Last week, there was lots written about StickK.com, a start-up allowing people to take out contracts on themselves; e.g., to suffer financial penalties if they fail to lose weight.
This week, Aaron Schiff, proposes a start-up for customers of StickK to insure themselves against failure. Now Aaron Schiff has proven himself to have generally good sense on his blog but this time his idea is truely market-killing (although I am pretty sure he realises that although Tim Harford who purchased a contract at StickK probably did not). Put simply, if the idea of StickK.com is to allow people to commit to a plan and penalty, unStickK.com destroys it as it will be always worthwhile for you to purchase a counter-contract from them after you have ‘committed’ to one from StickK.com. Moreover, the very existence of an unStickK option means that consumers will not find it worthwhile to purchase a contract from StickK.com. So neither StickK.com nor its anti- counterpart will end up making money.
Sadly, this exposes the problem with StickK.com. Even without unStickK, you will likely always have a ‘friend’ who will find it worthwhile to provide a counter-contract. StickK.com is a lovely idea but it relies on markets not working in order to work.