Yesterday I got a haircut and heard a business case:
Newborn umbilical cord blood storage services cost about 10,000
Most parents with extra money would buy it—psychologically, it’s buying peace of mind
Insiders did the math:
The actual probability that someone truly needs cord blood is only 2–3%
Charging 1,000 customers amounts to 10 million
Of those, 20–30 would need to be paid out; paying 200,000–300,000 would be enough
The margin between the two is enormous—so large that, in theory, you don’t even really need to preserve it
This is the typical structure of an information-asymmetry business:
They sell fear; they profit from probability
What customers buy is reassurance; what the merchant sells is actuarial calculations
It’s exactly the same logic as insurance
The difference is that insurance is regulated, whereas this gray area is much bigger
Newborn umbilical cord blood storage services cost about 10,000
Most parents with extra money would buy it—psychologically, it’s buying peace of mind
Insiders did the math:
The actual probability that someone truly needs cord blood is only 2–3%
Charging 1,000 customers amounts to 10 million
Of those, 20–30 would need to be paid out; paying 200,000–300,000 would be enough
The margin between the two is enormous—so large that, in theory, you don’t even really need to preserve it
This is the typical structure of an information-asymmetry business:
They sell fear; they profit from probability
What customers buy is reassurance; what the merchant sells is actuarial calculations
It’s exactly the same logic as insurance
The difference is that insurance is regulated, whereas this gray area is much bigger