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You're assuming perfect information in the market. The GP's point is that if there's trickery involved then that assumption doesn't hold. It's not hard to make

You're assuming perfect information in the market. The GP's point is that if there's trickery involved then that assumption doesn't hold. It's not hard to make a hefty profit in excess of risk pricing if you're conning a revolving set of desperate people.

Bartweiss 8y ago
> It's not hard to make a hefty profit in excess of risk pricing if you're conning a revolving set of desperate people. I don't think this is true, at least for payday lending. People seem to be trying quite hard and failing to make hefty profits. Payday lenders apparently run a pre-tax profit margin below 10%, while consumer financial services in general are around 30%. Real estate and vehicle leasing are also up around 15%, so there's plenty of money in lending people valuable things. (Sub-10% is not a low profit margin, broadly, and it's hard to find any more detail. But industries without significant unit costs often run at or above 10%.) About 20% of opex for payday lenders is apparently defaults; that "revolving set of people" point is quite true, but it also means lenders have badly incomplete information about their transactions. I don't mean to be glib, but it turns out that it's pretty hard to turn a profit when your business involves giving money to strangers without collateral. Realistically, I'd expect much higher profits for shady tax preparers and other people who can load all the risk of imperfect information onto their customers.