Market Discussions

The issue is not so much that the loan is loan number x as that people are willing to lend someone more if they have a prior history of repayments. Personally, I would look for increased interest rates, or at least no drop, from people who are increasing the amount of their loan. A combination of increased exposure plus a drop in rates, which we often see, makes little sense from an investor perspective but lots of sense from the perspective of the borrower. Unfortunately, bad investment practices have often prevented the mechanics that should be in place from taking hold.




Various people have tried the credit rating thing but it is a bad idea. A) someone's loan history is always available to anyone who can use eve-search and does not require a specialist. B) Putting the investment market into the hands of an elite has informally happened before and has ended badly. It still happens informally to some extent, though - if well known investors invest in a bond it is more likely to fill quickly.




Not really. The thing is, the collateral needs to be undervalued for the transaction to make sense. If the collateral is valued at market price then a 'borrower' can just use a loan to sell goods quickly at market value, shifting the work of selling the goods onto the lender. So, the lender needs to build the time it would take and the lost opportunity costs (as he will have been holding the collateral for normally a month before a default is recognised) into the price he values the collateral at and this will normally involve valuing it at 10% below market value to ensure he can sell it very quickly and still recover his money. But if the collateral is 10% undervalued there are a lot of people who would quite like to scam the borrower and simply buy goods at 10% under market price. That's why a third party who is trusted by both individuals is often needed.




This is really what a lot of the right 'procedures' are about. Audits, questions, an insistence that borrowers grow their borrowings slowly - NONE of these things can stop someone scamming. What they can do is introduce barriers to entry for the scammer and reduce the pool of potential scammers to only those who have the skills to actually operate successfully whilst also reducing the isk earned per hour of effort in a scam. Effective control of these elements can help skew the odds of successful investing in the investors favour. Unfortunately, historically most investors are very bad at what they are doing and don't have much of an idea of how to control risks and make the investment pool a cleaner and healthier place which leads to a proliferation of junk. There is a very real sense in which the greatest enemy for a responsible investor is not the scammers, who are just part of the scenery, but the other investors who encourage bad business practices.

This is what I am gathering from talking to you folks. It seems then that there is an actual "culture" of investors whether spoken of or not. When the culture is healthy, investors are checking themselves and their clients, making sure everything checks out. In a perfectly healthy market culture there would be no scams at all because the barrier would be too great / not worth the hassle. In a "sick" market culture there would be a proliferation of scams and troll-likes.

So it is then, each Investor contributes to the health and wellbeing of the greater community. There will always be a chance for it to end terribly, but that risk will always be there no matter how trust worthy a group of people or a person is.

This too seems to happen almost naturally, with bad or inexperienced investors rising from the gunk as their isk grows and jumping in without proper research or with brash confidence.

One could argue though, that the amount of information on how these procedures are done have not been as standardized. Perhaps a sticky thread is in order to encourage healthy loan habits? I've done some searches for info but it's hard to filter through all the loan requests and find the actual meat and substance of the How-To's and "Here's how we Roll"s

Seems it's mostly based on participation and community than anything else, which is a hallmark in Eve and isn't really found in other areas of game play.

Here's my own introductory advice or basic 'How To' guide for investing:

1. Get as much basic information as possible to build a risk profile. This in no way provides solid protection as people can certainly act against expectations but it does provide a guide as to when you might expect someone not to bother with scamming. The basic info I always want includes a) current outstanding unsecured debt; b) previous highest unsecured debt; c) earning history and potential, including current NAV; d) degree of activity. With this data you can see that if, for example, someone has held 20bil unsecured for 6 months, cleared that debt and then launched a new bond for 10bil then they are unlikely to be following a masterplan that will involve scamming that 10bil. It is important, however, to get a commitment, where possible, that additional funds won't be raised beyond a certain level or the 10bil could rapidly become part of a 100bil debt that may fit better into a rational masterplan.

Earning history and potential is also useful but by no means definitive. Someone who can earn 10bil a week and has actively engaged with the MD community for months is unlikely to be following a masterplan that culminates in scamming 10bil. Of course they may do so for the laughs but that is a different issue (see below). Degree of activity is worth bearing in mind as it may cast a risk profile based on the previous data into doubt. Whilst someone might not build a masterplan to scam 10bil after already not taking the opportunity to scam 20bil be aware that priorities may change over time. There may also be a desire not to screw certain old investors but to suck in new ones (see, for instance Bad Bobby's decision to refinance a bunch of old debts immediately prior to scamming).

All this data can initially be asked for from the person you are thinking about investing in but you then have to trust them that the data they give you is true. Whenever possible get a third party that you trust to confirm this information via an audit or fact check. This in no way makes the data absolutely certain but improves the chances of not being misled.

2. Be very wary about investing in people that appear to be slightly unstable, erratic or eccentric, no matter how much you like them or respect them. Unstable, flighty and changeable personality types may be lovely people (or *******s) but the additional uncertainty involved will always make an investment more of a gamble.

NEVER invest in people that are contemptuous towards their investors/potential investors or who take pleasure in the suffering, inconvenience or pain of others. If someone values putting other people in positions of distress they may well end up deciding that distressed investors are worth more than ongoing business relationships.

3. Make sure you get a decent return for your risk. Acknowledge your own fallibility and ask yourself how often you would expect to be wrong. If you think something like BMBE looks like a pretty good bet, ask yourself whether you would be surprised if analogously good bets failed defaulted or scammed once in a year, two years, three years, etc … So, if it wouldn't surprise you if you took three years off eve and came back to find that at least one person you trust as much as BMBE or Grendell or Chribba or Darkness had scammed then it would probably be a good idea to only invest in such people if you can get an interest rate according to which one successful investment would at least balance out a failure (so roughly 3%). Obviously this is a non-rigorous rule of thumb.

4. Never be afraid to pull an investment if new information or behaviour makes you nervous.

These have served me pretty well as guidelines for investing but it's obviously not an exact science. As a final note, all this applies to unsecured debt. But in the case of secured loans remember that if you are not holding the collateral yourself it is never really secured although a belt and braces approach can provide some safeguards.

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There is certainly something to the second part of this: 'Don't invest what you can't afford to lose'. However, I would resist the idea that loans should be treated in a fatalistic way. I have seen quite a few investors in the past who did work on the basis that they didn't expect to see anything back but this is both a cop out and dangerous to the wider market. It is dangerous because it breeds a willingness to take risks that are too great and tends to eliminate the distinctions between risk levels. If you think you are not going to get your isk back on this loan then how do you distinguish it from the next? Personally I expect to get my isk back and do everything possible to ensure the greatest likelihood of that happening. If you don't expect to get it back you are less likely to do all the work.

Secondly, it is a cop out because it is a way of avoiding responsibility for one's investment failures. If it's always the case that I shouldn't expect my isk back then this time when the investment didn't pay off, that was just a natural thing and not my fault, right? Nothing to do with the fact that I loaned isk to a one day old character or anything ...

Really the attitude to take is the same one as in PvP. You go into every fight recognising that there is a possibility of losing your shirt but you take the fights you expect to win and you do everything you can to ensure that the result is the one you want.

This analogy made me imagine a world where Goons got 200% reimbursement for investment failures.

I think they just take the risk :)

Literally the first thing I read that made total sense in the context of where we actually are. ...New Eden. All these ideas are great but no one is focused on the actual issue; the 'community'...MD or whatever would have to agree on some kind of open source standard for reporting these loans/transactions. Some place you could go and look at who has been doing what. Yes, API's and all. If that existed...well you'd be set with all this other large scale....illuminati silliness. I wouldn't touch it with a 10 ft pole......but IF i did that's where i would start.

.....and no the forums dont count, this place is a mess. You'd need something more organized. Something like a killboard for loans, bonds, IPOs, funds, etc. That would do it.

You seem like a nice guy, so I'll let you know that I can see a massive, massive hole in your risk assessment strategy here.

I'm not a nice guy, so I'm not going to tell you what it is.

Do you mean there is something missing or that some element that is present is flawed and liable to mislead?