Schock Market seeks auction of public schools--for $3.5 Trillion
BEND, Ore., Sept. 26, 2018 /PRNewswire/ -- Internet startup, Schock Market, Inc. (www.schockmarket.com) will seek to auction off the public school systems of Oregon, Washington, and California—for half a trillion dollars. Success would extrapolate to a $3.5 trillion sale for public schools nationwide.
The auctions are being managed through newly-conceived reservation markets. These markets have been pioneered by Stanford University graduate, Spencer Schock. Schock hopes U.S. Secretary of Education, Betsy DeVos, will support the experiment.
The markets are designed to unfold in phases.
In the first phase, individuals and businesses register as investors at www.schockmarket.com/Profiles/Register. Investors attempt to predict savings that may be achieved by privatizing government agencies. When investors guess well, they may earn payouts, potentially in the millions of dollars.
In the second phase, corporations bid on these same government agencies. In the case of schools, corporations will bid to purchase and operate public schools within a state.
During this second phase, proceeds from privatization are revealed to taxpayers. The California K12 market, for example, could conceivably reap $436 billion for California citizens. If so, every Californian would receive a check for $11,000.
In the final phase, completed markets are approved through statewide voter initiatives. These initiatives are backed by winning corporations as well as investors and taxpayers seeking the payouts described above.
Benefits
Schock suggests that democratic societies fail to embrace innovative solutions, often due to uncertainty associated with free markets. This hesitation causes voters to choose safe, but underperforming, government services over free markets.
Reservation markets resolve this problem by providing a high definition look into the future of a proposed market. It is important to note that reservation markets do not model a future outcome. Instead, reservation markets are the future outcome. Schock achieves this distinction by replacing a single financial transaction, with a multitude of reservations.
Schock suggests knowing market winners in advance will provide citizens with an opportunity to privatize much of the public sector, including schools. Says Schock, "Reservation markets represent an opportunity to reboot Western civilization . . . and earn a windfall profit, for everyone, while doing so."
Cost
Individuals and businesses may invest at Schock Market for $3 per month.
The site opens with three education markets: Oregon K12, Washington K12, and California K12. The potential taxpayer payout for each is $36 billion, $69 billion, and $436 billion respectively.
SOURCE Schock Market, Inc.
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Schock Market seeks auction of public schools--for $3.5 Trillion
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MARKET OVERVIEW
Reservation markets have many potential uses. In the example below, we discuss the most common application, which is privatization of a government agency.
U.S. taxpayers oversee trillions of dollars in public services. Taxpayers must choose a government agency or market solution to deliver these services.
Market solutions enjoy a reputation for efficiency. On the other hand, market outcomes cannot be predicted with certainty. For this reason, taxpayers often choose government agencies to deliver public services. For example, only 13% of the U.S., $4 trillion-dollar federal budget is outsourced to private contractors.
Reservation markets address this shortcoming of markets by:
a) Revealing the hidden value of privatization to taxpayers.
b) Revealing market outcomes to taxpayers, before they vote for those outcomes.
In this example, we also discuss the important role investors play in this discovery.
MARKET EXAMPLE
Imagine Schock Market launches a reservation market exploring privatization of a county landfill. Savings will be split between investors, taxpayers, and local environmentalists seeking restoration of a nearby, polluted stream.
In the first phase, investors enter the market and attempt to predict the savings that will be achieved through privatization.
When bidding, investors attempt to acquire reservations at a price at or below the actual savings from privatization. Investors that bid well are eligible to receive a payout. Investors that bid too high, are ineligible to receive a payout.
Over time, market prices will plateau. Why? Because investors are concerned that the market is reaching full valuation. If they now bid too high, they risk losing their payout.
The role of investors is to reveal for the public, the value of privatizing a government agency. When a market plateaus, we assume this value has been revealed and the market is closed.
In the second phase, the market is reopened for corporations. Corporations that specialize in waste management bid on purchasing the landfill and operating it for the local community. Imagine the winning bid is $30 million for the purchase of the landfill and $10 million in operational savings over ten years. In this case, the total windfall for taxpayers is $40 million.
In this phase, the winning corporate bidder is announced along with the total savings of $40 million.
The payout to investors is also announced. A payout might be 1% of the windfall, or in this example, $400,000. This payout will be shared among investors that acquired reservations priced at or below a market value of $40 million.
The payout to environmentalists is also announced. Let’s say the environmentalists have been promised 5% of the windfall or $2 million for restoration of the polluted stream.
Finally, the payout to taxpayers is announced. Imagine the $40 million in proceeds will be distributed to 50,000 county residents. This equates to a $752 check for every man, woman, and child living in the county ($40 million - $400,000 for investors - $2 million for environmentalists = $37.6 million / 50,000 = $752).
In the final phase, the now completed market is launched as a voter initiative for county residents. The initiative is backed by investors, the winning corporation, environmentalists, and taxpayers all wanting their payouts.
If the initiative passes, the landfill is privatized. The winning corporation purchases the landfill at the agreed upon price. Money from the sale of the landfill and ongoing operational savings provides for payouts to investors, environmentalists, and taxpayers.
KEY POINTS
Schock Market replaces a financial transaction with a multitude of competing reservations. This creates a sort of crystal ball where market activity today, reveals an outcome that will occur in the future.
This crystal ball is of immense value to voters. In the past, voters choosing market solutions could only hope for the desired outcome. Now, voters can choose a market solution and know in advance what the market outcome will be.
Also note that Schock Market creates advocates for change. In our example, the investors, winning corporate bidder, environmentalists, and taxpayers all have a financial stake in overcoming the status quo. They want their payout, so they push for change. This represents a new dynamic for voter initiatives.
INVESTORS
Investors play a critical role at Schock Market. Here is an overview of their role:
Investors are U.S. citizens that have registered at Schock Market. The cost of participation is a $3 per month subscription.
Investors receive $5 million in their account at time of registration. (This high value is required if investors are to make meaningful bets in a nation where government spending and assets are counted in the trillions.)
It is impossible for investors to lose their $5 million. When an investor cancels a reservation, 100% of the funds spent on that reservation are returned to the investor.
Investors review open markets at Schock Market. Investors then choose a market in which they would like to predict savings from privatization.
Investors that make accurate predictions are eligible to receive a payout or percent of the actual savings from privatization.
To receive a payout, investors must secure reservations for a price at or below the actual savings from privatization. Using our example above, investors that make bids at or below a market value of $40 million are eligible for a payout.
Investors that bid above the actual savings from privatization are ineligible for a payout.
Investors compete for a limited number of reservations in each market. Investors attempt to pay a low price for a reservation and hang on to that reservation for as long as possible. Payouts are based upon how much time an investor accumulates in a market, at or below the actual savings from privatization.
A low-priced reservation may be taken from an investor by a new investor bidding more for that same reservation.
In this manner, competition for reservations causes the price of reservations to rise over time.
As markets approach what many consider full valuation, investors become cautious and slow their trading. Why? Because these investors don’t want to bid too high and have all of their accumulated time become ineligible for a payout.
At this point, the market has plateaued and is thus telegraphing a likely maximum savings from privatization. Investors have fulfilled their role which is to inform the public about possible savings.
At this time, the market is closed to investors. It is then reopened as a market for corporate bids.
Each reservation market is a proposal. It is a form of free speech.
Many obstacles stand between this free speech and actual implementation of the market proposal. Some reservation markets may be contrary to existing local, state, or federal laws, making implementation impossible without changes to applicable law. Schock Market makes no representation as to whether any particular reserve market will result in tax savings, voter initiative, privatization, or any changes or outcomes proposed by investors or other participants. Schock Market cannot guarantee that our market proposals will be implemented or that investor payouts will be paid.
http://www.schockmarket.com