How Financial Tech and Outsourced Banking Made Saving Risky Again
Adam Moelis and Ben Doyle had an outside-the-box business pitch: Many Americans struggle to build a savings habit but also enjoy spending money playing the lottery. What if they could combine a bank account with a sweepstakes to make savings more fun?
The two entrepreneurs developed the idea with the help of Y Combinator, a storied tech incubator where business founders can hone their ideas and get them in front of venture capitalists. In 2020, Moelis and Doyle launched a finance app called Yotta. For every $25 users deposited into Yotta, they'd get a virtual sweepstakes ticket instead of interest. Prizes ranged from 10 cents to $10 million. Drawings would happen once a week, encouraging people to keep coming back to the app. Yotta Technologies Inc. got early investments from VC firms including Base10 Partners and Core Innovation Capital, as well as hedge fund manager Cliff Asness and Moelis' father, Ken, the billionaire founder of the investment bank Moelis & Co.
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Society gatekeepers like Astor made social mobility difficult for the newly rich. In 1883, Alva Vanderbilt, daughter-in-law of Cornelius Vanderbilt, threw a masked ball which cost about $250,000, or about $8 million today. She invited 1,200 guests, but purposefully didn't invite Caroline Astor's daughter unless she came with her mother, according to the Museum of the City of New York. Caroline Astor did attend as she'd hoped, strengthening Alva Vanderbilt's place in society. The ball was a huge success. Dinner wasn't served until 2 a.m. and the dancing continued until dawn. The newly rich displayed their fortunes by attending the opera, access to which was controlled by old-money families. In New York, a group with inherited wealth controlled who could get tickets to the Academy of Music, an opera house, and made it impossible for others to see a show. In 1883, a group of newly rich families banded together to open the Metropolitan Opera so they could see opera performed, as well. Gilded Age tycoons did some good with their fortunes, funding museums, orchestras, and opera groups. Industrialist Andrew Carnegie, who donated money to fund more than 2,500 libraries around the world, said if a rich man died rich, he "died disgraced." By the 1910s, the Gilded Age was coming to an end as the age of tycoons weakened and the underbelly of corruption was exposed. Tycoons made their money at the expense of the working class. As newspapers exposed the underlying corruption that allowed an elite few to hoard enormous amounts of wealth, President Theodore Roosevelt imposed new limits on corporate power and established tax and political reforms. It would take a few more years before the Gilded Age fully ended, but the days of ostentatious eating, spending, and partying were over.
