Larry and Barry Discuss the Merits of Relative Performance Stock Betting*

Lawrence (Larry) Lion and Bernard (Barry) Beaver have been used to illustrate the reactions of entrepreneurs to new ideas. Larry and Barry first appeared in my monthly Chairman’s / Editor-In-Chief column of Venture, The Magazine for Business Owners, and Entrepreneurs. I have also used them in several books on entrepreneurship and royalties, as well as in many columns.

Larry:	Arthur Lipper’s Relative Performance Stock Betting (RPSB) idea for a new web service has enormous potential.
Barry:	Why so? There are a vast number of investor focused services already seeking users.
Larry:	Yes, but none offer a similar service or benefit. Every investor in stocks has opinions as to what the performance of the selected stock will do versus the market or other specific stocks in the next 30-, 90-, or 180-day period. Clearly, they believe that the stock which they have selected will do better in market value than the other stocks or market indices.
Barry:	Ok, so they pick a stock which they think will do better, going up more or down less, than another identified stock or index, and bet one or more $200 betting units for a selected period.
Larry:	That’s correct, and if the selected stock or index does have a superior relative performance in the chosen period the return for the winner of the bet is $180 for each $200 betting unit. Of course, if the selected stock does not outperform the identified stocks or index, the better loses the entire amount of the $200 per betting unit(s).
Barry:	Yes, and all of this requires that a funded counterparty to the bet be arranged.
Larry:	Yes, and that is what the Do Better Club (Club) does to earn its fee of $20 paid from each of the winner’s betting units. The Club provides a brokerage service assuring the payment of winnings at the conclusion of the betting period. However, the Club is never the counterparty bettor because that function is provided by another member of the Club.
Barry:	So, both the Club member initiator of the bet and another Club member, the counterparty, deposit with the Club the necessary amount, depending on the number of $200 betting units, before the bet is consummated.
Larry:	Right, the bet initiator selecting, for example, Ford versus Boeing or Ford versus 150% of the S&P 500 tells the Club the desired bet, and the Club then surveys its membership to find a counterparty. The counterparty can accept the terms of the bet initiator or make a counteroffer.
Barry:	Yes, and RPSB will be fun and exciting, and membership in the Do Better Club makes it all possible.
Larry:	The important point about the RPSB activity is that the information and judgement used by the bettors will result in either a total loss of the amount bet or extraordinary gains in the betting period completed.
Barry:	All that is needed is an organization to operate and market the Do Better Club. The Club should be extremely profitable. All the price change data needed to determine winners is readily available. There would have to be an ability to virtually communicate with Club members in consummating the bets and managing payments to the winners. There are many investment information services and casinos able to provide the service with our continuing participation.
Larry:	Those underwriting or recommending a stock would be expected to bet multiple betting units on its positive relative performance for all the betting periods. Those having knowledge of favorable coming events can be expected to be active initiators of bets against advances in market indexes.
Barry:	Yes, the fact that bets on the relative performance of securities are not themselves securities may well result in the initiation of bets by some Club members.
Larry:	Investors who have strong opinions about the relative performance of stocks they favor will be logical bet initiators. The service will provide a platform for lots of creativity. A Club member making only 5 winning $200 bets in a year would have a profit of $900, whereas the loser of 5 betting units would have a loss of $1,000.
Barry:	Seems like a good application of a Club member’s skill and information.

Arthur Lipper, Chairman arthurlipper@gmail.com
British Far East Holdings Ltd.