What they need is money, not loans, and, in particular, not loans against consumption rather than production, which is what broadly available credit inevitably devolves into. (Look at college loans, which started off ostensibly as an investment in productive assets and has devolved into financing four years of heavily curated consumption followed by crushing student debt.)
Even loans against production are dangerous and eventually lead to debt peonage and wealth concentration, as we have seen time and time again, from roman times onward.
The problem is usury, and there is a long, historical argument about it that is completely ignored in the west. This is because history is written by the victors, and the usurers won. We are all usurers (or aspiring usurers) now.
Don't downvote me here please. Honest question. If you want some of my money, and I am willing to give it to you if you pay me back with a little extra due to compensate for my worry that you'll not pay me back... what's wrong with that? Why am I a bad person for agreeing to it?
So you’re not a bad person. If you design it like a bank, charge a reasonable interest rate, deny people you know can’t pay you back, and give up on getting a return on people who legitimately can’t pay you back for unforeseen reasons. That would be fine.
But what these companies are doing is essentially giving a loan to anyone, at an incredibly high interest rate, to pretty much anyone who applies. If they can’t pay back, they keep increasing interest, charging fees and if it get really bad, they will make claims on the victim’s future wages.
The high interest rate is for the high risk. If anyone who could qualify for a lower interest rate, wouldn't go and borrow at the higher interest rate.
High interest is only for high risk when the lender is forgiving more of their loans. That's the risk - too much forgiving means they need to make up the difference with a higher rate for the fewer people who do pay it back.
The parent is arguing (correctly) that you can't have both high interest rate and a low/zero rate of loan forgiveness while claiming to be ethical.
Respectfully, zornado is correct and I'm not sure why he's being downvoted.
The market cannot operate without a free market for risk-taking and a free market for assessing confidence of repayment as expressed in interest rates. Borrowers are not entitled to money at a set interest rate in the private market (I would argue this should apply to the public market as well, or at least the markup through banks should be minimized). Saying "these interest rates are too high" is the credit market equivalent of saying "the price of this car is too high, give it to me cheaper".
The individual defaults if they file for bankruptcy. Until then the terms of the loan, voluntarily signed, determine an interest rate and an obligation to repay. The lender is not obligated to forgive a loan; if that were the case credit liquidity would be nonexistent. (IANAL)
> Another of these apps, Okash, took this logic of stigmatization even further, harvesting users’ contacts and calling bosses, parents, and friends to shame defaulters into repaying.
(emphasis mine)
This has nothing to do with free markets for risk-taking or confidence assessment. If you want markets like these to work well, you build them using information, not shame. Shame is a tool of last resort used by abusive lenders who are too lazy/stupid/corrupt to do their homework.
This is just another bog standard case of powerful actors abusing weaker ones. These lenders are targeting populations who don't have the knowledge or the resources to "correctly" default or file for bankruptcy, or to defend themselves against abuse when they do manage to do it correctly.
If the borrower defaults, the lender is supposed to stop hassling them and write off the loan. There are a whole bunch of other things they can do, but again, those things are not ethical.
That's treating delinquency and default as the same thing. Even if your debt isn't forgiven, if you repay late, then the present discounted value of that future money is worth less to the creditor than had it been paid on time.
Tala, Branch, and all these fintech firms are taking out debt themselves in order to lend to these individuals. Thus, they are paying interest. If you are late in your payments, they are floating you on their debt lines for longer.
Thus, even without loan forgiveness, a higher interest rate make sense to account for the risk if delinquency.
Secondly, even if they don't forgive the loan formally, internally it will eventually be taken as a writedown. You can default on a loan and they never get the money back without loan forgiveness existing. That again affects their rate of return and thus needs to affect their interest rate.
If instead they shouldn't be allowed to charge above a certain interest rate, then that will internet come with denying credit to a lot of the population.
People always want to have it both ways: don't discriminate against poor people by denying them credit but don't charge them the interest rates that are required to offer them credit. It's why people simultaneously complain about how sub-prime was predatory but also complain that the banks aren't doing enough to get low income people into home ownership. You can't have it both ways.
I'm not saying that there shouldn't be regulation limiting the types of loans allowed, interest rates, etc. Uneducated people in developing countries are probably not the best rational actors when it comes to making complex financial decisions. Some regulatory paternalism (and even libertarian paternalism by the govt through forcing clearer information on loan terms) is definitely warranted.
My point is fundamentally you can't have it both ways. Interest rates are a reflection of risk. And the result would be denying people access to financial services. We should be honest ourselves about these tradeoffs instead of pretending we can simply have our cake and eat it too.
There is only so much philanthropy money from the Gates Foundation, World Bank, etc. The rest of the capital to fund development ultimately comes from the private sector wherein there must be a sufficient return on that capital to justify its use in that scenario. Otherwise, the capital will simply just go elsewhere.
And again there could be other solutions. A massive overhaul to tax policy worldwide could provide a massive new source of capital to solve the problems of economic development. But I'm not holding my breath for such changes in a world where the super rich have only become more adept at tax evasion.
Disclaimer: I worked in online lending at Avant. I know some of the Tala guys as I live in Santa Monica. And my wife works at the World Bank in international development.
The article mentions "...high rates of borrowing on weekend nights as evidence that loans are marketed and taken in moments of inebriated revelry."
Assuming that's true, and considering all the data these fintech operations are collecting, surely they can't believe they're funding development rather than consumption.
That makes some sense for the bank. But a person who doesn't qualify for low rates certainly shouldn't qualify for a high rares loan, as that only raises the risk.
The problem comes when you use the money form the loan in a competitive market - e.g. real-estate. The availability of credit increases what people are able to pay, and hence the price. To buy a house, a loan becomes a requirement, which benefits the lenders, as their market grows.
I should add a disclaimer: While this is a harmful consequence of loan availability, I wouldn't conclude from it that credit is harmful in sum. E.g. higher house prices eventually increase the supply (there are exceptions, like if the supply is limited by some other factor, like land availability).
But whatever the other effects of credit may be, empirically, it sure does look like it concentrates wealth.
This is a totally fine and ethical arrangement. What makes someone a bad person is if they see that, for whatever reason, these kinds of arrangements are inadequate to meet the needs of people (and particularly children of people) to have a decent life and they do nothing.
High interest rate loans to people who can never repay them don't do much of anything to help actually lift people out of poverty. Being in the loan business is fine, but accepting a world where a kid's entire life is stunted because of who they happen to have been born to is not.
This seems to me almost impossible to change. Of course a child's entire life is hugely affected by genetics and upbringing. That's not even to mention the connections anf opportunity gained through family ties. It may be unfair
(debatable) but it's the way of the world.
Sure, the genetics are not easy to fix, but we can and must fix problems like crushing poverty, shitty infrastructure that poisons kids, and lack of good public education. These are not even remotely intractable problems and its the most ridiculous kind of prevarication to suggest that they are.
>what's wrong with that? Why am I a bad person for agreeing to it?
It's not about "a little extra" (a fixed amount), it's about the interest (which can get many times the amount).
Historically and globally, from the ancient Greeks to the Arab world, and from Japan to Americas, in all kinds of moral systems, people agreeing to it are not just "bad people", but the scum of the earth.
Historically also, loaning, from ancient Babylon, to 19th century USA, and even today in many places, has been closely associated with slavery. Many ancient slaves were debtors, all the way to debt bondage, indentured servitude, and so on.
You are correct that a higher interest rate is supposed to compensate the lender for the risk that the borrower defaults and the lender loses all his collateral.
But when the lender can garnish the borrower's future wages, sabotage his job applications, and force the borrower to repay with the threat of criminal prosecution, the lender's risk of losing his initial collateral goes down significantly. What justifies the lender charging exorbitant interest rates when he has all these tools available to avoid the loss of his initial investment and earn even more profit?
I think that combination why usury is reviled. It's not just the high interest rates, but the tools and punishments lenders use to lower the risk of default below what justifies their high rates. It's high interest rates + debtor's prisons that's really repulsive. Having a lender offer you higher terms because he says you're more likely to default, but then refusing to let you default and seizing your economic production for the rest of your life.
> It's not just the high interest rates, but the tools and punishments lenders use to lower the risk of default below what justifies their high rates
It obviously often doesn't work out this way, but the baseline assumption in a competitive market should be that businesses aren't able to charge significantly over the market-clearing price. OTOH there's no evidence behind your assertion that rates are "unjustifiably" other than a gut feeling, only one step removed from the classic "money doesn't have time value, any interest payment is theft". Why do you think the price is higher than the risk would imply (including the cost, delay, and failure rate of recovery efforts), and why wouldn't a competitor have filled the gap with lower rates?
Again, I get that markets aren't instantly perfectly efficient, but there's usually something you can point to that shifts the equilibrium away from efficiency.
Well, my assertion for why people dislike usury isn't because of just high rates, but high rates + unreasonable measures to ensure repayment. Focusing the discussion to whether the rates are a particular economically justified number or not ignores the social aspects of usury.
Even the article doesn't just focus on high interest rates, but discusses hectoring people during their daily lives, calling bosses, friends, and family to shame them into repaying, and linking credit ratings to job applications.
Maybe the outrage on usury would be lower if it was legislated that lenders cannot use public shaming, criminal sanctions, or garnishing wages to force repayment on someone that has stated their intent to default on their loans. The borrower would be blacklisted from the lender in the future and overall interest rates would go higher due to less recovered funds. However, there may be less outrage because as I stated, the key issue isn't just rates but rates + unreasonable lender behavior. The difference between a bank and a loan shark isn't just different rates, but that a bank will only downgrade your credit rating in a default while a loan shark will break your legs.
If you're interested in some reading, check out David Graeber's "Debt: The First 5000 Years." It's a pretty interesting presentation of the social nature of money beyond just a number on a balance sheet.
I guess what I was addressing was the claim that the rates are "unjustifiably" high given the aggressive recovery tactics:
> tools and punishments lenders use to lower the risk of default below what justifies their high rates
My point was that this assumption was unfounded, and it's a better baseline assumption that the counterfactual of aggressive recovery tactics would be even higher rates.
It seems we're in agreement that it can be entirely salutary for the government to decide to limit the actions you can take to recover debt (at the likely cost of higher rates), but it's important to be clear on the model we're using here.
Because some people are too poor and/or too bad of decisionmakers to get loans. If someone's eating just one potato a day, you loan them money and you know they're not going to invest it in a business, they are going to buy a second potato to quell the hunger pangs and now they're back where they started but now they owe you a potato + 15% every month.
You don't give a handgun to a toddler or a case of whiskey to an alcoholic, for someone who can't ever repay your loan, then it's not ethical to loan to them.
If you were two people who started on a more or less level playing field, it wouldn't be. The problem with these kinds of systems (at least the ethics of them) is that what conservatives call the "West" which is to say, America, Europe, sometimes Russia depending, or what can also be called the "1st world" is yes, wealthy, yes, successful, but that a great deal of that wealth and success was derived from colonial exploitation of these other countries.
So, in simpler terms, we've spent more or less 4 centuries robbing these people blind, stealing their resources, occasionally their actual people, and murdering them in droves as we did. And now, we sold them cheap phones, and linked them to a network of banks that allow westerners to loan them a tiny, infinitesimal amount of money to us, in exchange for getting a profit when they pay it back.
Now there are people who are going to downvote you and also me because they don't like being reminded that the alabaster clad civilization we all enjoy is built on the backs of just, stressful amounts of slavery, be it literal slaves, economic slaves or political slaves, but it's true. It's also true that our vaults are packed to the brim with wealth that was taken from those who had rightful claim to it. These are unambiguous historical realities.
We here are not fortunate; we are the victors in a war that's been going on since about the time the first iteration of the Dutch East India company was chartered; the war between the haves, and the have-nots. And we have won so hard that it will probably take generations of dedicated effort to make things even remotely equal again.
Edit: Just to make this clear, when I say we are not "fortunate" I merely mean to say that it is not good fortune or some divine will that's put us in this position, as is a common citation of those seeking to maintain this status quo. I'm saying that it was a concentrated, often violent effort that put us here.
I don't disagree with much of what you're saying, but it's orthogonal to the claim that credit availability and its attendant worst cases is worse than lack of credit availability. I'm not sure the evidence supports this: even well-known "horrible exploitation" like payday loans have significant evidence behind the fact that they're net beneficial to the communities they serve.
It seems to me that this is one of those cases where people are conflating a larger problem (global poverty) with a system that incrementally helps the situation (access to credit), due simply to its adjacency. The outcome, in this case and others, is to advocate for making these people's lives _worse_ by removing access to credit.
That is to say, I'm a stronger theoretical supporter than most of radical global redistribution, whether as recompense for colonialism or out of a duty to our fellow humans. But this is more or less a complete non sequitur when it comes to debt, since that responsibility, to the extent you agree with it, says nothing about whether access to credit is helping or harming these people (and all the evidence I'm aware of says that marginal credit extended to the developing world tends to help, though this is an oversimplification).
There is nothing wrong with investing in a productive enterprise and expecting to share in the profits of that enterprise.
If a man is starving (or, worse, has convinced himself he needs a new iThing when he does not) and you loan him money you are either violating charity or enabling debt-peonage, respectively.
This is setting aside the exponential nature of compound interest, which is why debt-based economies always go bust, and focusing on the individual morality of the transaction.
Learn the difference between a legitimate loan and predatory practices. There is a distinct difference between capitalizing on a market and pure exploitation. The Wall Street/Harvard Business ideal is the latter.
If you'd like some interesting reading, take a look at the traditional Catholic analysis of usury: https://zippycatholic.wordpress.com/2014/11/10/usury-faq-or-.... According to this modern summary, anyway, any interest-bearing loans that are personally guaranteed (such as credit card loans or student loans) are immoral. However, investment is permissible, as are collateralized loans (either against property, such as a house, or against a corporation, which is a sort of property); however, in the event of default, it would not be permissible to go after the corporation's owners to recover the rest of the loan (although if the owners illicitly withdrew money from the company they'd still be liable for fraud).
> Even loans against production are dangerous and eventually lead to debt peonage and wealth concentration, as we have seen time and time again, from roman times onward.
> The problem is usury, and there is a long, historical argument about it that is completely ignored in the west. This is because history is written by the victors, and the usurers won. We are all usurers (or aspiring usurers) now.
You can say 'it was always like this' as much as you want, that doesn't make it true.
Not a single society that didn't have 'usury' ever developed a middle class, human rights, a welfare state and most other things in modernity. The reason the 'usurers' have won is because it is a far superior system and no society that has experiance it actually goes back to the old system.
People like to complain and complain, but when somebody actually tries to remove these insitutions from modern society its a total failure. As we have seen with different communist and other revolutions.
In fact broad access to credit was a major driver for the industrial revolution and for the modern world. It didn't lead to wealth concentration but rather to a broad wealth explosion.
I am informed that "History is written by the victor" is bad historical thinking, one that people should not use in their arguments. Presently, the past is constantly interpreted by people, 'winners' and 'losers', historians with expertise, and folks with an axe to grind.
History is written by the victor needs to be complemented with "and also by the wealthy" - it was very expensive to learn, produce and store the media used for reading and writing. Then the wealthy could care less about the peasant 500 miles away, but patronage artists dealing with subjects of their interest.
This is specially important if you want to know how people truly felt during big historical moments, and compare them with modern lifestyle. We know very little about most of humanity throughout history, their feelings and worries and suffering and if they slept in 2 phases or whatever. So we have records of those big events, and practically no clue what the hell regular folks at that time thought about them.
> I am informed that "History is written by the victor" is bad historical thinking, one that people should not use in their arguments
Who informed you of this? The person who wrote the histories of given events absolutely matters. Time and again textbooks have had to be recalled and reprinted because of crazy amounts of slighted disinformation that amounted to little more than sexism or racism on the part of the original authors.
Somehow I feel like poor people in Kenya are not the primary source of overconsumption. And giving people more money decreases population growth, it doesn't increase it.
> What Patch offers instead is to take a piece of your home equity (currently limited to $250k maximum) and sell the upside on it to a investment fund.
Sometimes I can't help but feel that we deserve what's coming.
What's wrong with something like that? Ok, selling the upside might be stupid, but it also might make sense in some situations. I dont think this product will be wildly succesful and change a lot of things, just a niche thing.
It's already not what most people would call a sensible price. Seems difficult to significantly shrink a phone that has a pair of M.2 slots in it though.
I wonder if you'd find the Xperia Ace (or an XZ2 if you want used) close enough for you. I think the Xperia line is where I'll be looking for my next phone, personally. https://phonesized.com/compare/#632,968
Edit: additionally, it looks like the Xperia is thick enough to have no noticeable camera bump. Has a 3.5 mm jack too; I like the look of this quite a lot.
It's unclear if Kaczynski received any psychedelics. What we know is that he faced hundreds of hours of intense personal abuse including belittling his hopes for the future. Nobody is pushing that.
I haven't heard Manson's story on the issue, but he would have already spent a decade incarcerated before they did anything.
Yes, and he underwent said abuse at Harvard by a doctor named Henry Murray who was apart of the division that created MKUltra/MKSEARCH and who had previously administered LSD to unwitting patients.
Lets get real, when your goal is complete ego control, all forms of mindfucking are on the table.
Also, almost all of the MK Ultra files were destroyed. So what people know is residual and stories from guilt ridden scientists and abused people.
There's no logical reason why we should necessarily uphold the institution of marriage and the nuclear family as the foundational structure of society. We could all enjoy fulfilling relationships with each other and with our community's children without marriage. In fact, I'd go so far as to say that we are failing many people in society by only legitimising those relationships that are based in marriage and legal parenthood/guardianship of children.
Historically, most humans did not marry and were engaged in collective child-rearing, rather than foisting the responsibility on a single pair of parents that were either biologically or legally bound to a child. These practices only emerged with the agricultural revolution. I think it's easy to imagine that children would have a far more enriching experience of growing up if they were cared for by a larger group of people with a wider range of age, experience, skills, etc. Not to mention that it would help with the problems of children growing up in "broken" or single-parent households, where they may experience poor or insufficient care and attention due to economic hardship or parental absence.
> Marriage is a wonderful institution and the children that come from it are the greatest gift you can be given.
This is true only if the finances are there to support it and both people really want it. In which case any "institution" can be considered wonderful and the fruit of it a "gift."
Most people can't get out of the consumer wage slave trap, it's their only opportunity or the only one they know about or can use to try to be in a better economic situation.
Children strain things and make things less happy between the mom and dad in a lot of marriages unless there's enough money.
A close friend of mine had her mom and step dad married for easily 25 years and they both hated each other. He hated her kids (that lived with them) she hated his kids that were weed dealers (tbf so were her kids thats how I knew them lol). She gambled online all night or went to bingo, while he powered through a 30 pack on a Tuesday chillin on the couch.
They had to stay together because they couldn't afford to live without the other. They were already in a small ass apartment, they didn't have assets to liquidate. They were slaves to each other because they needed the money.
Unfortunately some of my close friends are stuck in a similar situation. Luckily they like each other more than the case above and have pretty much always struggled financially. But it's clear they need each others income to survive, and they just had a kid. Hoping they can maintain the love.
>But our culture is insane and wants you to be an isolated, rootless, consumer wage slave
See also: Jihad vs. McWorld by Barber, it is essentially a discussion of that phenomenon. Forcing everyone into a consumer role is liberating in some ways if you're someone who never had those rights (dalits in India, housewives in the West), but now you're just another wage slave competing against everyone else for their slice of the profits.
Thanks to higher education, a lot of people now have realized that their own life is worth living beyond the two catholic-born axioms of family and succession, and are looking to experience their whole existence just for themselves.
There's no mega corporation or consumerism involved, just lucid realization of one's own aspirations and desires.
I translate 'marriage' to 'mature monogamous partnership' and I think scientific research shows that people who have a happy long-term partnership live longer than lonely single individuals. Perhaps especially true if children are part of that partnership.
I don't think simply being married equates to happiness though. The institution is probably irrelevant when held up to the quality of the actual relationship.
Correct, it's having a partner that has an impact on our wellbeing. Also, last time I checked psychology textbooks having children had a neutral effect.
This message needs to be tempered a bit. Marriage can and often requires hard work, pain, struggle, and sacrifice. To say it is wonderful is wrong and will lead to disillusionment. Working through arguments, child issues, sex deprivation, affairs, moves, finances, etc. can be very rewarding and worth the struggle, but it is not wonderful all the time.
Seriously. I used to be on a high flying career path and was pretty happy about it. Then I had kids and realized I never knew what happiness was. I have about $2m and will be going to stay at home dad soon. Now everything at work seems like such utter bullshit. Who cares if this code compiles or not. We’re all just useless worms on a piece of dust. I’m going to spend my femtosecond with my kids.
Elephant in the room is the $2m in the bank. This alone affords you the perspective to value family life over all else. If you were struggling to make rent and feed your kids you might find that children are a burden and stress. I don't think this would necessarily make you love them any less, but some of my friends have warned me off of deciding to have children because of the financial strain that comes part-and-parcel for the average person with kids.
> The 90-minute presentation essentially demonstrated almost all the fundamental elements of modern personal computing: windows, hypertext, graphics, efficient navigation and command input, video conferencing, the computer mouse, word processing, dynamic file linking, revision control, and a collaborative real-time editor (collaborative work).
Whoa, 1968! It seems incredible that was half a century ago!
What they need is money, not loans, and, in particular, not loans against consumption rather than production, which is what broadly available credit inevitably devolves into. (Look at college loans, which started off ostensibly as an investment in productive assets and has devolved into financing four years of heavily curated consumption followed by crushing student debt.)
Even loans against production are dangerous and eventually lead to debt peonage and wealth concentration, as we have seen time and time again, from roman times onward.
The problem is usury, and there is a long, historical argument about it that is completely ignored in the west. This is because history is written by the victors, and the usurers won. We are all usurers (or aspiring usurers) now.