How Long Bets works

You may have heard of Long Bets. It's a great website and service that allows people to participate in bets lasting a long time (at least 2 years), with the winning party having the stake paid to a charity of choice. People who have heard of it are quite favorably disposed to it. While I approve of the convenience and publicity each bet gets, I think people should avoid it, in favor of individual contracts. Here's why.

As soon as the bet is made, the stake must be paid to The Long Now Foundation, as a donation. (In addition to the $50 Publishing Fee). This money then gets invested in a long-term portfolio  - "The Farsight Fund" - and through the magic of Compound Interest, it (expectedly) rises exponentially.

This kind of interest visibly occurs especially over long periods of time. As you can see in this picture shamelessly stolen from Wikipedia, a 20% annual interest compounded yearly can yield upwards of 6 times the original sum in just 10 years. But a realistic, less risky level is more like 15% - which still manages to quadruple the amount within 10 years. 

The deal-breaker for me is that Long Bets gets to keep 50% of that interest - "growth", they call it. They only donate 50% of what has grown out of the original sum to the chosen charity. But the growth becomes significantly greater than the original sum, especially on long-term bets!

So, there you have it. If you really want to match a donation by betting for your favorite charity, do it more efficiently by placing the stake in a mutual fund, instead of giving away half of the increase, and bypass this site by using legally binding agreements.

Also, if you want to, publish it by announcing your favorite newspaper/site/channel, which will be more than happy to report on it, especially if there's lots of money involved.

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