Author Topic: Fairer Solutions to Excess Investor Demand  (Read 82600 times)

cfb

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Re: Fairer Solutions to Excess Investor Demand
« Reply #90 on: August 23, 2013, 09:33:28 AM »
I think I've got a workable solution.

Don't release all the notes at four prescribed time, but rather dribble them out as they're stamped approved for fill and defer access to new notes to any mechanized process for xx minutes, I'm thinking an hour.  This levels the playing field by allowing those who are committed to the service to manually look at what is on the table at that time, and for large automated buyers to still have access to a collection of notes.  Institutional buyers can hire people to monitor the available notes and buy by hand if they want more timely access.

This eliminates mad scrambles, large automated buying of everything decent in under a minute, levels the playing field, but it does handicap the institutional buyers who want to buy en masse with an automated process.  Notes could be displayed as non-text, reducing or eliminating screen scraping or forcing the screen scrapers to do optical character recognition, which would need a lot of hardware and more time.  Or only show notes 5 or 10 at a time, and install an xx second delay between screens.

However answering a question generally requires knowing what the question is.  I don't think the question is "What's fairer", but rather "Who exactly does Lending Club want for its investing customers?".  If they want large institutional investors who wouldn't accept a more laborious process or lesser notes after they've been picked over manually, then some sort of 'fairness' system is needed, but they'd be unlikely to implement that.  If they feel that the institutional folks should be on a level playing field with the individual investor, then some compensation is needed for large companies with lots of employees and hardware to even things up with one person sitting at home with a PC.

I'd use their Prime investing system if it didn't charge extra and if they had complete filtering of all data with booleans and comparisons.  When looking at the total data, I was frankly appalled at what you DON'T see on the main LC screens.  I saw borrowers looking for 'debt consolidation' with great credit and low credit balances who had 400-500k of loans out that weren't primary mortgages and weren't reflected in the revolving credit number.  I was financing someones small business endeavor (either buying homes or other biz expenses) and not real debt consolidation, and those have VERY different default rates.

Of course, the real fix is simply broadening the field of prospective borrowers.  I could see LC becoming 'google loans' or 'facebook loans', where its a fairly obvious and ubiquitous process to lend and borrow money.

DanB

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Re: Fairer Solutions to Excess Investor Demand
« Reply #91 on: August 23, 2013, 10:49:31 AM »


 Someone taking me seriously isn't going to add money to my bank account. 


Oh, but it could, it really could........... & for some of us, perhaps it already has.  :) It really depends on who that "someone" who may be taking you seriously happens to be, don't you think?

core

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Re: Fairer Solutions to Excess Investor Demand
« Reply #92 on: August 23, 2013, 11:16:35 AM »
Notes could be displayed as non-text, reducing or eliminating screen scraping or forcing the screen scrapers to do optical character recognition, which would need a lot of hardware and more time.

That would indeed require them to spend a little extra time on developing a new bot.  Some of them wouldn't bother perhaps.  For the rest it would be a fairly simple exercise (one afternoon) as long as LC didn't skew all the text.  Heh, can you imaging trying to read a whole page of info that looks like a captcha?

This non-text idea would prevent visually impaired people from being able to use the site.  I think they would run afoul of the ADA or something.  Maybe they could require the blind to call in and have their account flagged as such and then the plain text is displayed.  LC would quickly find out that half their users are "blind".

Or only show notes 5 or 10 at a time, and install an xx second delay between screens.

A delay based on account (not IP, and not session) would certainly slow things down for them.  Maybe humans too, maybe not.  Since there's no restriction on multiple accounts I think I would just start creating more.  If the delay was 10 seconds, then 10 accounts seems like it would be enough.  Again, some people wouldn't bother, further cutting down on the bots by just a hair.  We've only eliminated the non-hardcore bots, leaving the serious ones with more prey.

I'd use their Prime investing system if it didn't charge extra and if they had complete filtering of all data with booleans and comparisons.

And the fact that you have no control over it.  If you see that it picked up a few notes that are blatant scammers, you can't even sell them!  Hope you like your 5 year ride on the notes that it selects.

When looking at the total data, I was frankly appalled at what you DON'T see on the main LC screens.  I saw borrowers looking for 'debt consolidation' with great credit and low credit balances who had 400-500k of loans out that weren't primary mortgages and weren't reflected in the revolving credit number.

Being able to filter things on different criteria is one reason people write bots in the first place.  You want better data and filtering, but you don't want other people to be able to take the initiative and develop it for themselves.  Forced least common denominator?  I'm on a slow satellite connection... can I ask LC to slow everybody else's connection down too? 

core

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Re: Fairer Solutions to Excess Investor Demand
« Reply #93 on: August 23, 2013, 11:22:50 AM »
Someone taking me seriously isn't going to add money to my bank account. 

Oh, but it could, it really could........... & for some of us, perhaps it already has.  :) It really depends on who that "someone" who may be taking you seriously happens to be, don't you think?

Meaning you got paid a hefty consulting fee by someone who read your posts on the forum?  Sure I guess that does qualify.  Congrats if you landed something big.  For me, I'd sure have to be paid a highly unreasonable fee before I started singing like a canary or developed tools for the competition.   What's the cap rate on something like that?  I wouldn't put myself out of business for less than 10 years of my expected trading income because 1) I don't want to have to go find another finance area to make money in until I'm darn good and ready, and 2) I actually enjoy doing this.

TonySaunders

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Re: Fairer Solutions to Excess Investor Demand
« Reply #94 on: August 23, 2013, 04:57:09 PM »
Don't release all the notes at four prescribed time, but rather dribble them out as they're stamped approved for fill and defer access to new notes to any mechanized process for xx minutes, I'm thinking an hour.  This levels the playing field by allowing those who are committed to the service to manually look at what is on the table at that time, and for large automated buyers to still have access to a collection of notes.  Institutional buyers can hire people to monitor the available notes and buy by hand if they want more timely access.

This doesn't do anything but make it necessary to manually check LC every hour, it would be even more maddening. Also, automation that uses the web interface already exists, so there'd be no stopping more sophisticated users from abusing it on day 1.

TonySaunders

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Re: Fairer Solutions to Excess Investor Demand
« Reply #95 on: August 23, 2013, 05:01:08 PM »
But it is fair.  Institutions get the same chance as anyone else to get the same size of note.

...


I'm a small investor, so I would benefit from a system that defines fairness in this way. But I disagree. I think it's just as reasonable for a big investor to expect to invest big as it is reasonable for a small investor to expect to get his share. Preventing it would essentially cut them out of LC, unable to access enough of the loans to make it a viable investment for them. Also, I don't think I'd prefer that large investors were put in a position of abandoning p2p over such a concern, because I like the philosophy of p2p lending and I want it to succeed. However, I want my piece of it too, just like the big guys.

I'm not necessarily right, it's pretty clear that defining "fair share" is a major crux of this discussion and that ethical considerations for such a task exist. I think that you and I have reached a fundamental difference of opinion on the matter.

(Edited)
« Last Edit: August 23, 2013, 05:52:41 PM by TonySaunders »

investforfreedom

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Re: Fairer Solutions to Excess Investor Demand
« Reply #96 on: August 23, 2013, 05:18:08 PM »
I can't believe how indiscriminate people have become in their desperate hunt for yields.  Even F and G Loans with 3 public records get funded very quickly--loans I wouldn't touch even with a 10-ft pole.  My takeaway of this is that institutions or institutional money managers aren't going for Morningstar Fund Manager of the Year.  As long as they can earn decent yields, they will just eat whatever is served on the plate, whereas most of us here somehow aren't content with mediocrity.

That's why even if we impose a time lockout of some kind on the big guys, it doesn't matter.  They will sweep up whatever is left regardless. 
« Last Edit: August 23, 2013, 05:21:09 PM by investforfreedom »

TonySaunders

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Re: Fairer Solutions to Excess Investor Demand
« Reply #97 on: August 23, 2013, 05:25:35 PM »
I can't believe how indiscriminate people have become in their desperate hunt for yields.  Even F and G Loans with 3 public records get funded very quickly--loans I wouldn't touch even with a 10-ft pole.  My takeaway of this is that institutions or institutional money managers aren't going for Morningstar Fund Manager of the Year.  As long as they can decent yields, they will just eat whatever is served on the plate, whereas most of us here somehow aren't content with mediocrity.

That's why even if we impose a time lockout of some kind on the big guys, it doesn't matter.  They will sweep up what is left regardless.

Small investors want to optimize our return by waiting for the best notes because we have a limited supply of money.

Large investors (because they have an essentially unlimited supply of money) optimize their return by buying EVERYTHING that is expected to give them a return better than X. (Where X is the return they currently get on their money.)

So, of course they buy those notes along with the good ones, otherwise it's a missed opportunity.

You'll find small investors there too, but probably because they can't access better notes. They are settling.
« Last Edit: August 23, 2013, 05:30:39 PM by TonySaunders »

cfb

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Re: Fairer Solutions to Excess Investor Demand
« Reply #98 on: August 23, 2013, 05:30:08 PM »
This doesn't do anything but make it necessary to manually check LC every hour, it would be even more maddening. Also, automation that uses the web interface already exists, so there'd be no stopping more sophisticated users from abusing it on day 1.

The truth is, there is no solution other than to increase the # of borrowers to the extent that supply exceeds demand.  But spreading it out would prevent the mad stampede four times a day.  They could also throttle people who keep hitting the site to screen scrape, or periodically shuffle things around, but the smart determined folks would just make 10,000 accounts or write more code and get by anything LC would do to level the playing field.

I actually had never seen the information about the 4 times a day dumps.  I've read a whole lot about LC for the last 18 months and never saw that information until this week when I came across this site.  Its a bit of work to sift through 58,000,000 blogs and forums that all say "I tried that LC thing...I put $100 into four notes and I picked 'small business' because I'm entrepreneurial and 'A' notes because those are probably the best kind, then one defaulted and I quit because that p2p thing isn't a good idea".   :)

TonySaunders

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Re: Fairer Solutions to Excess Investor Demand
« Reply #99 on: August 23, 2013, 05:33:31 PM »
This doesn't do anything but make it necessary to manually check LC every hour, it would be even more maddening. Also, automation that uses the web interface already exists, so there'd be no stopping more sophisticated users from abusing it on day 1.

The truth is, there is no solution other than to increase the # of borrowers to the extent that supply exceeds demand.  But spreading it out would prevent the mad stampede four times a day.  They could also throttle people who keep hitting the site to screen scrape, or periodically shuffle things around, but the smart determined folks would just make 10,000 accounts or write more code and get by anything LC would do to level the playing field.

I actually had never seen the information about the 4 times a day dumps.  I've read a whole lot about LC for the last 18 months and never saw that information until this week when I came across this site.  Its a bit of work to sift through 58,000,000 blogs and forums that all say "I tried that LC thing...I put $100 into four notes and I picked 'small business' because I'm entrepreneurial and 'A' notes because those are probably the best kind, then one defaulted and I quit because that p2p thing isn't a good idea".   :)

There will never be enough borrowers. Ever. If you think that's possible then you don't understand how large investors work. Luckily, I think there are other solutions. Like a LendingClub implemented auto-invest tool that is applied before the remainder of the loans are posted for manual purchasing. The tool can simply award notes according to some "fair share" rules instead of whoever-clicks-fastest.

EDIT: A second reason there will never be enough borrowers: If we all compete for 1 out of 10 notes now and LC increases borrowers 10-fold, then we'll all compete for 2 out of 100 notes. No matter how many borrowers there are, there will always be a desirable proportion of loans that we want fair access to and can't successfully compete for.
« Last Edit: August 23, 2013, 05:36:09 PM by TonySaunders »

investforfreedom

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Re: Fairer Solutions to Excess Investor Demand
« Reply #100 on: August 23, 2013, 05:33:53 PM »
And LC likes this, since the more loans they originate--and the faster they originate, the more money they make.  They aren't going to change that.

I can't believe how indiscriminate people have become in their desperate hunt for yields.  Even F and G Loans with 3 public records get funded very quickly--loans I wouldn't touch even with a 10-ft pole.  My takeaway of this is that institutions or institutional money managers aren't going for Morningstar Fund Manager of the Year.  As long as they can decent yields, they will just eat whatever is served on the plate, whereas most of us here somehow aren't content with mediocrity.

That's why even if we impose a time lockout of some kind on the big guys, it doesn't matter.  They will sweep up what is left regardless.

Small investors want to optimize our return by waiting for the best notes because we have a limited supply of money.

Large investors (because they have an essentially unlimited supply of money) optimize their return by buying EVERYTHING that is expected to give them a return better than X. (Where X is the return they currently get on their money.)

So, of course they buy those notes along with the good ones, otherwise it's a missed opportunity.

TonySaunders

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Re: Fairer Solutions to Excess Investor Demand
« Reply #101 on: August 23, 2013, 05:40:54 PM »
And LC likes this, since the more loans they originate--and the faster they originate, the more money they make.  They aren't going to change that.

Why would you want them to?

dontvote

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Re: Fairer Solutions to Excess Investor Demand
« Reply #102 on: August 23, 2013, 06:26:24 PM »
Originally the business plan was a peer to peer one. That's awesome but if these companies aren't really peer to peer lenders anymore. Business plans change and at the end of the day these are professionals trying to maximize returns to their owners (which we are not -- we are clients). If they want to leave a bit of space for us that's great. If they don't, they are fully aware that there is plenty of room for another 'true' p2p lender to enter the marketplace, take our money and give us a shot at similar notes. There will not be a shortage of people who need money and that supply will always go to the lowest interest rates or to the lowest credit requirements. What is the startup cost for a p2p lender like this? 10m? Probably not much more... (4m to hire some guys away from either platform, 3m for legal and regulatory, 1m for the website and 2m for advertising.)

I won't pretend my own criteria did significantly better than the IR and P2P stuff I'm blindly following (about the same with more effort), but I'm fine getting the loans I'm getting, though I share the gripes about loan selection not being in my favor. I'm fine with The difference between making XX% on my money with first choice of notes and XX-2% on the dregs that are left until TrueLenderP2PIPromise.com comes by.

If they wanted to fix the supply/demand problem, they could just reduce interest rates. That's the 'price' in our econ 101 graphs here. Borrowers would gobble the lower rates, investors would get lower returns and we would both get to pick out the loans we want. This would cause a huge pain in the ass for their institutional clients but I'll bet they wouldn't get a huge exodus for a small reduction in rates. The value proposition for a fund is still too strong.

dontvote
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rlv99

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Re: Fairer Solutions to Excess Investor Demand
« Reply #103 on: August 23, 2013, 06:42:17 PM »
After 5 days of reading posts on this thread,  I no longer believe there is a valid reason for whole loans.  I don't know how many whole loans are available nor do I know if every loan is being funded,  however, even a couple more loans being made available each day to the retail investor would help.

I tried researching the whole loan subject on the LC HELP site,  but nothing came up.

Dennis

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Re: Fairer Solutions to Excess Investor Demand
« Reply #104 on: August 23, 2013, 07:20:08 PM »
If they want to leave a bit of space for us that's great. If they don't, they are fully aware that there is plenty of room for another 'true' p2p lender to enter the marketplace, take our money and give us a shot at similar notes.

dontvote

There could be a real niche or opportunity for the next P2P lender now.  While Prosper and LC seem to be attracting more and more institutional money, maybe this would be a very good time for the next P2P player to come aboard with a true catering to the small investor.  They could steal a large amount of business from Prosper and LC, judging from some of the opinions here.  As more P2P start-ups undoubtedly will appear, catering to specific types of investors would distinguish one from the other and create even more opportunities for everyone.  Maybe portfolio sizes could be limited to 100k or no institutional investors allowed or some other distinguishing characteristic.  - just throwing an idea around.......