Interest
As most people know, banks make their money by investing customers’ money. They use fancy calculations to decide how little money they can keep on hand for people that come in wanting to withdrawal. The rest is then invested at a higher interest rate than they pay their customers.
Grocery stores make money by doing a similar thing. They earn the majority of their profits by investing, not by simply selling goods for a higher price than they bought them for. Here’s an example. A store gets an invoice for a flat of toilet paper on the day they received the shipment. That invoice isn’t due for sixty days, but you or I buy a package of rolls when on the shelf, one or two days after the shipment arrived. The grocery store then invests the money they got from you and me for the 58 or so days between when they get our money and when they have to pay their bill. After 60 days, they pay their bill, and the profits they made in the interim just keep growing and growing.
The moral of this story is that there is a lot of money to be made off of other people’s money. This makes me wonder who is making money off of the final table proceeds while it is just sitting there until November. At a very reasonable daily interest rate of 3%, the $23,626,746 that is waiting to be handed out, should reap a profit of $200,000 between July 15 and November 10. That’s a lot of money, and if I was sitting at that final table, I’d want my interest. By pushing the table back several months, Harrahs is costing the final table, as a group, all the interest they could be earning on the their money. And with some savvy investing, it could potentially costing them a lot more than $200,000.
And here’s another crazy idea…it seems like players should start pushing internet poker sites to keep our online funds in interest bearing accounts. After all, our online accounts are little more than checking accounts that we make rapid withdrawals and deposits from. I’m no genius, but I’m guessing that if every industry out there has figured out how to turn profits using idle customer money, that the poker sites have as well, and we should ask for our cut.
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Hey Amarillo,
The money actually is being held in an interest-bearing account. Not sure what kind of return they are getting, but the players are making some sort of interest. Probably less than they would get if they invested independently though.