The summer of 1986 was my only real experience with the business of gambling. I was helping the Libertarian Party of Alaska raise money by selling raffle tickets. The prize was a brand new, fire-engine-red Corvette.
It was gorgeous.
People slobbered over the car—literally. We had to keep cleaning materials in the trunk to wipe off all the hand prints, nose prints, and I don’t even want to think about what other prints that glossy coat picked up.
As I recall, the terms of the deal were:
- Tickets sold for $20.
- A book of six sold for $100—you got one free ticket.
- Only 30,000 tickets were printed.
- The drawing was to be held at the end of the summer.
As gambling goes, it wasn’t a bad deal. The odds could never get worse than one in 30,000. Buying two tickets made your odds one in 15,000. The more you bought, the better your odds. And if we didn’t sell all the tickets, the odds would actually improve. But even with one single ticket, the odds were better than what most state lotteries offer.
I was paid $4 for each ticket I sold. I got very good at explaining the odds… and arguing for liberty and free markets.
At the beginning of the summer, sales were slow. Some days, I didn’t sell a single ticket. But things picked up as the date of the drawing approached.
Consider the psychology of this.
When we sold the first ticket, that person’s odds of winning were 100%. The moment we sold the second ticket, the odds were 50% for each. The closer we got to the raffle date, the more tickets we sold, and the worse the odds got. And yet, the closer the date came, the greater the excitement, and the more tickets we sold.
With about four weeks to go, I was selling several tickets a day and at least one book of tickets per week. With two weeks to go, I was selling a book of tickets every other day. During that last week, I was selling books of tickets every day. The day before, people started buying batches of multiple books.
The day of the raffle was mayhem.
We’d arranged with the largest shopping mall in Anchorage to use their central court to hold the raffle.
A cute, blindfolded child was to draw the winning ticket.
A line formed as soon as the mall opened.
You see, we were supposed to write each person’s name, address, and phone number on the ticket stub, so we could find them if they won and were not at the drawing. We sold tickets as fast as we could, but filling out the stubs took time. In retrospect, we should have printed the tickets with matching numbers on the stubs.
Too late then; the line kept getting longer.
So we decided to skip the address part and just fill in names and phone numbers. Even that wasn’t fast enough. With the drawing taking place within hours, we decided to just jot down names of people who assured us they would be present for the drawing. It was still too slow. The line turned into a crowd swarming around us.
The last hour before the drawing was one of the most memorable of my entire life.
People were pressing around us, jostling to buy their tickets before time ran out. As the time drew to an end, people become more and more desperate, holding out their cash, hoping I would take theirs. In the final moments, people were crying out, some with tears on their faces: “Take mine!” “Please, pick me!”
I was surrounded by a mob waving fistfuls of $20s and $100s in my face, begging me to take their money.
I was literally unable to take the cash fast enough.
I’ll never forget it.
Now here’s the thing: I didn’t buy a ticket myself.
Oddly enough, I don’t remember anyone asking me if I was participating. Perhaps it was assumed that since I was with the organizers, I wasn’t allowed to participate. But I would not have bought a ticket anyway.
The odds might have been better than a state lottery game, but they were still very long against any individual. I don’t know how many people bought tickets that summer, but only one won the Corvette. I wouldn’t waste even $20 on something so improbable. (And I still don’t, to this day.)
Do I feel guilty about this? No. It was for a good cause. It seemed clear to me that apart from that final frenzy, most people understood this. They were as happy to support the cause as they were to have a chance to win. Another organization was raffling a car that summer as well, so people had a choice.
If anyone had asked me if I’d take such a gamble, I’d have said no.
All but one of those thousands of people spent money and got nothing. That’s never been my kind of deal. Being young and idealistic, I’d have preferred to go hungry than to lie to people. I suspect that most people who’ve met me—even those who dislike me—would not find this hard to believe at all.
The point of this story is the vital importance of skin in the game.
All those people asked me how many tickets would be sold, when the drawing would be, how the drawing would be done, what would happen if they weren’t present, and all about the car. There were lots and lots of questions about the Corvette. But nobody asked me if I would take the deal myself.
Today, one of the first things I do when researching a speculation is to ask management how much skin they have in the game. And by that I don’t just mean options and such, but how much of their own money they put into the deal.
I was pleased that my former employers used to allow me to put my money where my mouth was, as long as all was disclosed. Readers wouldn’t—and shouldn’t—feel confident of my analysis if I had no skin in the game.
When I was later prohibited from investing in companies I researched, some readers cancelled their subscriptions for that very reason. Others stayed on because they trusted me. But I never felt good about it.
I’m a bit older than I was in 1986, but still just as idealistic.
I wouldn’t want to get my readers into anything I wouldn’t put my own money into. The newsletter business is no charity drive, in which participation is more important than the outcome. Just doesn’t feel right.
If I make a bad call, I should feel real pain alongside my readers—and if I get things right, we should profit together.
This is in my long-term self-interest. It’s also just a lot less stressful dealing with people when we’re in the same boat.
So I’m very glad to run my own company now and call my own shots on this, among other matters. I feel good about having skin in the game again. I’m happy to disclose all the details of my trades to my readers—including evidence, as you can see on my track record page.
Whether you do business with me or not, you should always ask those who are selling you something if they would buy if they were in your place. Not just if they would, but if, in fact, they have.
Insist on skin in the game; your money where your mouth is, or no deal.
That’s my take.
