[GCA10]

I'm not sure we can really say "smart consumers aware of the risk." Isn't it more like "Opportunistic customers who hoped the risks were immaterial beat a path . . . "

Out of morbid curiosity, during a long drive this weekend, I listened to 20 minutes of an AM radio guy's pitch for some retirement annuity system that sounded quite sweet at first. As he kept talking, though, I realized that he was being very evasive about what happens if you die early. Connecting the dots - he keeps all your assets. No survivor benefits at all.

I used to do financial investigative reporting. I was looking for the catch. And it nearly glided past me. Ditto for disclosing the full details about the maximum caps on your electricity charges.

These promoters are masters at smooth, low-candor discussions of risk. They're what make the pendulum keep swinging back and forth between deregulation and re-regulation.

[rowland66]

I think that it is called an immediate annuity. It is a standard insurance product that offers protection against outliving your assets. You pay a lump sum in return for a guaranteed income as long as you live. Yes, if you die early, the insurance company wins, if you live longer than expected, the insurance company looses.

I think these are more common in Europe where people will often take a lump sum pension payout at retirement, and buy an immediate annuity.

[curryst]

Isnt a pension already designed to be a payout until you die? What's the advantage?

[ryanmarsh]

I consulted for a large existing REP to help analyze the market and suggest strategies for launching their own Griddy competitor brand. So when I say "smart consumers aware of the risk" that is exactly who the research showed the customer was. The initial customers were people perfectly capable of the arbitrage. They even had customers using IFTTT to turn up the thermostat (summer months) when prices would spike (in 15 min increments).

I literally built a prototype competitor product to Griddy and I'm downvoted for explaining exactly how this shit works.

[talentedcoin]

I didn't downvote you, but comparing this situation to what happened with GME (as in your previous comment) is, at best, a stretch. At least with GME one could argue that people signing up for margin accounts to buy stock options should know what they're doing ... which is maybe a different subject ... but as others have indicated in this thread, a lot of providers like these employ some fairly aggressive/shady strategies to get consumers to sign on, and don't candidly discuss worst-case scenarios like these.

[alasdair_]

IFTTT doesn’t seem like the best solution to something that costs you an enormous amount of money if it fails. especially in a situation with potential power outages killing the box you were using at an inopportune moment.

[bumby]

Can you elaborate on how the research was conducted and specifically how the risk was measured by consumers?

There’s an awful lot of research that implies humans are very poor estimators of low probability / high severity events

[ryanmarsh]

Research was normal UX/cust research... interviews, polls, etc.

Customers were intelligent and motivated by a desire to do their own hedging rather than have an REP in the middle with an opaque profits. There’s a lot of profit in there and customers wanted to keep it. Customer ultimately knows his own demand and tolerances better than any REP. When I say “he” I mean men. Overwhelmingly male market. Lots of small business owners, day traders, cognizant their investment performance. This was very early. Few had even heard of Griddy at this point. I think it’s a fantastic addition to the market. What’s missing is the ability to hold futures. That would really level the playing field for sophisticated customers.

[rfdave]

Sounds like a fun filled hobby. How many people are interested in actually spending 30 to 40 hours spooling up to understand what they're getting, and 5 to 10 hours a month tracking it? I'm sure there's a population, but I'd rather spend another $20/month and do something fun with my time.

[bumby]

Thanks for responding. I’ll just say it’s important to distinguish between a desire to make a profit and the ability to accurately gauge risk. Behavioral economics has a lot to say about this