision.

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This is…perhaps a questionable application of prediction markets. In theory, a high liquidity market like the mayoral race (nearly $400 million in volume!1) should arbitrage out big swings that diverge from the conventional wisdom of the traders.

So people began asking the obvious question: does momentum exist in election prediction markets?

After two days of learning the Polymarket API, I can definitively confirm the answer is: yes, but with some caveats.

Duration makes a big difference

I looked at a set of 562 election markets that closed between 2020 and 2024 and had at least $50,000 in volume. For each of these markets, I downloaded the ending price for each day the market existed, then gave every market equal weight to avoid double-counting busy ones.2

Using this data, I tried to define momentum — the probability that if there is a percentage shift at point A, that the market will keep moving any amount in the same direction the subsequent day. Surprisingly, the answer was basically the same whether the move was 2%, 3%, 5% — one day of movement correlates with a 6%-8% increased chance of moving the same direction the next day.

This effect shrinks to a 2%-3% improved chance of continuing through day 3, and fades by day 4. While momentum for down events is a little less correlated than swings up, the basic story is the same in both directions.

So momentum seems to be real, at least for a day or two. What’s interesting is that larger moves are correlated with lower odds of continuing, while smaller moves (2%-3%) have both the highest effect and the largest persistence.

You may have noticed that a 10% swing is also on the chart: surprisingly, 10% swings are less correlated to ongoing momentum. This seems unintuitive, but it actually makes sense; big enough swings likely prompts profit taking while attracting opposing bettors drawn to higher returns.

That seems to be what happened with the New York Mayoral Election, where Zohran Mamdani’s declining odds were pretty short-lived.

So why does momentum exist?

I can think of three basic theories of momentum: news-making, campaign dynamics, and momentum-trading.

Polymarket’s tweet is a good example of the news-making theory. Prediction markets have become a progressively larger part of the public eye. It’s not that uncommon to see news stories about election odds, and changes in the odds fuel narratives that impact how campaigns are reported on. If those narratives have a real-world effect on how the media reports on the race, a shift in Polymarket odds could become a self-fulfilling prophecy and even affect the outcome.

The campaign dynamics theory would say that campaigns have momentum, and prediction markets follow the campaigns. Sometimes a good debate can lead to a good poll, which can compound into new donations, volunteers, institutional support, and eventually inevitability. If prediction markets are effective in reflecting the dynamics on the ground, it might just be properly conveying information.

Finally, the momentum-trading theory would say that election markets are fun, and people like to trade in them. If people see that there’s a lot of movement in the market, it is a much more fun market to bet in. These traders are here to have a good time, and don’t have particularly good information. So when they see a change in odds, they figure someone else knows something and bet in kind.

I think it’s totally plausible that all of these play a role. Only a few very prominent markets get real attention in the press; Polymarket doesn’t tweet as much about the Barbados presidential election, so their impact would only felt in a few key markets. Campaigns certainly believe in momentum, and it’s true that good news begets good news in an election (and vice-versa!). The Big Mo is a cliche for a reason.

In theory, well-capitalized markets should wipe out momentum traders. But what about in not-well capitalized markets? If you flip our filter and only look at markets below $50k in volume, you find that large swings (5%+) have virtually no impact on moves for day two. Maybe that’s because low volume means everything is swingier, but it could point to momentum traders having some role amplifying moves in larger markets. Maybe momentum traders are less up to date on Uruguayan politics than who will win Pennsylvania.

The biggest question: does momentum tell us the winner?

If you’re reading a tweet from Polymarket, odds are you’re interested in divining something about the outcome of the race. For New York Mayor, I’d recommend waiting 12 hours to find out.

But since you asked, it turns out that large single-day swings in odds do correlate with the final outcome. I ran a second analysis that checked: for each swing of X at a given odds to win, how often did that token resolve yes:

In other words, a 2% daily move down for someone with 81%+ odds is correlated with a 10% higher chance of the market resolving no. The biggest effects for 2% jumps are long shots (<20%) and for mid-range (40%-60%). I can see why this happens, given that these are likely the spaces where you see real information getting priced in (either a 50/50 race or a total long shot candidate getting some momentum).

But the real question: does Zohran’s 10% swing down mean anything?

It turns out that while 10% swings aren’t as predictive of momentum, they are correlated with outcome. A 10% swing UP at odds <=60% has a statistically significant increased chance of resolving yes (over 20% higher!). A 10% swing DOWN at 61% or above is statistically significantly more likely to resolve no about 25% more often.

This makes sense to me. When the odds are very skewed in one direction or the other, the winner has almost become conventional wisdom. If something shifts those markets 10%+, it probably means that real new information has come to light. I’d imagine most drops this large are in response to a “major poll came out/disastrous debate” level of impact.

So: is Zohran cooked? If he is, it’s probably not because of the swing in the prediction market. No real new information came out, and his odds returned to 93% two days later.

I don’t have a lot of examples of favorites that dropped 10% only to recover. But of the 20 that recovered at least 5%, 90% went on to win. It’s not proof, but I certainly wouldn’t take out a loan to make a bet against him on Polymarket.

Conclusion:

As someone who occasionally writes about prediction markets, this was both fun and extremely time consuming to analyze.

One day I’d like to see how well this holds in other types of markets. Well-capitalized prediction markets for sports, cryptocurrency, financial, policy, and more might have totally different dynamics. That said, even elections are a little suspect: I’m not sure “Who will win Georgia in 2024” has the same market dynamics or bettors as “Who will be the next prime minister of Iceland,” and maybe it’s not fair to blend the two.

So we’ll see how the New York election goes tomorrow. If the Polymarket tweet wasn’t right in the end, it at least sparked some interesting research — and given it got over 25 million views, I’m sure their social media person will continue to give us frequent updates on the state of the race.

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In retrospect, the students throwing house parties were pretty sophisticated in navigating local rules. The hosts often formed a sort of informal insurance system: when the police came, one person would come out and take the fall and MIP charge, while the rest hid or ran out the back. They got a first-time-offender exemption, and next time a different roommate took the fall.

The fact this was possible is a pretty good example of how current laws have gotten sort of silly. States know that underage drinking happens, but enforcement is selective because nobody really wants to give 19 year olds a criminal record for having a beer. The system is a series of bolted together exemptions, with halfhearted enforcement and light adherence.

NDI reader David Muccigrosso proposed a brilliant way to bring this grey market into the light: a license that lets 18-20 year olds drink underage.

There’s real logic to a licensing system

Despite what college students who like to drink will tell you, the research is pretty clear that increased access to alcohol usually means more drinking. There are negative health effects to underage drinking: brains don’t stop developing until 25 or so, and drinking is (you guessed it) bad for brain development. If you are young, you really should minimize if not eliminate alcohol.

But despite telling that to young people, they seem to keep drinking. Given our inability to stop 18 year olds from partying, it’s worth asking if there are harm reduction options through legalization.

A license system could work, as long as it clears some (pretty low) bars:

1. It shouldn’t facilitate underage drinking for even younger people (<18)

2. It should generally redirect drinking from unsafe environments to safer ones

3. Enforcement of alcohol laws should be redirected to the most dangerous drinking, and away from relatively less harmful drinking

So what might that look like?

Imagine an 18 year old named Josh, who just started his first semester at University of Maryland. In the past, his main experience with alcohol would be a mix of frat parties, hidden bottles of dorm room vodka, and sneaky beers picked up at football tailgates. With cheap alcohol and no supervision, he’s probably binge drinking regularly.

Instead, what if his first stop after getting to campus was a university-provided bus to the local Maryland DMV. Once there, he fills out his application for an underage drinking license (UDL). He gets his photo taken, puts down a credit card for a license fee, and walks out with a permit to drink.

The UDL is a distinct ID that’s usable at bars, restaurants, concerts, and other venues to purchase alcohol on premises. Josh can go watch the game at a bar, or have a beer with his burger. But a UDL does not permit the holder to buy from a liquor store; take-home booze needs to wait until he’s 21.

This totally changes the calculus of college students. House parties and bars are not complete substitutes, but they’re pretty close. Creating a legal alternative at bars relatively weakens the value of throwing a party at a frat house, where the police still might come by to issue MIPs. The frat social might move to a rented out bar, giving at least a little more supervision than exists today.

Channeling these drinks to venues could be better than the status quo. One study found that large groups drink significantly less at bars than at off-premises parties. This makes sense: it’s more expensive to drink in bars, and multiple studies have found that increases in alcohol prices decrease alcohol consumption. It sucks to pay $6 for a Bud Light, but it’s a much bigger constraint for cash-poor students than $12 for six.

That’s not to say that nobody will be throwing house parties. But college students already show a shift to bars as they get older; this implies that students have a revealed preference for bars that is currently constrained by legality. For the 19 year old that’s indifferent, a difference in enforcement risk could change behavior.

The behavioral impacts of the UDL

Bringing drunk teenagers into public spaces might be scary for the type of person who chooses to live in a college town while hating noise. But a license system actually gives much more flexibility in dealing with the negative social effects of drinking.

Buy alcohol for kids under 18? Lose your license. Get in a fight after drinking too much? Lose your license. Drive drunk? That UDL is going even faster than your license to drive is. The system could even adapt the points system from driver’s licenses, with relatively minor infractions like alcohol-driven noise violations eventually leading to a license suspension.

The incentives of the system might encourage better regulation, both individually and socially. Individually, the upfront fees for the license create a loss aversion: if you just paid the annual fee, you’re really going to want to avoid losing your license through public urination. Getting your UDL suspended means social isolation as your friends go to the bar without you, leaving you alone. Groups of friends might even begin regulating each other in recognition of the downstream impacts.

There may be some equity concerns with the campus culture change towards bars, with wealthier students getting early access to bars while lower-income students are pushed to the cheaper grey market for house parties. But I think there will be some self-regulation with this; the bars I knew in college that targeted students had extremely cheap drink specials, and it wasn’t uncommon for student loans for living expenses to get siphoned to alcohol anyway.

You might be wondering: is it legal for a state to do something like this? The answer is complicated, going back to the history of alcohol laws in the United States, and the political battle over drunk driving in the 1980’s.

A brief history of the legal drinking age

After the end of prohibition in 1933, nearly all states implemented a minimum legal drinking age (MLDA) of 21. This only began to change after the ratification of the 26th Amendment, which lowered the voting age to 18 nationally. With new constituents who apparently liked drinking, 29 states lowered their drinking ages between 1970 and 1975.

This free-flow of booze coincided with a spike in drunk-driving deaths. Mothers Against Drunk Driving (MADD) became a major political force, driving policy changes around the country. It became conventional wisdom that lower drinking ages correlated with higher drunk driving deaths (although there’s some dispute on this question).

Whatever the connection, the 1984 National Minimum Drinking Age Act was signed and passed. The bill requires that the Federal Government withhold 8% of federal highway grants to states with a drinking age under 21 years old.1 After some lawsuits, all 50 states gave in and raised their drinking age to 21.

The 8% cut to federal highway grants remains the biggest obstacle to lowering the drinking age. When Wisconsin briefly tried to lower the drinking age to 19, it was contingent on not losing federal highway funding, which made it a nonstarter.

If we were just legalizing underage drinking, the idea would have to end here. But states charge fees for licenses all the time; what if we could replace federal highway funds with the fees paid by underage drinkers?

Replacing federal highway revenue with state-based fees

In 2023, federal highway grants to states were nearly $55 billion; an 8% cut equates to $4.4b in withheld funds nationally, or tens of millions of dollars per state. That’s a lot of money to ask young people to cough up.

Let’s assume that 50% of eligible 18-20 year olds would opt to get a drinking license. That might seem high, but nearly 70% of 19 year olds bothered to get a driver’s license despite overall declines in drivers. For the sake of argument, let’s say the first batch would come with enough excitement that there’d be meaningful adoption.

Using a combination of census and DOT data, we can estimate the implied license fee to 100% offset an 8% loss in federal highway funds.

While some states are outliers — sorry young Alaskans, your implied fee is over $2,300 annually2 — most states actually have fairly low breakeven prices. 25 states have fees under $360 annually, and 43 states have implied fees under $500.

That might feel like a lot for a young person, but it’s only $30-$40 per month. Even if the state requires a lump sum upfront for the license, I imagine some enterprising financiers will see the opportunity to finance it to a monthly plan. You could even imagine it as a customer acquisition play for local banks targeting students — open a checking account and a credit card, get your first year of UDL free.

Beyond replacing highway funds, this redirects alcohol spending from liquor stores to bars, nightclubs, and restaurants. Not only does higher individual alcohol prices likely mean less overall drinking per session, the downstream benefits of redirecting drinking are massive. More foot traffic could revitalize downtown areas. Alcohol tax surcharges could bring even more overall tax revenue.

There’s even an economic argument. U.S. Bureau of Economic Analysis (BEA) data shows that restaurants and bars create more than twice the economic value per dollar than retail food and beverage retailers. Holding everything else constant, shifting $100M in alcohol spending from retail to on-premises consumption could generate tens of millions of dollars in additional value added to GDP.3

Maybe if enough states adopted this, the federal government would stop punishing states that lower their drinking age. But even if that happens, states that started with an underage drinking license would be likely to keep it — it’s hard to imagine them giving up this kind of revenue stream. Maybe they can at least redirect the proceeds to alcohol harm reduction.

The long-term public policy of a UDL system

With budgets aligned, state policy could begin to shift. States might start competing to get more 18-20 year olds by expanding class sizes at their biggest and best universities. Economic revitalization plans will take the addition of underage drinkers into account as part of plans to revive the nation’s restaurants and bars.

While states generally recognize each others’ driver’s licenses, it’s questionable that they would do the same for a UDL. That doesn’t mean the youth are out of luck though.

States like Florida might recognize that thousands of visitors come and drink illegally on their beaches. Rather than spend millions on blanket law enforcement, these states could issue short-term visitor UDLs for out-of-state spring breakers and gamblers for $200 a week. Lots of places with youth tourism could lean into this — think a gambling UDL for Vegas, or a Mardi Gras pass for New Orleans.

Of course, drinking is extremely unhealthy. It’s likely that in the long term, an increase in underage drinking will add indirect costs to medical and social systems for the states that opt in. But if we’re already legalizing marijuana and casinos, expanding alcohol access certainly seems in the window of possibility.

The first state to pass this would face a lot of pushback. MADD still exists and would absolutely freak out about this. But in the era of rideshare, I don’t know if “push drinking to licensed venues” is as scary as it used to be. Once the trend starts, it might be too hard for them to stop.

The first mover advantage

The biggest risk to this plan is demographics and cultural changes from the phones. We’re just about at peak 18 year old right now, and the number of young people will start to decline rapidly over the next decade. At the same time, drinking is in decline among young people. Only about 50% of under 34s report drinking alcohol, and that number is likely to keep declining over time.

These numbers work today, but to continue breaking even states will have to keep increasing fees on the college students of tomorrow.

That means that UDLs aren’t necessarily viable as a long-term replacement for highway funds. But they are viable as a 10–15 year bridge loan to boost the alcohol economy. That’s not necessarily an argument against doing it: it’s an argument to be the first mover.

The first state to adopt a UDL will get a bump in young people wanting to live there. Their universities will get more competitive, youth spending will increase, and their demographic pyramids will get progressively healthier. The money from UDL can even be redirected towards infrastructure to keep young people in state long term.

States that move late — say 2030 — will have to charge high fees to make the UDL math work, driving out even young people and making their universities less competitive. That means that late adopters might never adopt at all, further calcifying the approaches over time.

Official idea rating

4/5 today, 2/5 in 2030. The demographic window is closing fast, but I’d be interested to see a state try this! It may have some negative long-term effects, but it really does seem both financially feasible and (maybe) even politically popular.

Massachusetts, New York, Colorado, and California could all break even on highway funds by charging about $20/month ($240/year) per underage drinker. The first mover for any of these states — all with excellent universities and young people who want to live there — will get a huge leg up.

If they don’t do it first, Wisconsin is a good choice. Big drinking culture, established college towns, and a required fee of only around $30/mo. If you know a Wisconsin state legislator who wants to get national news coverage, send this their way. It could be their chance to reshape their state.

A special thanks again to reader David Muccigrosso for an excellent idea. I love getting pitches from readers: if you have a great (or terrible) idea, send it to me at nodumbideas1@gmail.com or via Substack DM.

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I keep feeling like something gets lost in the transaction. I’ve put dozens of hours into each of these hobbies; when I sell the equipment piecemeal, that all gets lost. Months of classes turn into a slightly sweaty Orangetheory band (don’t worry, I cleaned it).

People buy and sell businesses all the time through sites like BizBuySell. Why can’t you buy and sell an entire hobby when it’s ready for a new owner? What’s stopping us from creating HobBuySell?

HobBuySell: The Hobby Acquisition Marketplace

Imagine you’re interested in roasting coffee. In the past, you might have agonized on the internet, looking at hours of content to decide on your first roaster. $300 is a lot of money, so you fall into analysis paralysis as you try to understand exactly how often you want to do Ethiopian light roasts and which machines give the best range. You end up researching it for 2 months before actually making a purchase, then giving up on it a few weeks later.

Instead, you log onto HobBuySell and find my listing for a full acquisition of my roasting hobby. Not only does it come with a full suite of equipment, inventory, learnings, and relationships with suppliers (my order history from Sweet Maria’s), it comes with an earn-out period where I help transition you into the hobby by doing a few roasts with you. Once you’ve fully taken control of operations, I can finally disengage, knowing that my hobby is in good hands.

The exact knowledge transfer would vary by hobby, but is a key part of the value proposition: if buyers were comfortable just buying used equipment on Craigslist and watching YouTube, they would. The package of equipment + knowledge is worth more than the sum of its parts.

Of course, it’s not as simple as that. Earn-outs need to be performance milestones: a buyer might require three successful loaves of sourdough baked before full transition is considered complete.

HobBuySell’s business model is pretty simple: a commission on the transaction value, plus a listing fee for premium placements. Their fee can include an escrow service that releases funds as performance milestones are hit, verified through templated contracts.

The value of the platform goes beyond matching buyers and sellers; after submitting an LOI1, HobBuySell can help facilitate and verify a memorandum showing the health of the equipment, an explanation on why the seller is giving up on the hobby, and receipts from suppliers to show they’re in good standing. This process is key to a clean transaction — you don’t want lawsuits over a hobby marked as “beginner friendly” being more challenging than expected.

The real value is building trust in an inherently risky transaction, facilitating a vibrant market where only an inefficient one exists today. For the first time, people will be able to really transfer everything that comes with a hobby, lowering the barrier to entry and the barrier to exit.

Entrepreneurship through acquisition has paved the way

This kind of resale market already exists in one big market — businesses. Very broadly, entrepreneurship through acquisition (ETA) is the idea of buying an existing small business as a jump start to entrepreneurship. ETA can be anything from the classic “buying an HVAC operator” to more esoteric businesses you find on BizBuySell (my favorite: goose abatement).

A lot of boomer business owners are retiring. While private equity will get first dibs on a lot of these small businesses, a meaningful share will end up with a smaller (but engaged) operator. MBA programs and ETA podcasts like Acquiring Minds and Acquisitions Anonymous are proselytizing to a new generation of potential buyers, removing barriers to entry and sharing knowledge. The result is a wave of highly educated and well-capitalized buyers descending on small companies around the country.

These businesses actually have a lot in common with hobbies. Many hobbies have high capital expenditure to get started; a new instrument or grill is easily hundreds of dollars, and that number only compounds as you get deeper. Product-market fit is a challenge for both — you might spend thousands of dollars only to realize that you really aren’t that into beekeeping.

When these hobbies start to fade, the initial investment in time, equipment, and knowledge goes to waste. At best, you put the equipment on Craigslist — which is sort of like building a lawn care service business, then retiring by selling the lawnmowers. You’ve sold the equipment, but lost the customer relationships, operational knowledge, and the brand.

In hobby terms you’re losing the hours spent researching which equipment to buy, the knowledge of troubleshooting your gross first batch of beer, and the ideas for woodworking projects that never got done. The whole is more than the sum of its parts, and people would be willing to pay for it.

There’s a lot of economic value from transitioning these hobbies. Let’s look at the numbers:

• The Bureau of Labor Statistics estimates an average spending of $1,057 for pets, toys, hobbies, and playground equipment in 2023.

• If we assume 25% of this category is hobbies, that’s over $35 billion in annual spending.

• Per the St. Louis Fed, after a COVID-driven 41% increase in spending on hobbies between 2019 and 2021 there was a 16% decline in 2022.

• That means 2021-2022 alone led to a potential $5 billion drop in hobby spending, presumably driven by people abandoning candlemaking after return to office picked up.

It seems inevitable that the COVID hobby boom and bust left mountains of abandoned hobbies. But hobby spending is still well above its 2010s norms — all of that trapped enthusiasm is unrealized value waiting for a liquidity event. Let’s give it one.

Resale might change how hobby adoption happens

One key dynamic in ETA is that many acquirers are business…if not agnostic, then open. Typically an acquirer is mostly focused on the economic characteristics of the business — cash flow, EBITDA, revenue growth, etc. It doesn’t matter so much whether it’s a cleaning company or a sandwich franchise as long as the numbers look good.

Most hobbies don’t work that way today. Discovery mostly happens through friends and family, social media, or just browsing Reddit late at night. HobBuySell opens up the possibility of hobby-agnostic acquisition — people who are looking for a change of pace and a purpose in their life, and willing to jump into the one that seems best.

There’s actually some real advantages to being hobby-agnostic in your search. It takes time to figure out if a hobby is in your budget, compatible with your lifestyle, and if there’s a local community. The clarity of the full cost of entry and ramp up with the seller means you can eliminate whole classes of hobbies that don’t make sense with your lifestyle. That means cleaner sorting, better information, and happier hobbyists.

Of course, to make a truly agnostic hobby acquisition, there will need to be some new metrics. These would evolve, but could include hours of weekly engagement, compatibility with lifestyle, local community size, and resale difficulty index. At least at first.

A structured market for hobbies might have some negative side-effects

A big part of the ETA ethos is financing an acquisition. If hobby acquisition is to reach any scale, it’s going to need financial infrastructure.

A common financing tool for ETA is an SBA 7(a) Loan, which comes with a government guarantee. SBA loans typically come with longer payment schedules, better interest rates, and down payments as low as 15%.

But hobbies have value too! An SHA (Small Hobbies Administration)2 could guarantee financing to help acquire hobbies. For someone getting started in beekeeping, the estimated $800 cost could be made up of a $120 down payment and a $680 loan. This would dramatically lower the barrier to entry for these hobbies, bringing in a wider range of incomes and making large scale hobby trading feasible.

Now, you may be asking why the government would guarantee loans to buy a pottery wheel. I can give you some intangibles like hobbies make you healthier and happier, but there’s a financial reason too — a robust marketplace for hobby acquisition means hobbies become tradable and priced. While cashflow is certainly easier to value, the ability to resell the hobby enables repossession of a failed acquisition.

Hobbies are already mostly standardized at the entry-level and become more specialized as you advance. One of the interesting side effects to financialization is the drive towards conformity; lenders will prefer legible sets of assets, so esoteric sets of equipment will be harder to sell than clear “entry-level, mid-level, advanced-level” style sets.

This is a massive opportunity for the hobby providers that become the standard, but may take a bit of the joy out of the process.

A financial motive might also professionalize hobbies a bit

It’s likely real capital would enter the market over time. Our coffee roasting example might attract an entrepreneur that comes in, vertically integrates an espresso making hobby, and cuts some of the costs through bulk bean purchases before bringing it back to market at a 30% price hike. This type of hobby flipping might be suitable for a search fund, with MBAs raising capital to start a gardening roll-up across vegetables, flowers, and landscaping.

You can even imagine specialists, like a soapmaking guy that buys up old soapmaking kits and resells them with improved education. These small-scale consolidators can begin vacuuming up niche hobbies, becoming small-scale aggregators. Supporting businesses, like hobby brokers, would spring up to supply a growing demand for acquisition.

This opportunity would attract institutional capital sooner or later. Big private equity firms might roll up 2,000 woodworking hobbies, implementing standardized processes and standardizing lumber suppliers to an (also PE-owned) firm. With nationwide data, arbitrage opportunities will abound. Trucks full of knitting yarn in Des Moines will be sent down to San Francisco, chasing the arbitrage between hobby valuation multiples.

Hopefully HobBuySell can emulate the old days of Etsy for at least a little bit before it’s full of full-time hobby flippers.

Official idea rating

3.5/5. This would be great if you can solve the cold-start problem, but until its culturally normalized people will have a hard time adjusting. Handoffs will go poorly, scams will hit the platform, and most markets will struggle to balance supply and demand. That said, if Airbnb was able to do it then HobBuySell can probably figure it out.

Still, the friction of starting and exiting hobbies probably keeps a lot of people from trying new things. How many people would try to learn an instrument, knit a sweater, or grow some plants if they knew they could resell the whole thing if it didn’t work out?

So many people today are seeking ways to spend their time that isn’t endlessly scrolling their phones. A hobby marketplace makes total sense, both as a way to reduce waste and as a way to help bring new hobbies into the lives of the bored.

The challenge is always going to be balancing monetization and exploration. It’s only natural that people will see profit-maximizing opportunities in your rock climbing equipment. But it’s not necessarily bad — a liquid market means the cost of starting and exiting a hobby will be lower than ever.

And it’s a nice idea: your sourdough starter lives on. Your woodworking set stays together. A failed hobby becomes a seed investment in someone else’s engagement. At least until they resell it a few months later.

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But you may have noticed that you’ve never seen a 4 star driver on Uber. That’s because Uber regularly culls drivers who fall too low on the ratings. It’s not just terrible drivers that get cut; during my brief stint there a decade ago, a 4.5 rating was enough to risk removal from the platform.1

It makes sense why Uber does this, but it’s still a waste. These drivers passed the background check and are ready to drive; even if Uber wants to keep the quality of the platform high, they’re throwing away a valuable resource.

What if instead of removing these drivers, Uber just charged less for them?

Removing drivers creates deadweight loss

Uber works because both sides know almost nothing about each other. If executing a transaction required both sides to assess things like the quality of the car, driver safety, demeanor of the passenger, or tipping frequency, the number of rides would plummet from cognitive overload.

Instead, all of this information is aggregated into two things: a product tier (UberX, Uber Black, etc.) and a 5 star rating. This transforms a ride into something closer to a commodity trading at a market price. It’s not so different from an econ 101 model of perfect competition, with Uber adjusting prices to make sure the market clears.

If you buy that Uber acts like a commodity, then the removal of low-rated drivers is functionally a supply shock. It might be a meaningful difference.

Of the drivers who do at least 1 trip, 75% reportedly churn within 1 year.2 Some quick math:

• With an estimated 1.7M new drivers between 2022 and 2024, a 75% churn rate implies that 5.1M drivers did at least 1 ride before leaving the platform.

• If just 5% of those drivers were removed for poor ratings and would have otherwise kept driving, that’s over 250,000 additional drivers.

• If those drivers averaged 1 trip a week at $15 per trip, nearly $200 million in annual bookings disappear into nothing.

Sure, not every one of these rides would have been additive. But up to $200 million in deadweight loss sure seems like it’s at least worth looking into.

Moving beyond premium tiers

The idea: Uber Discount, an Uber tier made up entirely of drivers between 3.5 and 4.5 stars. These rides would be discounted up to 20%, in exchange for the rider almost certainly getting a worse experience.

This could be a win-win for drivers, riders, and Uber.

Riders get a cheaper option, allowing price-sensitive customers to take rides that otherwise wouldn’t happen. There’s growing evidence that price hikes have begun to affect rideshare demand — offering better segmentation might bring some of those price-sensitive riders back.

More price discrimination might be a real opportunity for Uber. An experiment in Egypt found that a 50% discount quadrupled demand for rides. Rideshare is an extremely price-sensitive category, which has presumably slowed down growth in cities like New York that face above-average prices. Flexible pricing might let Uber restart growth in mature markets from potential riders that are currently priced out.

Uber Discount also lets drivers make a real tradeoff between their reimbursement rate and improving rider experience (which often isn’t free; think going to the carwash or offering water). For drivers on the edge, the option to fall into Uber Discount means more space to identify what’s getting them low ratings and address it. Uber can even help this process by analyzing poor ratings and giving personalized advice to drivers.3

Of course, these drivers often get bad ratings for a reason. An (admittedly out of date) 2014 leak showed that only 1% of ratings were 1 star, and only 5% were 3 stars or lower. When drivers do get bad ratings, it’s often for reasons like poor driving, being rude, or browsing their phone while going 80 MPH down the highway.

This is a pool of drivers that not only provides a worse experience, but also adds legal liability for Uber as the coordinator. It’s only prudent to require riders seeking a deal to sign a waiver before taking an Uber Discount ride.

The waiver not only shields Uber from legal liability, it signals to the rider that they should expect a worse experience. That means that they’ll either be pleasantly surprised when their driver doesn’t run a red light or more accepting of a driver offering them a cigarette.4

Ok, maybe a checkbox isn’t enough. Even if we assume that covers legal risk (a big if), Uber relies on a massive commercial insurance policy for its drivers. I’d expect that the insurer would still require that Uber remove drivers that regularly get pulled over for reckless driving, even if they let them keep the drivers that just provide a bad experience.

Maybe that’s a blessing in disguise. Taking an Uber Discount is probably an easier sell when the main risk is a dirty car vs the possibility that your driver will run red lights.

Riders could face ratings consequences too

Uber uses a two-way rating system, so it’s only fair that riders also have their experience affected by their rating.

This already happens informally. Anecdotally, drivers often refuse to pick up riders with a rating below 4.6, causing longer wait times and difficulty getting picked up. Instead of forcing them to trade on wait time, why not let them trade on price?

Much like drivers, riders that fall below a 4.6 rating could have a 20% Painful Rider Surcharge (PRS) added to their fare estimates. This surcharge compensates drivers for the pain of taking these specific passengers, sort of a hazard pay for “this guy is going to watch YouTube videos without headphones during the ride.” This might actually be a better experience for these riders vs having drivers repeatedly cancel on them.

You may have noticed that the PRS perfectly offsets the Uber discount fee. The PRS serves a secondary purpose of seeding the Uber Discount market. Passengers subjected to the PRS will be more likely to seek out Uber Discount vs a traditional Uber, seeding demand for the new service.5

This system has real synergies with Uber’s other lines of business. It’s not so hard to imagine Uber Gold freezing customer ratings, or giving them a PRS discount. Letting users prepay the PRS at a discount with Uber Cash is a great way to lock in purchases on the platform. Uber Eats can offer PRS waivers if you order enough delivery.

Most importantly, the PRS needs revenue sharing with the driver that’s being asked to stop at the McDonald’s drive-through in the middle of a 30 minute ride. It’s only fair.

There could be some unexpected behavioral changes

If the discount pool really takes off, the population specifically seeking discounted rides may begin to cannibalize today’s UberX population. That could reverse the value of a rating; with enough demand, getting reliable rides could be worth a 20% price cut. In extreme locales, drivers might start intentionally speeding, watching NFL on their phone, and coughing aggressively to kill their rating and stay in the cheaper price tier.

Or, if falling into the discount pool is too rough, drivers might more aggressively push for higher ratings. Optimistically, this could lead drivers to be extra intentional about the riding experience they’re giving. But it could also mean drivers asking riders to give them 5 stars immediately when the ride ends, using social pressure to artificially inflate their ratings.

On the rider side, charging more to low-rated riders means that they’ll be more protective of their reputation. That’s good in some ways — they’ll be more polite — but it may stop some socially desirable behavior. I’m still a bit sour over paying for my drunk friend’s Uber home in 2014, then waking up to my perfect 5 star rating being ruined.6 If it got me into the PRS pool I might have thought twice about it (or at least Venmo’d her for the cost of the Uber).

This has some negative effects on Uber’s business too

There’s theoretically a lot to like about Uber Discount. By allowing more dimensions of trade, Uber creates more space to find unserved rides and make them happen.

But it also might have some unexpected consequences for the platform.

I imagine that Uber lives in fear of bad customer experiences getting into the public consciousness. While Uber Discount could get a lot of positive attention — really crappy rides with Uber discount could go viral in a fun way — it’s more likely that the cost of negative experiences will outweigh anything else. While a story about someone getting yelled at by their Uber driver might push users back to UberX, it’s more likely to push them to Lyft.

More concerningly, pricing discipline becomes significantly harder once a discount tier is introduced. Some of the purchasers that move to Uber Discount would have otherwise just sucked it up and paid for the UberX. A discount tier anchors users to see UberX as relatively more expensive (I imagine this is why Uber Pool never really recovered after COVID).

But the biggest impact might be on the rest of the market. Uber relies on a small number of highly engaged, savvy drivers that do thousands of trips to make sure that general demand is covered. Even if Uber Discount brings net new rides, it’s likely that it will reduce demand for UberX. If these high-value drivers start to see their earnings drop, Lyft will be ready to swoop in and take them.

It’s a tricky balancing act, and likely means that Uber Discount is only feasible in markets with a general shortage of drivers. If it launched, it’d come to Omaha before New York.

Official idea rating

2.5/5, maybe worth trying in a test market. I think there’s real potential in expanding the supply of drivers, and giving people a little more optionality on the low end. Uber specializes in turning data into price signals; it only makes sense that they could lean further into their strength.

Still, I can’t quite see this launching in a mainstream market. People have already anchored on the 4.6-5.0 star system. Even if the legal, network, and pricing issues weren’t a problem, changing that consumer behavior is a tall lift.

But maybe there’s value to de-anchoring ratings. It’s probably not ideal that all of our platforms have 5 stars as the standard, and anything below a 4.7 as an implicit failure.

Platforms compensate by adding new layers on top, like Superhosts on Airbnb or Top Rated on eBay, but it seems silly to create endless sub-tiers within the 0.4 star variance we limit our transactions to. Maybe Uber Discount would make it easier to just say that sometimes the experience will be cheap and mediocre, and that’s ok.

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There are multiple intersecting reasons for the price hike. Coffee-producing regions like Brazil and Vietnam recently went through major droughts that dramatically impacted coffee production. But in the United States, prices are also responding to a new dynamic: tariffs.

Nearly 99% of coffee in the United States is imported, meaning that any disruptions to trade have an immediate and significant impact on coffee prices. Major producers like Colombia and Vietnam now face tariffs ranging from 10% to 20%, and imports from Brazil — the U.S.’ largest source of coffee until this year — are currently taxed at 50%.

Maybe the tariffs on coffee will go away — there’s a bipartisan bill proposed to repeal them — but even if they do, trade is being re-routed and coffee prices are likely to stay elevated for at least the short term. It got me thinking: could there be a tariff-free substitute?

The U.S. can’t meet its coffee needs domestically

It’s tempting to assume that the U.S. can replace its coffee imports by expanding domestic production. Sadly, there just aren’t that many places to grow coffee in the U.S.

Perhaps the most famous American coffee is Kona coffee, grown in the mountains of Hawaii. This microclimate is perfectly suited for coffee, and the beans grown there make a highly prized (and equally expensive) coffee. Unfortunately, Hawaii is pretty small — the entire area only produces about 4.3 million pounds per year, about 0.1% of the 3.5 billion pounds of coffee the U.S. consumes annually. Even tripling production wouldn’t put a dent in demand.

The other potential American coffee region is Puerto Rico, which used to produce 30 million pounds of coffee per year. That’s now a thing of the past: up to 90% of Puerto Rico’s coffee plants were destroyed in the 2017 hurricane. While the island is trying to rebuild their coffee industry, a 3-5 year growing time for new coffee plants means it’s not likely to replace imported coffee anytime soon (and given subsequent hurricanes have hindered coffee regrowth efforts, I assume financing is difficult).

And…that’s sort of it. There are micro-projects in Florida and California that are still experimental. Most of the deep south has periodic deep freezes, which would kill any large-scale attempt at growing coffee. There’s not that much we can do to expand our production of domestic coffee, outside of annexing Colombia.

So as supplies dwindle, the cost of tariffs will begin to flow to customers. But there’s a long history of people looking for substitutes when coffee becomes scarce, whether through war, blockade, or it getting really expensive. Maybe we can look to alternatives to find a way forward.

Idea 1: Barley

After the Italian invasion of Ethiopia in 1935, the League of Nations imposed a series of embargoes and sanctions on Italy. In response, the government began a propaganda campaign pushing self-sufficiency for key imports, including coffee beans.

The result was Caffè d’orzo, or barley coffee.

Caffè d’orzo is simply roasted barley, ground up and brewed like coffee (or, more likely for Italy, espresso). Although its popularity declined in the post-war economic boom, Caffè d’orzo is still drunk in Italy as a caffeine-free alternative.

In an affront to my 13 Italian readers, I made it as a pour over instead of the traditional Moka pot.

My initial reaction was that the raw barley smells sort of like dirt, but that largely dissipated after adding hot water. The resulting drink sure looked a lot like black coffee, and I wouldn’t necessarily have been able to tell the difference at a distance.

It wasn’t great. The flavor reminded me of the cheapest possible diner coffee, left on the heater for hours until all the flavor is lost and only the bitterness remains. Milk helps with the harshness, but the resulting drink still disappoints. Still, I can see how the bitterness and roasty flavors evokes the idea of coffee, particularly if I was being blockaded.

Idea 2: Chicory

The use of chicory as a coffee substitute likely originated in Prussia, but reached mass adoption in 19th century France. During the Napoleonic Wars, France set up the Continental System: an end to European trade with the British, which ended in mutual blockade. Unfortunately for the French, you can’t really grow coffee in Europe.

So much like the coffee-lovers of 1930s Italy, the Napoleonic French began looking for a coffee substitute. Over time, some enterprising individuals began mixing chicory in with their coffee to stretch supplies, which through the power of cultural exchange eventually became ‘New Orleans style’ coffee. Today, it’s not uncommon in some markets for chicory to be blended into cheap coffee to cut costs during times of high prices.

I also made it in a pour-over for consistency.

Much like the barley, it smells sort of bad; a cloying sweetness that I found overwhelming. It also brews a cup that looks a lot like coffee.

The taste is like a dark roast coffee with a heavy layer of licorice-like sweetness. It’s honestly not that different from New Orleans coffee, which (given New Orleans coffee is typically 40% chicory) makes me realize how overpowering the chicory is in the recipe.

But while the chicory was more appetizing than barley, both options have a critical flaw: they’re caffeine free. To me, that makes them coffee substitutes in name only. That brings us to a tariff-free source of caffeine that’s native to the U.S.: The yaupon leaf.

Idea 3: Yaupon

Yaupon is a little-acknowledged tea that’s mostly known for being North America’s only native plant containing caffeine. Yaupon was widely consumed in the U.S. for centuries, both by Native Americans across the continent and by early settlers. As the American Revolution picked up, yaupon was dubbed “liberty tea” and consumed as an alternative to the heavily taxed British imports (sound familiar?)

By the late 1700s it was popular enough that the British East India Company allegedly considered it a risk to their monopoly, lobbying for laws to ban its export to Europe. The tea largely fell out of fashion as it became associated with poverty in the 1800s, only regaining some popularity in the 2010s when pioneers across the American South began selling it at farmers markets.

There aren’t really yaupon farms at scale, so nearly all yaupon today is foraged. I got mine some from some very nice people who forage for yaupon to help protect the Houston Toad’s habitat (really).

The leaves (and twigs) smelled a bit like matcha, with a particularly strong seaweed note. Brewing it makes a clean cup of tea that’s herby and light, sort of like a milder green tea. I like it!

Maybe the marketing just got to me, but I felt a decent jolt drinking it. There’s definitely caffeine in there, along with theophylline and theobromine — which I know nothing about, but supposedly give you some extra energy as well.

Unfortunately, it’s not really a coffee substitute. The tea-like flavor fails to deliver the morning ritual I’m after. We can do better.

Combining them into a new product

Out of the 3, the barley reminded me the most of actual coffee and thus felt like the right base to start with.

Blend 1 — 60% barley, 20% chicory, 20% yaupon

The sweetness of the chicory did soften the bitterness of the barley. Unfortunately, the woodiness of the yaupon did not quite mesh with the remaining flavors:

“This tastes like compost water” — An early reviewer

Blend 2 — 60% yaupon, 20% barley, 20% chicory

A yaupon-first approach. This sort of tasted like tea with a splash of burnt coffee in it. The tea flavors were actually far too strong in the ratio — less is more with the yaupon.

Blend 3 to 5 — iterations on a chicory-first approach, leading to 71% chicory, 20% barley, 9% yaupon

The sweetness of the chicory benefitted from some of the bitterness in the barley, and smaller shares of yaupon kept the woodiness without tasting too much like tea. After several iterations, I felt like I had something decently close — and was totally wired from all of the yaupon I’d been drinking.

“If someone hadn’t had coffee in a while and was served this at a diner, they might believe that it’s actually cheap coffee” — An early reviewer

That sounds like success to me!

Could you go to market with this?

Well, first off: you tell me. If you want some NDI brew, let me know: maybe we can do a limited run batch.

My rough estimate based on wholesale prices for chicory, barley, and yaupon is that this would cost around $10.32/lb in ingredients. Add packaging, shipping, and SG&A and you’re approaching $20 per lb. So it’s going to be difficult to sell this as a cheaper coffee substitute; if it ever becomes viable, we’ve already reached crisis level in the coffee market.

One solution: find a gimmick. I’d advise an aspiring struggle-coffee entrepreneur to test three markets to see which approach gets more attention:

The tariff market: Go all-in on this being a response to tariffs. Business and finance journalists will love this as a tariff-impact story. With the media attention, promote the hell out of NDI Tariff-Proof Coffee Substitute and get on a series of podcast interviews about supply chains and responding to global market trends. Use the publicity to raise money for a better business via your new connections.

The health market: Both my barley and chicory packages are covered in (maybe dubious) boasts about how healthy they are. Yaupon also subtly does this, talking about how it provides a better stimulant than coffee with less jitters and other micro-stimulants. If coffee is expensive, the pitch — “clean caffeine that’s also good for your gut, all locally grown or foraged” — might reach audiences open to trying something new in response to expensive coffee.

People who really like American stuff: There are a lot of successful companies that boil down to being a “thing, but patriotically American” brand. A fully produced in America coffee substitute could get some legs; like the Napoleonic or Italian Fascist eras, local production in times of struggle is often a point of pride. It’s not that hard to imagine someone suffering through the mediocre NDI juice as a statement of their belief in American juche.

There’s also a fourth option: if you believe the tariffs are here to stay, become a leader in the downstream coffee industry.

Some coffee substitution might be inevitable

The combination of long lead times, uncertain tariff rates, and global shortages mean that coffee is likely to stay expensive in the U.S. for a prolonged period of time.

Coffee has evolved beyond a simple beverage into a cultural touchstone. Cafes are where people can work without an office; meeting for coffee is the casual engagement. As the price of coffee squeezes these places, owners will be stuck between declining profit margins and high prices that push out their customers.

This is an existential threat to the cafe industry. Coffee is one of the most consumed drugs in the world, but at some point people will stop buying $9 cappuccinos. Brands like Starbucks are already positioned to make this shift — expect to see more emphasis on non-coffee caffeine SKUs like refreshers or primarily milk-based drinks — but traditional “sit and work for the day” shops are in a lot of trouble.1

With elevated prices crushing margins, these shops could become real customers of coffee alternatives — not as full replacements, but as fillers to stretch coffee bean supplies a little further. Replacing 20% of coffee beans with chicory or barley meaningfully cuts costs; don’t be surprised if you see more New Orleans coffee or new, experimental coffee-herb blends on the menu at your local shop.

Of course, the transition might be a little ugly. Chicory and yaupon aren’t cultivated enough to really scale up production quickly, but DO grow all over the United States. The supply chain would start out extremely fragmented, with foragers collecting coffee substitutes to buy time while major chicory and yaupon farms get online. Foragers scaling up might begin raiding garden centers for mature yaupon trees that were previously used for decoration.

These new farming entrepreneurs will eventually seek new markets to diversify their buyers. The story of yaupon is pretty compelling; I wouldn’t be totally shocked if it became the next Yerba Mate or Kombucha, which would probably be more successful than trying to use it in fake coffee. If production really takes off, expect to see industry-funded studies and news articles on the health benefits of drinking these coffee alternatives. You’ll know we’ve made it when you can find yaupon in the supplement aisle of CVS.

The good news: coffee substitutes may save the barley industry, which is suffering from a declining craft brewing market.

Official idea rating

4/5. It tastes mediocre, but so does a lot of the coffee that Americans drink. I think it’s only a matter of time before coffee blends start actively mixing in other ingredients; Folgers will stop being 100% coffee before it reaches $20/lb.

I’m not sure an NDI brew is the future. But it only seems a matter of time before people try to create substitutes to stretch their coffee supplies and protect their wallets. It feels dramatic, but we might look back at the tariff shock as our own Continental System or wartime blockades, and new coffee substitutes as our own cultural echoes.

Maybe there’ll be enough backlash that the government finally offers a coffee exemption, like it already has for copper and coal; I actually think that’s pretty likely, given how visibly coffee prices are increasing. Until that day, we’re at increasing risk of some entrepreneur adding barley to coffee to save money and getting covered in Business Insider. When that happens, remember: you read it here first.

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In response, some couples are going into debt. Roughly two-thirds of surveyed newlyweds took out a loan to pay for their wedding. A growing wedding finance industry — an $11B global market today — targets newlyweds with high interest rate loans topped with origination fees up to 12%. A big wedding is a lot of fun, but the financial hit starts many lovebirds’ new life off on the wrong foot.

At the same time, marriage is the beginning of at least one financial boon: the ability to file taxes jointly. For couples with earnings gaps, this can easily reach thousands of dollars in tax savings per year. What if you could securitize those tax benefits to fund your wedding?

The US tax system benefits unequal earners

Federal taxes in the US work on a progressive taxation system, with higher tax rates for earned income above different thresholds. For married couples filing jointly, the thresholds for each tax bracket doubles1; if a tax rate previously came in at $100,525, now it comes in at $201,050.

If both spouses make around the same amount, the doubled brackets don’t change anything. But if one spouse makes much more, they can “use” their partner's lower bracket and standard deduction; a couple earning $150,000 from a single earner saves over $9,000 per year from getting married.

This is real money over the course of a marriage, but it’s not flexible: either your take home pay goes up a little, or you have to wait for your big refund. There are dozens of cottage industries like legal finance that let you pull future money out early. Why should tax savings be different?

Introducing: the marriage bond

Imagine a couple looking to pay for a $33,000 wedding. Instead of taking out debt or asking their parents for money, they sign up for a Marriage-Backed Bond (MBB). The MBB works pretty simply:

1. For the duration of the bond, the couple calculates their taxes as if they filed separately

2. They calculate what they actually owe jointly

3. The difference — or “marriage surplus” — is paid out to bondholders.

It’s a love-powered coupon stream: semi-predictable, recurring, and guaranteed until the note matures or the marriage ends (or tax laws change). Depending on the relative earning power and adjusted gross income (AGI) of the couple, a 20-year note on their marriage benefits could easily support $33,000 or more in upfront payments.2

It’s not just useful to pay for a wedding. The existence of MBBs opens an entire new business model for dating. The underlying challenge for a company like Hinge is that if they’re too successful, their customers graduate and are never seen again. As a referral service for MBB brokers, they can get one last kickback before their success stories go away for good.

This would be hard to price

Of course, there’s an immense amount of credit risk from signing up for a 20 year marriage loan. Only about 50% of marriages make it to 20 years, an unacceptably high rate for underwriting. Terms might anchor around 8 years, the average length of marriage that ends in divorce. This roughly halves the fair value of the bond, but a couple earning low six figures can still achieve big leverage.

To avoid unexpected separation risk, MBB bond holders might put stipulations in their contract to strengthen marriages. Strong communication is the foundation of a strong marriage; MBBs might offer better rates for couples that agree to take a class on how to communicate with their spouse and set times to intentionally connect. Entrepreneurial marriage counselors might partner with MBB issuers to intervene if their investment seems at risk.

Separation isn’t the only challenge. Earning incentives for the couple become skewed; MBB sellers, a parent staying home with the kids becomes a double whammy, removing both their income and increasing payments to bond holders. The value of aligning your income with your partners’ can be thousands of dollars per year.

More challenging, the structure of the bond makes payments uncertain. Both spouses losing their job means their obligation falls to $0. It’s all the risk of a personal loan, but with a built in mechanism to stop payment when income falls. Nice for a couple, but scary for an investor.

Maybe that’s fine, depending on who the investors are. Couples could sell MBBs to their friends and family, treating it as a community-building wedding gift. Not only are they getting funding for their wedding, they’re building a diversified portfolio for their extended family.

For couples whose families don’t have the confidence, resources, or risk tolerance to buy their MBBs, going out to public investors might be the only option.

Going to market with an MBB

Given these challenges, couples might have to get creative to get new investors into an MBB.

Individual investors will demand diligence on couples seeking investment. A full dossier of the couple, including affidavits from friends and family, form the baseline to show the marriage is being entered in with good intentions. Marriage counselors can build a new line of business doing assessments of couples for institutional investors and rating agencies.

Speaking of ratings agencies, it seems logical to set up a standardized assessment system to help speed up the process. An AAA-rated marriage might look like two doctors in their 30’s with differently-paid specialties, while a subprime marriage is more like a Vegas elopement between two people who just met.

Another assessment tool might be down-payments from friends and family. Bachelor party attendees will face a lot of social pressure to invest in an MBB as a signal the groom is a good credit risk; choosing to have the party in Vegas is a negative signal.

There’s potential here for small-scale lending. But as we see in other markets – loans, mortgages, etc. — it’s almost certain that there’d be pressure to bundle these up and sell them.

A secondary market for love

As with any new financial instrument, once it’s established there will be new and exotic instruments to support them.

Collections of MBBs can be rolled into Collateralized Love Obligations (CLOs), bundles of loans to a diversified mix of couples at different income levels, years together, and psychological fear of being alone. Creative firms might even begin to put together gimmick CLOs, specializing in celebrity couples or employees in hot (but stable) industries.

To secure against default risk, separation insurance swaps would pop up to hedge exposure to shaky marriages.3 Couples therapists could put their money where their mouth is and bet on the couple surviving as a show of faith in their relationship.

There’s no reason to leave passive investors out either. An ETF, $TILLDEATH, would allow 401(k)s and pensions to get exposure to the exciting new marriage market. This actually serves as a way of betting on the overall divorce rate in the US, allowing doomsayers to put their money where their mouth is (fun fact: the US divorce rate is actually collapsing, a bullish sign for marriage backed securities).

Official idea rating

1.5/5. This could plausibly be a niche, specialized financial instrument…but it’s a little hairy. You can’t legally assign your tax refund to somebody else; technically you’re not assigning the refund specifically, but this is still a grey area with lots of potential for litigation. Beyond the IRS, consumer finance and securities law present a series of landmines for a proper MBB. Family courts won't love it in a divorce. Tax laws can and probably will change in the next 8 years.

But biggest obstacle to making this real is the unknowingness of love. Nobody really wants to get into the business of assessing a strangers’ relationship. I think the best you can do is a traditional loan with payments indexed to estimated tax benefits, a much more boring and high-interest idea.

Still, I expect some wedding finance agency out there is pitching the marriage tax savings as a reason to take out a loan at 19% APR. Maybe some competition, attracted by the tax argument, will take a little pressure off of the world’s newlyweds.

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The quick version of the story is that SVB got a lot of deposits from the tech industry as the standard bank for startups. They grew especially quickly during the post-COVID low-interest-rate venture capital boom of 2020-2022.

With lots of deposits and low interest rates, SVB decided to seek a little extra margin by buying long-dated bonds. Inflation hit, interest rates rose from 0.25% to 4.75% over the course of a year, and suddenly SVB had a lot of underwater instruments that couldn’t quickly be converted to cash.

The problem was that they had a lot of uninsured deposits above the FDIC limit of $250,000, very concentrated in a close-knit industry. Rumors kicked off that SVB was short on cash, VCs told their portfolio companies to pull their money out, and in a few hours there were over $40 billion of withdrawals.

This raised the specter of a bank contagion — a failure at SVB causing runs on other banks, SVB customers unable to pay their bills, and a broad-based economic and banking collapse. The Fed, Treasury, and FDIC came out with shock and awe, guaranteeing all deposits at SVB. Things calmed down, SVB was acquired by First Citizens, and a lot of risk managers at banks had a terrible few weeks.

This was my first experience of a widely-followed bank run — before then, they were something that happened in collapsing economies or as a bit of interesting economic history. So when the Fed released a great article on The Banking Panic in New Mexico in 1924, I couldn’t help but be interested in the parallels.

So this week, let’s skip the business idea and do a bit of economic history.

The early 20th century economy of New Mexico

The First World War created a massive supply shock for European agriculture. Production for staples like wheat fell by 50%+ in France, Germany, and Italy, while Livestock collapsed by 75%+ in places like Denmark.1 This created an opportunity for American farmers, who took advantage of the soaring agricultural prices to expand production and export to Europe.

New Mexico was a major producer of cattle and sheep in this period. In response to the demand, farmers sought loans from local banks to expand operations based on inflated wartime prices. The financial system responded to this spike in demand, with a rush of new banks opening to serve demand for credit.

These highly leveraged cattle farmers took a double hit in the 1920s. As European production recovered post-war, the price of agricultural commodities collapsed more than 50%; cattle collapsed from $16 per hundred pounds in 1919 to $7 per hundred pounds in 1922 (albeit still above the prewar average). At the same time, New Mexico suffered a major drought that was hugely damaging to agriculture.

This was a bad situation for the local banking system, which had an estimated 70% of outstanding loans in agriculture (typically using cattle or crops for collateral). Like SVB’s long-dated bonds, these were fairly illiquid, meaning that in the case of a bank run it was difficult to turn them into cash.

Worse, many of these banks were chartered by the state — which had lower capital requirements — meaning they were not required to join the Federal Reserve system. Only about half of the banks in New Mexico opted to affiliate with the Fed; the other half had no access to a lender of last resort.

The panic and the response

New Mexican banks began closing in early 1923, accelerating throughout the course of the year. The crisis hit a peak in January 1924, when 13 banks closed in a single month. You can imagine the panic for locals, some of who saw every bank in their city close in a single day.

Interestingly, Carlson doesn’t find that the banks that closed were in particularly worse health than banks that remained open. The main driver was liquidity; banks with more liquid assets tended to survive, while those with less liquidity were more likely to close. It’s a very classic bank run story: the panic and rush to withdraw money is what causes the crisis, and liquidity is what lets a bank survive it (or not).

The generally larger Albuquerque banks held some deposits from regional banks around the state. Like SVB, there was fear that cross-bank relationships could act as a contagion. By February, three of the five banks in Albuquerque had closed down, accelerating the run on the final two banks. The two remaining banks were flooded with anxious depositors, who withdrew nearly 5% of total deposits in a single day.

The Fed arrives

The Fed responded with maximum spectacle. Borrowing a plane from the nearby Fort Bliss Army base, the El Paso branch of the Fed began to airlift $500,000 in cash to support local banks. From Carlson:

“The Albuquerque Journal (1924) describes the scene as follows: “The crowd in the bank [the First National] lobby gave a cheer when, at 2 o’clock in the afternoon, Chief of Police Galusha and Sheriff Felipe Zamora, with a squad of policemen and deputies sheriffs armed with shotguns cleared a path through which two army officers walked, carrying sacks containing $500,000 in currency. The army men had flown from El Paso in an airplane, bringing the money in the record time of two hours.'“ — The Banking Panic in New Mexico in 1924 and the Response of the Federal Reserve

A quick aside: The airlifted cash coming in with huge spectacle is a time-tested method to restore confidence. In 2002, Uruguay had a massive currency crisis where the U.S. Treasury gave a $1.5 billion dollar bridge loan until the IMF could distribute cash. While most of it arrived electronically, rumors spread of an “avión del dinero” — a money plane — carrying huge amounts of cash. While it didn’t carry $1.5 billion, there really was a plane bringing cash to support Uruguayan banks.

A big deal was made of waiting for the money plane to arrive, which ended up being psychologically impactful — people waited until they saw the plane arrive on TV before they went to the bank, knowing it would have money. Uruguay paid the U.S. back four days later, but the spectacle was a meaningful (and memorable) part of resolving the crisis.

Reports surfaced that the Fed had already sent another $500,000, with a million more ready to go if needed. Statements came out that the treasury, Fed, and War Finance Corporation were ready to step in to calm the situation. These strong statements of support began to restore confidence in the banking system.

More quietly, the Fed lent additional money through the discount window to a small number of especially distressed banks through 1924. There was no public reporting that these banks were particularly distressed, which likely helped avoid a further run on their deposits.

Both of these actions served to indirectly rescue the state-chartered banks in their time of crisis. The federal banks were able to access capital through the discount window,2 shoring up the risk to the state-chartered banks they had relationships with and allowed liquidity to spill over outside of the direct federal system. At the same time, the level of public support reduced the run on the banks everywhere — not just the covered institutions.

At the end of the crisis, confidence was broadly restored. Some of the closed banks were even able to find new equity investors that allowed them to reopen, including in smaller locales like Silver City.

Why care about the 1924 crisis?

So this Labor Day, why am I writing about a hundred year old banking crisis?

Some of it is just that I enjoyed the paper. Economic history has the effect of making you think about the second order effects of big events. I know a decent amount about the First World War; I had never thought about how shipping all of the men to fight meant that agricultural output declined. I’d heard that the US lent a lot of money to the Entente; I hadn’t fully processed that it was partially to buy American food, not just sending weapons.

But history can also feel weirdly familiar; I kept thinking back to SVB while reading this article. The progression of the crisis really is the same general story we see over and over again with financial crises — panic, spillover into adjacent systems, and response.

One of the subplots of the New Mexico banking crisis was the impact of state bank failures on federally regulated banks. Intervention to stabilize the federal banks implicitly shored up the non-federal part of the system. There was a similar subplot with SVB — the risk of failing stablecoins.3

At the height of the SVB crisis, Circle — which runs the stablecoin USDC — announced that they had over $3 billion in deposits at SVB they couldn’t get out. A panic ran on USDC and it depegged from $1 per coin to as low as $0.88 per dollar. In the same way that state banks got liquidity indirectly through Federal intervention, the peg only recovered when SVB was able to get their bailout; if SVB had failed more completely, it could have caused a cascading reaction that further disrupted the crypto market.

It’s not quite right to call Decentralized Finance (DeFi) lending analogous to the state-chartered banks…but it’s a little similar? The Fed, by definition, does not directly regulate DeFi institutions. It’s a growing source of parallel financial services, intertwined with the banking system but not part of it. It’s not so hard to imagine another traditional bank failure putting pressure on the crypto market.

With the GENIUS Act giving regulatory guidance for stablecoins, DeFi networks are likely to grow and get more embedded with the broader financial system. Some banks are even beginning to explore the idea of collateralizing loans with crypto; as the two sectors get more intertwined, cross-contagion risk seems like it’s destined to become a topic of conversation. If a banking crisis hits both markets at once, the Fed might find itself looking back to an old western banking panic as they plan their response.

Credit to: Carlson, Mark (2025). “The Banking Panic in New Mexico in 1924 and the Response of the Federal Reserve,” Finance and Economics Discussion Series 2025-064. Washington: Board of Governors of the Federal Reserve System, https://doi.org/10.17016/FEDS.2025.064.

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It's historically been a successful model. But wineries today are increasingly struggling in a tough environment. More competition and overproduction has coincided with an overall decline in consumer demand from decreasing alcohol consumption. At the same time, growing anti-American sentiment from tariffs has been a major hit to American wineries’ ability to compete in export markets.

One of the few bright spots is direct to consumer (DTC) sales — nearly 90% of revenue for smaller wineries. The best kind of DTC sales come from the wine club: a subscription offering regular wine shipments and discounted bottles. If you dig into the excellent SVB reports on the wine industry, it’s clear that small wineries disproportionately rely on in-person wine tastings to recruit for their wine clubs. The main alternative — digital acquisition — only makes up ~10% of wine club revenue for smaller wineries, compared to 20%+ for larger ones.

It makes sense. Big wineries can use their brand to attract joiners to the club, while a small family-owned winery relies on word of mouth and the tasting room experience to get people to try their production. More remote wineries may also struggle to properly sample wines for their members, forcing them to choose new wine shipments blindly.

Reader Adam Weir wrote in with a solution for America’s small wineries: package new wines in 50mL bottles, commonly known as “airplane bottles”, and send them as samplers to members and potential new customers.

Wineries don’t go that small today

The standard winery bottle size is 750mL, enough for roughly 4-5 glasses. Most other bottles just go bigger; 1.5L or 3L, for when you’re a restaurant or having a particularly wild party. But a bit under 10% of the US market goes smaller — either a half bottle (375mL), or the somewhat-rare 187mL single glass bottle.

If you order a glass of wine on an airplane, the 187mL size is probably what you’re getting. It’s as small as you can get, but poorly suited for tastings; a typical tasting pour is about ⅓ as large, meaning you’re either overserving one person or requiring them to find others to split with.

A 50mL bottle provides an almost-perfect serving for an individual tasting. But wineries never offer this size, and for good reason — it's too small to enjoy outside of a tasting setting, and producing new SKUs and bottles is expensive. Worse, they lack some of the branding power of a fine winery; airplane bottles are usually used for a stealthy shot, not savoring a fine merlot.

But there are real advantages to the portability, particularly around distribution channels. Instead of sending a rep to give wine samples, wineries could package a 5-wine sampler into a single package to sell at liquor and wine stores. Not only does this create a novel experience for the customer, it gives customers a cheaper entry point while pushing customers towards higher-margin direct to consumer purchases.

Given an in-room experience can cost $20 to well over $100, a 5-sample bundle could be a good deal at $10 to $20. But wineries could charge more and let buyers roll the upfront cost into a wine club membership or direct bottle sales. If they get the experience right, the airplane bottle could be a powerful customer acquisition tool.

Designing the miniature tasting experience

A small bottle isn’t the optimal consumption mechanism for a glass of wine. You need to be able to smell the wine, look at the color, and let it breathe. The ritual is important. But if you buy a pack of 5 airplane bottles, you’re locked into needing to find wine glasses — not always convenient, especially when buying these as a gift.

There needs to be some product innovation. My idea: stemless wine glasses with the 50mL bottle attached to a lid, peeled off when it's time to serve.

This allows for a single-serve packaging for the full wine tasting, ready to be served anytime, anywhere. For the right manufacturing partner, there could be a lot of lucrative dealmaking done in the wine industry.

And the manufacturing will be important. This is an entirely novel production line; most new manufacturing processes have a multi-thousand dollar upfront cost for a mold that requires tens of thousands of units to pay for.

Unfortunately, it’s quite impractical for a small winery to take the lead in production. Most small wineries only produce a few thousand bottles per year; setting up a manufacturing line is silly for them.

Worse, the logistics are tricky. As wine enthusiasts know, large bottles of wine age slower than small ones. The higher oxygen to wine ratio in small bottles causes more rapid oxidation. In other words, you need to drink it relatively quickly — long stored inventory is a fast track to expiration. That means frequent restocking and turnover, unrealistic for smaller wineries.

The solution: a separate business that handles bottling for the 50mL packages. This centralized distributor can partner with individual wineries, co-pack their products into these containers, and distribute them to partners. This separate company gains the ability to substitute across wineries as wine clubs fill, consistently give new product, and innovate on packaging.

I think wineries would rush to sign up for this. Customer acquisition costs (CAC) just for a wine room visit are reportedly $60-$120; with wine club membership conversion being closer to 5%, that implies a CAC for wine clubs of $1,200 to $2,4001. Reaching an audience that indicates interest through buying a sample pack is almost certainly a great deal for them.

But liquor stores might be reluctant to sell these. This is a product explicitly designed to cut out the distributors and retailers; when wine stores realize they’re seeding DTC, it’s unlikely they’ll order another set.

Maybe wineries aren’t the right distributor. There is one place where alcohol is regularly served. A place with a captive audience of higher-income customers. A location inspired by the 50mL bottle: an airplane.

Tastings in the sky

These are sort of perfect for air travel.

Flights are the only place in the world where you can find a few hundred people stuck for a 3-6 hour period. It’s a captive audience that’s bored, stuck, and has disposable income. It’s sort of weird that there isn’t more effort put into selling experiences to passengers.

Wine tasting in the past would have been too burdensome on attendants. But with all-in-one packaging, wine tastings can be quickly sold and done unsupervised. Airlines can easily upsell additional food purchases like cheese and crackers.

Even better, premium economy fliers might be the perfect customer. They’re disproportionately higher income and have already displayed a willingness to pay a premium for better service. Selling one of these packs for a $15 down payment on a wine club is a high-touch point of connection with their ideal customer; there’s a lot of power in being a brand new experience in a familiar space.

Wine connoisseurs might be thinking: “isn’t an airplane the worst possible place to try a wine?” You have a point, hypothetical reader: food famously tastes worse on airplanes, with taste buds weakened due to low pressure and dryness. The resulting dry nasal cavities weaken the sense of smell, a major issue for the wine tasting experience.

Today airlines solve this through intensity: saltier meals, stronger tastes, and spicy cocktails. That doesn’t work for wine, but that doesn’t mean there aren’t alternatives.

Ahead of drinking the wine, flight attendants could provide moisturization — water, a wet towel, some nasal saline, or (for tough cases) a steam inhaler — to re-hydrate ahead of a tasting. And given that dryness is the bigger taste-culprit (your cabin is a little lower pressure than Denver, and there are in fact wine tastings there), this may get taste buds to an acceptable level.

Especially as a novelty, the experience of an air tasting — with a hot towel over your face to open your senses, followed by a sampling from a small local winery — is certain to get some word of mouth attention, helping push the idea beyond premium economy into the public consciousness.

As the wineries partnering with airlines sell out, you could imagine a gold rush of wineries trying to become the next sampler on the list. Airlines could begin doing themes based on the region: a flight to the Bay Area could feature Napa wines, while a flight to Oregon could offer a Willamette Valley Pinot Noir.

With wineries competing over access to this valuable customer group, they might start cutting airlines into the deal and give them a commission on wine club sales that originate on their flights. Airlines might begin to bring their frequent flier programs into the mix, offering points on wine purchases and letting fliers redeem points to get a wine sample.

Other consumables might begin competing for this market. It seems natural that chocolate makers, specialty coffee roasters, and breweries might create their own samples to push on airlines in a mad dash for partnerships. In the same way that most airlines are negative operating margin without credit card points, subscription models in the cabin might become a subsidy to keep ticket prices low.

Maybe it all ends with wineries reverse-integrating with airlines; the micro-winery, micro-brewery, micro-chocolatier, and micro-roastery all become part of the Delta suite of products. It’s not enough for 1% of US GDP to go through Delta; the real flex is 1% of US specialty grocery purchases originating on a Delta flight.

Official idea rating

4.5/5. At first this seemed like a silly idea, but the more I learned about the wine industry — the struggles of small wineries in the DTC market, the overproduction of US wine, and the price pressure small wineries are facing — the more I think this might be the perfect time to do something like this.

Of course, my bottle design is mediocre and I’ve glossed over all of the pain setting up this manufacturing process would take. The first generation of glasses will break. Some batches would go bad. There would be supply issues. A lawyer needs to look at FAA regulations (which don’t seem to be an issue to me but I am not a lawyer).

But for an entrepreneur plugged into the wine industry, discovery as a service is massively valuable. In an era where there’s unusual pressure on small wineries, the right founder has the opportunity to secure a lot of meetings. Just don’t forget to send me an NDI branded bottle in recognition that you read it here first.

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Today, over 1,800 of you subscribe to No Dumb Ideas — which is still totally insane to me. Thank you for reading.

With this being my 30th post, it hit me that it’s probably time to check off a Substack requirement: a start here page.

So, here’s a look at 7 of my favorite NDI articles. If you’re a new reader, I hope you’ll take a second to see if any catch your interest.

A selection of the best NDI has to offer

The idea: What if we used prediction market contracts to pay lobbying firms? It’s a dumb-sounding idea that unlocks entirely new ways for lobbyists to engage with clients and influence officials. This is possibly my all-time favorite article, which had poor timing in being the third one posted.

The idea: what if you turned jobs into assets that you could buy, sell, or rent? It’s an idea that becomes less ridiculous the more you think about it — although I don’t think we’re likely to actually see it anytime soon.

An overview of 16th century gambling rings betting on who the next Pope will be. This article came out of my brief obsession with the (surprisingly rich) historical literature on papal betting odds. This also led to my first and only podcast appearance on Odd Lots.

The idea: make job applicants donate $1 to charity before they can apply to a job. Based on the response, I genuinely think this could work to reduce noise and help people get jobs faster. Unfortunately, whoever starts it needs to be pretty brave to endure the almost-certain media firestorm.

My backlog of ideas is full of ETF concepts. The idea: a SPY ETF that spends 10% of its AUM on buying lottery tickets. The math ends up being surprisingly plausible — I think we’ll actually see this one someday.

The idea: let people sell their legacy admissions spots at top universities. Inherited privilege has a lot of value; it sort of makes sense that someone would try to make it liquid. It just might require some adult adoption to pull it off.

I’ve had a lot of fun writing No Dumb Ideas, and I hope you’ve been having a lot of fun reading it. Here’s to the next 30 — if you have a big idea drop it in the comments, and if you like NDI, share it with a friend.

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Places like Venice, Santa Barbara, Barcelona, and Monterey all have scenic neighborhoods filled with residents who enjoy the picture-perfect environment. It seems idyllic, until you realize that the price of paradise is a never-ending stream of tourists.

The residents of these towns seem to hate their tourists with a passion. Tourists are blamed for everything from rising rents to expensive restaurants, but most importantly: they are considered annoying to have around.

Ironically, the very things that make these cities nice to live in attract the tourists that ruin them. Those picturesque neighborhoods are, in practice, a public good provided for free by the people living there.

The better they keep up the charm, the more annoying tourists they need to deal with. Any benefit is captured by local businesses, cold comfort for a retiree. For a tourist hater, the rational response is actually disinvestment: why beautify your house when it means you need to keep your curtains closed to hide from nosey tourists?

This seems like a problem. One idea to fix it: ask visitors to tip the residents for maintaining the charm they came to see.

Tourism can sometimes feel like an extractive industry

Tourism has surprising similarities to extractive industries like oil or timber. Locals live near a resource that’s primarily consumed by outsiders. Infrastructure is built to support the industry over residents. There are externalities to quality of life nearby, as the natural beauty of the place is disrupted.

Sure, a remote oil well (usually) is less disruptive than a million tourists in your home town. But while you’re not clear cutting the forests, the selfie line by the trees still has a cost. Paradoxically, as local economies become reliant on tourist dollars, you tend to see greater pressure for tourist-hostile actions like an Airbnb ban or aggressive protests.

Reasonable people can argue whether tourism is a net benefit. It clearly has economic value — Venetians might hate tourists, but that doesn’t change that tourism is 85% of their economy. Still, there clearly is some level where over-tourism begins, other local industries are replaced, and the quality of life deteriorates from overuse. Charming cities like Venice and Bruges have started taxing visitors directly to control millions of visitors eroding quality of life.

Externalities abound as tourism explodes. It only seems fair for tourists to compensate residents, but maybe we can be more creative than a €4 tourism tax.

The neighborhood tip jar as voluntary compensation

Unlike a traditional pay for service model, which charges for entry, the neighborhood tip jar uses social pressure to get drivers and pedestrians to pay up. As tourists turn onto the street, a sign with a QR code politely asks for a donation to maintain the quality of the road.

The QR code lets visitors Venmo or Cashapp an account run by the neighborhood association, which manages the collected money. Operating like an HOA, the neighborhood association elects a board that decides how money is distributed.

Neighborhoods could opt to distribute the money as cash to residents, but some might reinvest the money into the neighborhood. Think public amenities like swimming pools and playgrounds, flower beds for everyone to enjoy, or pristinely maintained sidewalks. The braver ones might use the money for new infrastructure to separate tourists from their homes, financing backyard porches that hide them from the annoying “Historic Downtown” walking tours.

This could legitimately raise real money. A study in Sweden found that mountain bikers gave an average of ~$10 based on a signpost asking for a donation. 71% of visitors to a cathedral in England donated, with an average donation between £1-£2. A marine park in Portugal was able to raise around $0.40 per visitor for charity just by throwing up a poster.

There’s a multitude of behavioral economics research for neighborhoods to leverage in driving donations. Museums have mastered a range of techniques that anchor guests on higher donations (think “suggested donation: $4” or “it costs us $3 per guest to maintain the museum”). Reciprocity is a powerful force — if you tell someone you’re giving them something, they feel a need to give back.

It seems reasonable that framing a visit to a picturesque neighborhood as consuming a good that residents provided could work. Some of these neighborhoods get several million visitors a year; if donations looked like the Portuguese marine park, top neighborhoods could pull in over $400,000 per year.

With a financial incentive to bring in guests, some neighborhoods may opt to maximize tourism. Streets that aren’t widely known might add themselves to Google Maps and start pitching themselves to Lonely Planet for the “cute neighborhoods to check out in Charlotte” list. Entrepreneurial neighborhood associations could start plastering those obnoxious “rate us on TripAdvisor” signs at the street exit.

Over time, residents might even start investing in new tourist attractions. Green St might become the new home of the world’s biggest pair of glasses, or a bootleg botanical garden facing the street. Beautification projects start competing as neighborhoods collectively invest in whole reams of tourist infrastructure.

But the new pressure on the town — additional demand for hotels, restaurants, road usage, and more — feels like a big risk. Not every resident is going to be on board with bigger and better; hatred of tourists seems destined to reemerge, even if they’re paying up.

Maybe it won’t have the chance to get to that point. There’s going to be competition for these tourism tips: if one house is the main attraction, why would they share with anyone else?

The enclosure of the neighborhood commons

Once there’s real money on the table, the logic of neighborhood cooperation starts to fall apart.

Imagine Maple Street has their tip jar, money is coming in, and the association has funded a garden project. Ellen at 442 Maple is an aspiring gardener, and did a particularly tasteful job with the tulips. She gets tagged on Instagram, takes off on Google maps, and suddenly visitors are coming to Maple Street just to see the locally-famous 442 Maple Gardens.

At this point, Ellen might reasonably go to the neighborhood association and demand a bigger cut — after all, the donors are coming to see her garden. The neighbors — who want to be compensated for the additional foot traffic — refuse. Negotiations break down. The next day, 442 has their own QR code up.

This is a disaster for the Maple St Association, who see their donations rapidly cannibalized by the savvy business sense of Ellen at 442. She starts pulling in real money, driving fancier cars around and getting new furniture delivered. Greg across the street at 445, sees this and thinks: “why can’t I do that?”

The next day, 445 has a peacock. After a week, 452 sets up a bouncy castle. 417 starts offering driveway goat yoga. The race is on.

The HOA tries to sue, but the offending houses have enough tip money that legal battles drag out for years. And with each defection, someone else thinks: why not me? Soon enough, Maple Street is a collection of houses with no clear cohesive theme. Tourists start to think of it as kitschy, stop donating, and the neighborhood is left looking sorta like this.

Maple street has reverted to its Nash equilibrium. Before the tip system is proven, the benefit of defecting is basically $0. You’re just putting an ugly sign in your front yard next to the tulips you’re presumably excited about.

But if Maple Street starts bringing in real money, the temptation to privatize becomes real. Any one individual with a good attraction can defect, and cooperation breaks down. The commons collapse into chaos.

The only stable equilibrium might be a QR code on every mailbox and dozens of competing walking tours. Or more likely, a strict HOA that stops the sign from going up in the first place.

Official idea rating

2/5. Don’t expect to get your neighbors on board, but if you have a really great garden slap on a QR code and see what happens. It might work out for you.

Modern tourism is a tough balance. Charming places are shared, commodified, overextracted, and become shells of themselves. But at the same time, the economic benefits become the lifeblood of the town — impossible to remove without killing the economy for those not lucky enough to retire there.

Cities are already exploring new ways to control tourism and properly internalize the externalities they cause. The bottoms up solution today seems to mostly be getting in on the gold rush or trying to shut it down. Maybe a combination of QR codes and social pressure is the technological solution we’ve been waiting for.

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Influenced by Shoup’s The High Cost of Free Parking, a common YIMBY goal is removing parking requirements from new buildings and properly pricing street spaces. As this coalition succeeds, it likely means parking will generally become more expensive in cities.

At the same time, return to office mandates are bringing employees that left town back to central business districts. This increased demand is raising prices in urban centers, which pushes residents into the suburbs and exurbs around their jobs.

Together, this means that we’re systemically increasing the price of parking at the same time that more workers will be driving into cities for work again. The likely result is a price shock and political reaction to the increased cost of parking and commuting.1 The biggest beneficiaries will be the parking garages that can charge even more outrageous pricing.

But this isn’t the same market as 2019. An increasing share of employers — 60% in New York — are on a hybrid schedule, with only a few days a week in the office. Why should we force everybody into economically inefficient parking rentals? The future of parking in major metros might be fractional parking spaces.

A model for fractional parking ownership

My quick review of recent sale prices for parking spots in central business districts (CBDs) found prices from $50k to over $250k depending on the city. That’s more than most people can afford, outside of taking out a loan — a significant debt load for one person. But there’s no reason that one person needs to take all of that risk. Instead of purchasing it outright, let’s use fractional ownership.

To enable fractional parking ownership, a single-purpose LLC is established that purchases the space. The LLC records a declaration creating deeded intervals — essentially timed property rights — and an owner’s association. Members buy these deeded rights, giving ownership of a set period of usage — e.g. every Monday and Tuesday from 7am to 7pm. To handle weekends, a rental pool can be created to manage hourly rentals on a parking platform like Spothero, with proceeds distributed pro-rata. Members pay a monthly assessment covering taxes, insurance, management, and other costs.

This would be a niche arrangement today, but it doesn’t seem so outrageous for an entrepreneurial parking lot to allow something like this. As time goes on, operations could get streamlined: license plate whitelists, automatic fees and tow calls for non-owner parking, and an app to manage rentals to third party users.

There are a few challenges though:

1. There’s a coordination challenge to find people to share a spot with you. You might struggle to find someone who has a complementary hybrid schedule to you. This is a pretty easy solve: an app, a waiting list at the garage, even social media networks. If this really takes off, nearby companies could coordinate opposite in-office days to optimize matching for parking spaces.

2. There’s an enforcement challenge. You need to have some enforcement of your spot usage. This means that purchased spots will mostly live in garages, requiring carrying costs to pay for staff, insurance, and maintenance. The good news: it makes it significantly easier to rent out your parking space on weekends.

3. There are some regulatory challenges. I looked up the timeshare definition on the NY Attorney General’s website:

“A timeshare as any arrangement for sharing ownership of a vacation home, condominium, or other interest in realty where each of the joint purchasers may occupy the unit during a specified period each year.”

That sounds a lot like partial ownership of a parking space that’s timeboxed to specific hours. It’s paperwork heavy, but not fatal: timeshares have to register with the state, make a series of disclosures, use the phrase “timesharing” prominently and repeatedly in any plan documents, and let buyers get a full refund within 7 days.

You also need to repeatedly tell buyers this is a high-risk investment that they shouldn’t expect any returns from — which sort of feels like a proto-version of Matt Levine’s Certificate of Dumb Investment idea? None of these feel like idea-killers, but some states might subject you to deeper regulations that raise bigger concerns.

So on paper, this is plausible to execute. Do the economics make sense?

Parking ownership might be an attractive alternative over time

Let’s think about the economics of buying a shared parking spot.

As a novel asset class, it’s likely you won’t be able to get the same loan terms as a mortgage. Let’s make some basic assumptions:

• 7 year loan at 8%, no down payment

• $800 per month in carrying costs — things like taxes and paying your share of attendant wages

• Rent out the spot for $25 per day every Friday through Sunday, around $325 per month in income. This is likely low given you could rent spots overnight

• Appreciate at 3% per year, sell at 25 years

• Value of 2 days a week of parking space use is $2,700 per year

• Let’s assume a parking spot price of $100,000

Splitting it two ways, that implies a per person monthly net cost of $1,016 per month for the first 7 years, then $237.50 per month afterwards. Given $25 per day is roughly $225 per month for a 2x/week hybrid worker, you’re worse off from a pure cashflow perspective.

But that isn’t the whole story. Taking the net present value (NPV) of rental income, final sale proceeds, fees, and the abated cost of parking as cash, a $100,000 purchase price is around a -$22,000 present value transaction over 25 years. If you’re able to change any of these variables — purchase price, interest rate, daily parking price, or appreciation — it’s not too hard to have this be a logical transaction.

The appreciation thesis in particular feels pretty plausible. If cities systemically remove parking, there’s very likely to be an increase in the cost of parking (and thus the value of a parking space). If parking appreciated like NYC apartments at 6% over 25 years, the NPV of buying a spot gets to $9,000. Suddenly, this is a reasonable diversification option for a commuter that also acts as a call on their cost of parking.

Even if none of these work out, there’s still intangible value to drive purchases. Allegedly New Yorkers spend over 100 hours per year looking for parking. Reliability has a value in itself, and six-figure parking spot prices imply a lot of demand for a secure space. And given all of this demand, it raises the question: is there a better way to source parking spots?

Condoization, but for parking

You may be asking: who is selling individual parking spots in the city? If this idea is going to reach any scale, the answer has to be parking garages.

Today, parking garages are mostly operated as pure rentals — a central management company that rents out individual spots. But nothing (as far as I can tell) generally stops parking garages from condoizing like rental buildings do and selling their spaces to owners.

Let’s take a random parking garage for sale that I found: selling for $6.5 million for 110 spots, or roughly $60,000 per spot. If the sale price is greater than the present value of future cash flows, then it probably makes sense to convert and sell these as parking condos (with relevant condo fees for shared staffing, taxes, and maintenance).

Naively, let's assume a spot is rented every day for $25: the NPV over 25 years is ~$115k (including a 3% annual growth in termination value). That’s before taxes and other operating costs — comparable “car condos”2 charge $400 or so per month per unit. Including these costs lowers the NPV to $64,420. Let’s assume 100% occupancy, minimal condo conversion costs3, and no platform/tax leakage, to keep it simple.

$64,420 is pretty high, but NYC parking spaces regularly go for $175,000 and above, not including monthly taxes and management fees. In neighborhoods like midtown, where there’s virtually no deeded spots available, the price is likely to be far higher.

It sure seems like there’s arbitrage in parking condoization. I know we have some private equity readers of No Dumb Ideas; you’re welcome in advance for this new investment thesis that I’m sure will make you very rich and very much villainized by people who hate paying for parking. Email me if you’re pursuing this.

Sure, an hour of parking is a security

With condoization, parking space hours (PSHs) — a standardized ownership of 1 hour of a parking spot — could be an attractive asset class. With legibility as an investment, new financialization opportunities open up.

One of the bottlenecks for selling parking spots upfront would be capital. Underwriters won’t have clear models for how to think of PSHs as collateral, leading to personal guarantees and high interest rates. But as this became something normal, specialized lenders would begin to issue and underwrite these loans. With greater access to capital, prices would go up and underwriting for condoized parking garages becomes a cinch.

To fund these loans, financial institutions can reach into the backlog of instruments used in mortgages. PSH backed securities can be sliced in creative ways — you can invest in entire spots, work hours, weekend parking, or even high yield overnight parking shares. Maybe the city of Chicago can restore their exposure to parking revenue through clever pension fund investment.

One of the bigger questions is whether this asset has overly-correlated risk. Attendance in the central business district is tied to employers bringing their employees into town to use the parking. If something causes demand for parking in CBDs to collapse at the same time as fractional owners lose their jobs — say, a once in a century pandemic or a big enough recession — you could end up with a lot of underwater loans on parking space timeshares.

But that’s a problem for the parking space timeshare CDS holders to worry about.

Official idea rating

5/5. I think the only reason this doesn’t exist today is the abundance of free parking spots, and maybe some hesitation with the novelty of the legal structure. The potential collapse of free parking is one of the last frontiers of enclosing the commons; people will find creative ways to allocate this increasingly scarce asset. I’m not sure if parking timeshares are the model that will win out, but I’m pretty certain it will at least be tried.

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What’s annoying is that I’m sure somebody near me would love to organize my closet! Marie Kondo built an empire with people who find joy in organizing things. I know they exist!

Sure, I could hire someone. But non-specialized tasks can be hard to justify paying for. It’s easy to pay someone to do your taxes when TurboTax can’t handle it; it feels a bit indulgent to pay someone to sort your recycling. And that’s assuming you can afford it.

That’s not to say that all chores are bad. Personally, I don’t mind meal prepping. Why can’t I make an extra large batch of chili and sell it to my neighbor for some vacuuming?

My pitch: Chorely, a marketplace to trade the chores you like for the ones you don’t.

Chores aren’t like other markets

Chores are an almost unique type of labor. Inside every home is an autarky where the inhabitants do a bit of everything. At best, they split it with their partner or roommates.

No other part of the economy really works this way. A lawyer wouldn’t spend two hours cleaning their office: they’d hire a custodian. But somehow, when it’s in the home they’ll pull out the mop without thinking twice.

On average, Americans spend 208 hours per year on household work; with ~350 million Americans, that’s 72 billion hours per year. Assuming $15 per hour, there’s over a trillion dollars per year operating in pure autarky — a bit more than the GDP of Poland. We’ve created a top 20 global economy where everyone is kind of bad at their job.

There are obvious benefits to bringing trade to this market. I’d be happy to swap doing laundry for somebody else deep cleaning my pans. But these types of trades almost never happen today.

Liberalizing chore marketplaces

The basics of Chorely are pretty simple: allow bartering in the chore economy. The app lets you find nearby people who want to trade chores, negotiate trades, agree on a time, and confirm completion. Afterwards you rate and review the quality of the job they did.

It’s a simple idea that hides a lot of economic complexity. Bartering requires a coincidence of wants; not only do you have to want the chore I’m offering, I have to want the one you’re offering. One solution to this is to allow for multi-person trades —I do everybody’s meal prep in exchange for person A doing all of our organizing and person B doing all of our cleaning.

But as this scales to more and more people, the organizational costs increase exponentially. I don’t really want 25 different people coming to my home, each doing a specific chore. Also, it’s not like all chores are equal; how do you account for a unit of deep-cleaning the shower being 1.3x the value of cleaning the coffee machine?

You might be asking: “why wouldn’t we just do this all with cash? Wouldn’t that simplify everything?” Well, at that point you’re basically recruiting people to be Taskrabbits. With cash, market prices begin to converge on the market prices for home services — unaffordable for many of the people who would be interested.

Even if it were affordable, cultural norms shape who is willing to supply chore labor. Lots of people who might be willing to organize a desk to avoid cleaning a litter box wouldn’t do the same for $8. Call it snobbiness, but selling unskilled labor is something that lots of white collar workers just won’t do. Their labor exists in terms of exchange: they work a job, get some money, and use that money buy services from other people.

It doesn’t have to be this way. Uber unlocked driving to a group of people that would have never driven a taxi. Airbnb unlocked hosting to a group of people who would have never worked in a hotel. Maybe direct exchange will give people the social permission structure to do some chores for their neighbor. Bring on the spirit of 2012 and change society through an app.

Still, it might be a bit easier if we didn’t have to do everything through bartering. Like the evolution of barter to currency, we need a unit of exchange. Let’s call it the ChorePoint.

A currency for chores

Say that you’re trading with someone named Greg, who is offering plant watering for dishwashing. You want to have someone water your plants, but it’s just not a fair trade — plant watering isn’t that big of a deal to you. You could come up with some complex trading algorithm like 3 dishwashings for 8 plant waterings, but the coordination and negotiating costs skyrocket. Instead, you might agree to trade a dishwashing for a plant watering + 50 chorepoints.

Suddenly, a whole new universe of trades are possible. Not every chore has to be directly traded; you can dishwash for Greg and trade it for vacuuming from Sally. It also means that chores can be traded over time — you can exchange snow shoveling in the winter for lawn mowing in the summer.

To get these trades rolling, we need to solve the cold-start problem. When the platform launches, nobody has any ChorePoints to spend. So how do you seed a brand new currency?

A traditional platform might start by giving users some free points, but this creates the risk of inflation and bad behavior. Other platforms have to constantly fight users creating phony accounts to use signup bonuses and never come back. Or Chorely could sell ChorePoints for cash, but that’s just Taskrabbit with more steps.

Maybe the answer is to keep following the traditional economics 101 historiography: after bartering and currency comes debt.

Fractional reserve banking for chores

At the creation of your Chorely profile, all users start at 0 ChorePoints. But that doesn’t mean that there’s no way to use ChorePoints — every user has the ability to go 500 points into debt. The catch: debt levels are publicly visible as part of your profile for each chore trade you do.

With this decentralized fractional reserve system, each individual user can do the equivalent of creating 500 points out of air. It’s not a free lunch: users in heavy debt can face social signaling of being a high risk trading partner, with consequences like lower search rankings for ChorePoint-negative offerings.

Over time, this actually becomes a natural risk assessment. It seems reasonable that you’d want to trade with the same people consistently after you’ve built trust. Someone in significant chore debt becomes a major credit risk for a long-term partnership.

Managing a healthy economy means encouraging sufficient trading of goods and services. For the chore economy, Chorely needs to act like a central bank. By changing reserve requirements (e.g. allowable debt), the company can indirectly influence price levels. If there are insufficient trades, it might make sense to allow more debt to drive a little inflation and get people trading again.

These prices are going to be set by the market, but this is a movement from autarky to trade. What can traditional economics teach us about this change?

An economic model of chore allocation

Trading chores isn’t so different from countries gaining advantages from trade.

Classic Ricardian comparative advantage is a simple model that says that countries should specialize in goods where they have the lowest opportunity cost (e.g. the value of what they could have produced instead). This is true even if a single country is better at producing any given good, because your total productive capacity receives gains from specialization.

If you remember econ 101, it sort of looks like this1:

Chores sort of work on the same principle…but also not really? If you applied Ricardian comparative advantage to chores, you would primarily be focused on your relative output in terms of speed. If I can do two loads of laundry in the time it takes to organize the closet, then organizing the closet is worth 2 loads of laundry.

But what if you hate doing laundry with a passion? Trades aren’t just a matter of productivity; we need to account for relative distaste using the burgeoning field of NDIan comparative tolerance.

Unlike traditional Ricardian economics, NDIan comparative tolerance doesn’t just care about efficiency. On top of the time something takes, a pain coefficient is multiplied to account for how much you think a chore sucks. If mopping is twice as miserable as laundry but takes half as long, you'd be indifferent on which one to do.

We also need to account for burnout; you could be fine doing dishes for 30 minutes, but after the 4th hour you might be dying to do anything else. Let’s call this burnout coefficient β, an escalating misery that comes from more time on the same chore.

So while previously a tradeoff of mopping and folding clothes might look like this:

Under our burnout system, it looks more like this:

This economic model tells us a few things about chores:

• Time isn’t the only factor; at some point, you’ll do the thing you hate for 10 minutes over the thing you like for 3 hours.

• The optimal tradeoff for most people isn’t pure specialization; you might only trade at the margins to avoid the most painful chores to you

• Any burnout dramatically reduces the total amount of chores you can do. You might trade away your most hated chore, but that doesn’t mean you want to do dishes 500 times in a row to avoid something you just sorta-dislike

While these all get aggregated out over time on the app, these are a lot of new considerations for people doing the Chorely system. Our product manager will need to incorporate a lot of behavioral psychology in their product design.

And I guess there are a few practicalities

When I pitched this to my wife, her first reaction was “why would you let a stranger into your house?” She argued — and I guess she’s right — that it’s different letting in a professional cleaner than some stranger down the street who offered to take out your trash.

She has me there, but it really highlights how weird the current system is. We’ll let a Taskrabbit in without thinking twice for $25/hour, but trading dish duty with your neighbor crosses a line. Money launders trust, but direct reciprocity feels unsafe. Even weirder, this actually scales — the more you pay, the more you trust your counterparty to be honest.

Of course, there does need to be some margin for safety. Platforms like Airbnb and Uber spend immense amounts of money on insuring the risk that comes with bringing millions of strangers together. This is worth it because each individual supplier will do many trades.

For Chorely, it’s not so clear who would pay for liability insurance, and who is responsible for vetting the people in their home. Even worse, you might be bringing in a dozen people to cover the full gamut of chores; the transaction and operational costs are brutal.

One idea is to solve this trust problem and monetization in one go — what if Chorely became a financial institution?

Chorely Pro is the option for real chore-heads trying to outsource the chores they hate the most. Pro users — for a low monthly fee — get access to a preferred liability insurance rate, sold and provided by Chorely’s insurance arm. As an insurance company with a chore marketplace attached to it, Chorely can make money through the float on the presumably immense amount of cash that will come as Chorely takes off.

Beyond insurance, there’s clear opportunities to do other upsells. If the boiler needs to be adjusted over and over, that’s a hot (and valuable) lead for a PE-owned home services business. If the bathroom needs weekly cleanings, serve ads for gut health providers. Chores are some of the greatest insights into the state of a home. Someone is going to be willing to pay for it.

Official idea rating

3/5. I want to love it, it’s clearly a broken market where there are benefits from trade. But I think the organizational and practical challenges are a little too high for it to survive in this iteration. People just really don’t want a stranger in their home, even if you tell them it’s irrational.

Still, I think there is something about the idea of service-for-service as a way to launder work that people otherwise wouldn’t do. Lots of people who wouldn’t sell their time to do cleaning would be happy to make the trade with a spouse. How many other trillion dollar markets are locked behind social expectation on who you can trade with?

Short of getting more people married based on their relative NDIan chore preference, the amount of wasted value will only increase. That said, social expectations evolve. Maybe one day, trading chores will feel as normal as calling a rideshare.

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It’s an awkward and unjust equilibrium. Because the etiquette isn’t clear, it’s a tax on courtesy. The socially awkward pay $5 for a coffee they didn’t want, while the shameless just walk in and ask for the code.

The current alternative, public bathrooms, can be pretty gross. Worse, they’re rare and unreliable, often closing at weird hours. New York City is trying to fix this, passing a bill to build roughly 1,000 public bathrooms over 10 years. It’s a good cause, but at a current cost of a million dollars each I’m skeptical they’ll all get built.

What if there was a third way? Could we simplify the social etiquette while providing exclusive access to the world’s finest toilets? Introducing: BathPass, a club that guarantees you access to private bathrooms.

Toilet law is a real thing

Paid toilets are common in Europe, usually charging a Euro or so for access to a clean bathroom. The Euro isn’t there to exploit; it pays for an attendant to monitor the bathroom and keep it clean, while funding additional restrooms in public places.

The US used to have 50,000 paid toilets across the country. But starting in the 1970’s, the Committee to End Pay Toilets in America — CEPTIA — organized a political campaign to make them illegal. The underlying logic for this was reasonable. There was inequality in access, with urinals sometimes being free while toilets were paid. They also weren’t perfect; the US often used annoying and inflexible coin-operated systems over Europe’s more luxe attended bathrooms.

But when the 50,000 paid toilets closed, the promised free bathrooms failed to appear in sufficient numbers. Today public bathrooms are scarce, and many of the ones that exist have a reputation for being dirty, unreliable, and in poor condition.

Paid toilet laws have been on the books for 50 years, and I don’t think we’re likely to overturn them anytime soon. New York’s law is pretty clear:

Pay toilets; prohibition. 1. On and after September first, nineteen hundred seventy-five, no owner, lessee or other occupant of any real property or any other person, copartnership or corporation shall operate or permit to be operated pay toilet facilities upon such real property.

However, I — despite famously not being a lawyer — believe I have found a loophole. In Nik-O-Lok Co. v. Carey (1976), a New York Appellate court found that:

“In our view, it is permissible to conclude that one commonly understands a "pay toilet" to mean, in its most literal sense, an immediate charge for the singular use of a closet for the discharge of human wastes.” (Emphasis mine)

SINGULAR. If it’s true that New York’s prohibition on paid bathrooms only applies to single uses, then disconnecting the payment from the use may let us recreate the paid toilet. It might look something like the Priority Pass.

A quick primer on priority pass

Airport lounges used to be a luxury product, only available to business class fliers.

That began to change with the mass availability of Priority Pass that accompanied the credit card boom of the 2010s. Holders of Priority Pass could access lesser lounges for free, as long as they were members.

The business model is pretty simple: lounges partner with groups like Priority Pass, which pay the lounge a fee per visitor. This fee goes towards food costs, maintenance, and cleaning.

For me, the number one use case for the lounge is the availability of clean bathrooms. But I don’t just need this at the airport — what if I had a Priority Pass-level bathroom anywhere I went?

The BathPass experience

The launch experience for BathPass doesn’t need to be too complex, just a formalization of the grey market bathroom. An app shows you all of the in-network bathrooms nearby; instead of asking the Starbucks cashier for the key, you flash them a QR code showing your membership in BathPass. They give you the key, and you’re on your way.

The main difference from the Priority Pass model is that we cannot, under any circumstances, tie the price to a specific individual use of the toilet. This needs to be an all-inclusive product with unlimited usage. For that, Priority Pass charges around $40 a month or $480 a year. That’s a lot, but I literally know somebody that signed up for Equinox all access in order to have reliable bathroom access while traveling.

But you don’t need to only target people with a high willingness to pay for bathrooms. The obvious path is to partner with credit card companies. BathPass feels like a natural perk to come with Chase Sapphire or Amex Platinum cards.

It’s not just about user acquisition: BathPass will need to get bathrooms on the platform. The best suppliers overlap heavily with grey market bathrooms today: think hotel chains, coffee shops, and chain pharmacies. The bigger the better with partners; a single partnership with Marriott could seed the central business districts of every city in the world.

Because payment has to be disconnected from the usage, BathPass will need to pay a flat fee to bathrooms in the network. That’s not optimal, but I don’t see why they couldn’t pay suppliers broadly based on how many monthly visits they receive. It seems reasonable to pay different fees for establishments that have under 100 monthly visitors, 1,000-4,999 visitors, etc.

This would need to be paired with a mutual rating system. For the customer side, peeing on the seat or neglecting to flush is a fast track to 1 star ratings and a ban from the platform. But in the same way some Ubers set up chargers and mints for you, 5-star-seeking bathroom suppliers will redo their bathrooms, have regular cleanings, and always replace the toilet paper. High ratings mean more visitors and bigger reimbursements.

Expanding the market

When Uber was still growing, employees would pass out free ride codes at events around the country. The goal was to seed the markets with enough riders to reach critical mass, creating a two-sided market that could support the ecosystem they were trying to build. BathPass will need to follow the same path.

To get a sufficient customer base, BathPass would need to sign up hundreds of thousands of people across the country. There’s one clear way to get the right scale with the right buyers: partnerships. Beyond signing up everybody they can with a nice credit card, BathPass could cross-sell to Uber Gold members, chain gyms like Equinox, or fancy IBS clinics.

And like Uber’s city launchers, hordes of 20-somethings chasing the startup dream will need to roam the country convincing stores to offer their bathrooms. Early adopters could sign up at preferential rates, with word of mouth bringing in new storefronts over time.

To fund this massive growth from the cities into the suburbs, BathPass is going to need some serious venture funding. They should be able to get it.

This is legitimately a billion dollar business

Thinking a few years into BathPass, do the unit economics even potentially justify venture funding?

While the list price is $40, nearly all members would come from partnerships that reimburse at a lower level. Let’s call those $8 each, and assume that 90% of users come in at the lower rate. At 1 million members, the total revenue is $11.2M per month or $134.4M per year.

It seems reasonable that the minimum viable product needs at least 1 bathroom within a half mile of any given spot in the city — around a 10 minute walk. That would require ~50 locations in a major city; let’s call it 400 prime locations across 8 major cities in the US as a pilot.

Before making everything variable, Uber used to take a flat 30% fee from their drivers. If 30% of revenue is allocated to paying stores, that’s an average budget of $8,400 per month — or $100,800 per year — per store to join BathPass. That’s enough to get almost any coffee shop’s attention.

Scaling these assumptions, it only takes around 7.4m customers to reach a billion in revenue. If Priority Pass and LoungeKey can have 40 million combined members, that isn’t as ambitious as it sounds. Seems VC investable to me.

The complexities of scale

Much like early Uber lacked the polish it has today — upfront pricing, automatic addresses, etc. — BathPass is going to be a bit janky at first. But as BathPass evolves into a normal part of daily life, its features will evolve with it.

The obvious long-term change is the technology. The QR code system has a real limitation in requiring staff time. Why couldn’t some high-traffic locations start to add smart locks, tied to a tap from your phone? Not only does this automate the bathroom access process, it can require Face ID approval before giving access — completely eliminating account sharing.

With an opportunity to monetize grey market bathrooms, businesses would almost certainly get more strict in giving access to their toilets. Maybe some stores go BathPass only, with locks only working for members. With the “I’m ballsy enough to ask for a key without buying a $5 coffee” market closed, these users would be forced to join the network or be redirected to public bathrooms.

I’d like to think this would drive additional investment in public bathrooms around the country, but more likely would be the appearance of lower-cost alternatives. BathPass may have the finest bathrooms, but a competitor — call it EasyGo — might offer a $2 membership for emergencies.

Like the rest of the app economy, eventually this could drive a regulatory reaction. People left out of the bathroom economy will lobby to have the city crack down on BathPass. You can imagine all of the ways this could go — force BathPass to offer a free tier, tax businesses that offer BathPass, or threaten to amend the law and shut down BathPass altogether. BathPass is going to have its hands full with government relations, but that might just be the cost of doing business.

Official idea rating

5/5. I mean, hire a lawyer first to make sure it’s legal, but I 100% believe this is going to exist one day. Build it, give me advisor shares, call it the first NDI unicorn.

Bathrooms are just one example of semi-public resources that persist due to informal social norms and low usage. These types of informal privileges — bathrooms, outlets, lounging in hotel lobbies without being a guest — break down when there’s too much information sharing and organized usage. As the world’s knowledge continues to be digitized and spread, these norms will continue to break down. It’s not crazy to think that the response could be adding a price.

I don’t know what the first one of these will be, but bathrooms seem like a pretty good bet. If it’s not number one, pretty good chance that it’ll be number two.

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