Note that "average" is misleading; as used by Even, it means "some amount we calculate by a secret-sauce algorithm that is not any usual definition of 'average'."
From the Even FAQ [0], under "How does Even calculate my average paycheck":
Even looks at how much you've earned and how much you've spent in the last 6 months. To be fully transparent, your Even pay isn't actually a mathematical average. When we use the word "average" we're using that word to make things easy to understand. Your Even pay is calculated using an algorithm that is more complicated than an average, because it does things like treating more recent paychecks as more important than paychecks you got 6 months ago.
(That they characterize this description as being "fully transparent", is further illustration of their creative use of words outside of their normal meanings.)
I don't think they're being too misleading though. If I were to do something similar, I'd weigh current pay higher than past pay too. They're topping up the difference so they need the overall math from the excess + interest to work in their favour after all.
They are most certainly targeting people who are bad with money though. But then again, so do lotteries and designer jeans makers.
Not really, since they are never taking any portion of that paycheck away from you. It's all yours at the end of the day, they just keep it "in trust".
(The point I'm struggling with is how they do this without a) earning interest, and b) earning enough for themselves)
The algorithm is a key component of the actual product they are selling to their customers. It's reasonable for customers to ask for a reasonably complete description of that product (note: your parent isn't asking for source code).
Even's algorithm is not comparable to actuararial predictions and it is not comparable to spread; both of the former are primarily useful to investors and executives, whereas Even's algorithm is primarily useful information for customers. It might be easier to infer Even's spread if you knew the algorithm, but the algorithm and Even's spread aren't one and the same.
Per your example, it's easier to infer a Big Mac's spread if you know they're using real meat or to infer a car's spread if you know the seats are real leather. But that doesn't give those companies a positive reason to not disclose the approximate contents of their meat patties or the material their luxury seats are made of.
Cars and Big Macs, like pretty much anything, are priced in no way according to their manufacturing or contents cost (aside from the end cost being something more than the sum of the cost of parts).
You can't infer anything about the cost of a particular car by knowing the cost of the seats. If fact, it's quite possible that your "upgraded leather seats" cost less than their standard cloth equivalents. That's my entire point.
The algorithm is important, sure, but not to the end consumer. At least, not to enough end consumers. I'm sure their investors are well aware of the details, but they are under no obligation to make those details public. If fact, they could probably successfully argue that it is a trade secret.
> You can't infer anything about the cost of a particular car by knowing the cost of the seats.
Oh man, my car analogy isn't accurate ;-)
> Cars and Big Macs, like pretty much anything, are priced in no way according to their manufacturing or contents cost
This may be true for cars and big macs, but you know what I'm saying -- knowing the components contained in a product is different from knowing the spread on that product, even if knowing the comnponents tells you something about the spread^1.
In any case, this is all irrelevant to the central and irrefutable point -- that that the way the algorithm works is of immediate and obvious importance to the customer.
> but not to the end consumer.
Sorry, but the burden of proof here is on you.
How is the algorithm not important to the end consumer? It's deciding how much money they get each week. How many things in life are less important?!
> but they are under no obligation to make those details public.
In fact, it'd be unsurprising to learn that they are.
--
footnote 1: BTW, I think you're unintentionally arguing against yourself.
In the event that knowing the components (i.e. the leather, the algorithm) tells you nothing about the spread -- as you maintain in your last comment -- you're basically conceding my point that there is a difference between knowledge of components (i.e., what you're getting) and knowledge of spread. In which case revealing the components can't possibly be justified on the basis that companies shouldn't have to reveal spread.
My argument was that even when components do tell you about spread, sometimes it's still necessary to say what those component are. And there are clearly examples of products where "what you get" does reveal spread (e.g., anything closely tied to commodities w/ very little or inexpensive manufacturing).
Seems like this is the million dollar question, regardless of what they think they are.
After all this though, I've got the following:
1. They seem to have a useful product that a good number of people could benefit from. A marginal step up from payday loans and credit cards.
2. They give off the appearance of transparency, but there is a lot there that doesn't add up. (In an other thread a founder seems to suggest that the bank retains all interest earnings on the "savings" accounts... that seems... off.) (Maybe that's how they skirt the regulations - don't collect any interest at all and receive some other form of payment... maybe a "bank partner fee" or something?)
I'm cautiously optimistic that I'm just a little internet jaded and these guys are all on the up and up.
> They seem to have a useful product that a good number of people could benefit from.
I'm skeptical.
Even if the algorithm is designed solely for the benefit of customers, there's very clearly some value extraction going on. It seems to me that personal finance training is a much better product for these individuals...
> They give off the appearance of transparency, but there is a lot there that doesn't add up.
This seems like a substantial business risk, right? What's to stop another company from coming along that is totally transparent and also just barely out-performs Even on payouts?
Or even a non-profit that prices things to manage risk as opposed to make profit, probably undercutting Even in the process?
Even's only defense against either is "nuh-uh, we're better", and I have a hard time seeing them winning that fight without full disclosure.
Fair enough, but you are at no time less than whole here, so how they decide to split your cash isn't much different than you deciding to buy product a over product b.
Note that "average" is misleading; as used by Even, it means "some amount we calculate by a secret-sauce algorithm that is not any usual definition of 'average'."
From the Even FAQ [0], under "How does Even calculate my average paycheck":
Even looks at how much you've earned and how much you've spent in the last 6 months. To be fully transparent, your Even pay isn't actually a mathematical average. When we use the word "average" we're using that word to make things easy to understand. Your Even pay is calculated using an algorithm that is more complicated than an average, because it does things like treating more recent paychecks as more important than paychecks you got 6 months ago.
(That they characterize this description as being "fully transparent", is further illustration of their creative use of words outside of their normal meanings.)
[0] https://even.me/faq