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I was a technically a loan shark at school, in my early teens. So I had a fairly small allowance which I mostly saved. Other kids were spending their afternoon

I was a technically a loan shark at school, in my early teens. So I had a fairly small allowance which I mostly saved. Other kids were spending their afternoons at the malls shopping, buying cigarettes and eating fast food. So the richer kids eventually had their allowances lowered by their parents because of some sort of misbehavior, and it turned out this wasn't very effective as they started asking around to borrow money to keep up their habits. So I gave small sums of money and since I was a very distrustful teenager I had the following terms - if you don't pay me back by Friday I'm gonna round up the sum or increase it to some other arbitrary point. Usually what happened is they would obnoxiously blow me off, but I would get a concession about increasing the interest further. I didn't want to argue over small sums so I just increased them, giving them a way out of the impasse In a few weeks the debt would simply balloon and I would start to get angry by the way they were treating me. I learned that I wouldn't get my money by cornering them alone someplace and they would make up credible payment arrangements as soon as possible. I ended up collecting everything with several hundred percent of profit. I learned later that interest rates are calculated yearly and these terms were absolutely insane. Even though the profits were big the sums were in fact quite small for the trouble, so I just stopped lending out the next year and honestly my market was saturated by then. My clients probably learned much more than me. At a later time in my life I read 'Poor Economics' and worked with fintechs in an IT capacity. What my teenage self was practicing was fairly common in poor developing countries with next payday or next week loans financing many lively hoods. I have also never taken a loan, and I'm not planning to.

agumonkey 4y ago
It's psychologically and socially so interesting. We often want the benefits without knowing how to repay, manage or handle things. Also you know that in the catholic middle ages, high lending rate was immoral, it was a big topic at the time (and apparently lead to some foreign groups to become the loan guys as an escape hatch in harsh times).
WalterBright 4y ago
> and I'm not planning to If you run a business, it becomes a necessity. The problem is that expenses like payroll have to be paid immediately, while accounts receivable are erratic. The choice is to keep a large amount of cash in a checking account earning 0 interest, or have a revolving line of credit at the bank. Having the credit is cheaper than having large amounts of cash sitting idle as a buffer. In fact, buffer is the right word. If you're a programmer, you use buffers to compensate for the mismatch between input and output.

agumonkey 4y ago

It's psychologically and socially so interesting. We often want the benefits without knowing how to repay, manage or handle things. Also you know that in the catholic middle ages, high lending rate was immoral, it was a big topic at the time (and apparently lead to some foreign groups to become the loan guys as an escape hatch in harsh times).

WalterBright 4y ago

> and I'm not planning to If you run a business, it becomes a necessity. The problem is that expenses like payroll have to be paid immediately, while accounts receivable are erratic. The choice is to keep a large amount of cash in a checking account earning 0 interest, or have a revolving line of credit at the bank. Having the credit is cheaper than having large amounts of cash sitting idle as a buffer. In fact, buffer is the right word. If you're a programmer, you use buffers to compensate for the mismatch between input and output.