Market Discussions

Also, there should be a savings/interest earning system in EVE. Of course, it couldn't just be an NPC bank with an arbitrary amount of interest on your ISK, because that isn't how things work. But I think there should be an option for players to earn something for the ISK they put away, on an average daily balance type of system...I don't know, I'm sure this has been brought up before..I just can't think of where the ISK would come from to be used as interest.

There have been a few attempts to provide formal credit ratings for uncollateralised investments in the past but the guys that put them together have not tended to last long and the systems they created never really got tested. Most successful investors in uncollateralised bonds and loans use informal risk assessments and place only limited weight on 'forum credibility' in the broad sense, although public behaviour, often as manifested on the forums, but also elsewhere is a pretty useful guide to reliability as long as you assess it independently. It's worth noting that trends in an individuals public behaviour do not always correlate with their 'forum rep' because many people in eve are happy to valourise unpleasant behaviour. An individual's rep can, then, increase in the minds of the majority by them being callous, imperious or self-centred. An investor, however, should view these qualities in a very different light.

This is an outline of my approach to informal risk assessment (cut and pasted from an old post):

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 BB'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.

Edit - As to whether people make public loans and investment uncollateralised, they certainly have done in the past (I've made over 100bil of uncollateralised investments, most of them public, none of them scams). However, I'm not sure what the situation is now and it is much harder to do a reasonable risk assessment without the help of an audit (which have been harder to come by in recent times).

Read below please.





I'd like to add a further 2 points to RAW23's excellent post.

5. Beware of forum rep grinders. Frequent posters are ok, but those min maxing consensus with an hidden plan of monetizing it will end up scamming you sooner or later.

6. Investigate on the in game day by day activities and see if the guy is just a "plastic forum face" or actually does something tangible and know in game. I.e. while it mostly won't show on the forums, I have a BPO copy / research service since years, with some customers giving tasks lasting several months.
They just hand me their capital BPOs (no collateral) and they get them back researched / copied since when I started.
Obvious that if I asked for a bond, they would probably trust me with some billions since they handed me BPOs for so long.

A guy known across several alliances for his carriers production will find no problem getting a loan. Of course such people might never make it to the forum since they seal their deals directly in game. But when it happens, it's worth considering them for your investments.

This is, imho, one of the most important aspect of investing in other eve players. Forum rep means nothing and this has been proven again and again.

As to loans, privately I do a fair bit of "pawnshop" loans. My basic rule of thumb is: 125% collateral. Each week your repayment is increased 5% starting at 100% the moment I give you the isk. Loan term is 4 weeks. After that, keep the isk as I've liquidated the collateral (or gotten it blown up!). If you let the term expire without communication - I never do business with you again. Period, for anything of any kind.

Publicly, it is not worth the bother. I think back to how Torn/BMBE got shafted by some dev/bughunter/tester over some mackinaw bpos. Too many people with knowledge of upcoming changes that will try to screw you - hard. If you don't know the person well, never get too invested in them.

PS: There are exceptions to every rule but if you don't have rules you are a buffoon.

I concur, generally speaking the best way to run corps/alliances is to have them based on out of game communities(OOG). Even with as small of a community as teamliquid.net, we certainly have no problems funding business ventures and loans for our members, your collateral (and determination of your credit available)is as always your teamliquid.net account.

OOG communities don't suffer the same kind of scamming risks as well as the normal politicking drama you find everywhere else in eve.

Additionally things like 125% collateral make me laugh, most things in eve are so liquid its lulzy to put up collat, just sell your assets and rebuy them after you're profitable. Any market change in most items is going to be less than the draconian interest.

nvm

I don't agree on this.
While "I want to get known" collateralized investments come with BPOs and similar "steady value", there are also a lot of:

1) I put my faction boat as collateral => in this case you must consider its value quite conservatively, because in case of default you need to liquidate that A-Type thing, that Estamel other thing. That faction item was worth 200M before incursions now it's 60M... the hull has T2 rigs but none will want them (much less pay for them). The ship might be in an high sec island (I DID have collateral to hold like that in the past BTW) so moving it will be a pain.
The ship might be migthly nerfed soon and thus lose a lot of value and much more.

2) The top case of non newb collateralized investment involves speculative material. Typically the guy heavily invested in the "next cool money maker item" therefore he will NOT want to sell it like you say.

Needless to say, these investments are dangerous because chances are that the "OH SO SURE" money maker could fizzle and then you need to accurately analyze its market.
Most often, the guy will tell you: "my item now sells for 50k a piece, my collateral is worth 10B on sell orders!".

Then I check it in game and see buy orders are visibly lower (= a pain to liquidate), item is illiquid (more pain to liquidate) and it spiked up to 50k from a yearly average of 10k. Will it go to 120k as the guy is OH SO SURE about (see Technetium threads for lulz) or will it fizzle back to 20k and then your 10B of collateral suddenly becomes 4B.