I’ve always been kind of an open borders guy. The ideal of it seems to have always precluded me from analyzing it closely, while by the same token, making it easy to dismiss even cautious arguments as xenophobic, racist, or both.
In a nutshell, I’ve always held that the problem with immigrants—”legal” or otherwise—sucking from the social teat is a problem with the social teat, and not immigration per se. If there weren’t all these “free” social benefits, then what’s the problem? Problem is, there are, and they’re not going away any time soon.
So now I find that my argument is quite bright eyed, superseded by numbers and proportions. Mathematics, basically. It took all of 6 minutes to completely change my view and also my focus. It’s a video, but it’s not an anti-immigration video. Rather, it’s a factual presentation of what amounts to pissing in the wind on US immigration policy—the implication being that the problem of vast poverty must be tackled at home, not here, and not Western Europe.
The scale of it is so ridiculous that in the four times I watched the video I just shake my head. What the fuck was I thinking?
Now, understand that I don’t see it as any individual’s duty to stay put and work for greater prosperity where they are. It’s their life and I can’t begrudge anyone for trying to improve their lot in it. However, the immigration policy here and elsewhere in the developed world seems to have gone from poor, hungry, downtrodden to relatively best & brightest, and what does that do?
Well, it removes the best people from the worst problems so they can come here and contribute to our economy, leaving those from whence they came worse off.
So, I began chewing on what to do that might be effective. I mean, our fucking, pathetic leaders have been dumping “aid” money at our expense into complete and obvious kleptocracies for decades. So do some of the big “charities” whose executive staffs rake in millions in compensation. All a big wink-wink, nod-nod scam.
But you can do something individually if you care about the problem and its massive scale. And guess what? You can make money doing it.
I’ll tell a little story first.
Way back when, like 2008 or so, I and an employee of mine at the time embarked on doing a startup company—a peer-2-peer lending platform, where I burned through $250k of my own and friends and family seed capital to create a consumer-2-business application where knowledgeable individuals could participate in loans to small businesses, incorporating a sophisticated algorithm. One could bid for amount and positioning in a loan that simulated 1st, 2nd, and 3rd position mortgages at different rates of return…and many other criteria. Think of it like a Kickstarter, but where instead of various perks, you get your money back, with interest, if the deal succeeds.
Small businesses are very underserved by banking products. Basically, under $250k, and it’s personal loans, not true business lending. Above that, banks base lending decisions on the P&L and Balance Sheet of the business.
At the time, there were two startups where people lend to other people. I tested out both Prosper and Lending Club with $1,000 in each of them. They lend to average consumers for any random reason. Our variant was to offer a platform where they could lend to small entrepreneurs, with a focus on specific knowledge. In other words, while you might not be a great angel or venture capitalist investor, you very well may have specific knowledge as a customer or employee in a particular business niche that does actually make you a competent investor in that specific area.
For example, those of you who hang around all the time in independent coffee houses might know a thing or two about a good loan application vs. a bad one. Or, you were an employee of some thing or other and might find good lending opportunities for folks running businesses in those areas.
Long story short, I lost money in both Prosper and Lending Club. Not much, but the losses on bad loans (I had substantial diversity, like a $50-100 slice in 10-20 loans on each platform) outweighed the returns on good loans. This is exactly why our model was lending to entrepreneurs, by folks with some special knowledge of the business as customer or employee. We gave maybe 30 VC presentations all over the Valley. A few nibbles, but the farthest we got was with Howard Heartenbaum and Andy Rapport of August Capital. Howard was bad cop, Andy good cop. They were really good to us. First the pitch, two more meetings for details, due diligence; but in the end, Andy said he could make a lot of good arguments to invest, but too many against investing.
The bottom line, and the chief reason everyone passed was that our technology was too complicated. I pleaded over and over again to look at the success of the many online trading platforms, even for complex options and derivatives—which I had actually done myself full-time for a few years—but to no avail.
So that was that.
I tested another platform too: Kiva. Only put $200 in it, $25 participation in 8 loans to some of the poorest people on Earth. Care to see how it went?
Yep, got back 100% of capital. This is, however, a charity; but a damn brilliant one, because it allows you to use your charity dollars over and over, and your only loss is interest (plus diminishing value via currency inflation), or the rare capital loss which on average is about .75 – 1.25%. So, at it’s worst, you lose $1.25 for every $100 you lend out.
But what if you could make up for both, plus make some money?
John Christiansen and I had a nifty little exchange in Facebook this morning in response to a proto-version of this post. Turns out, some credit card companies offer up to 5% cash back for payments to qualified charities that match certain parameters.
You can actually get pretty good “interest” with credit card cash back. US Bank has a card that lets you get 5% cash back on $2000 spending every 3 months for “charity” and Kiva counts. If you do 4-6 month loans its pretty good annual yield for pretty minimal risk (if you choose good field partners).
He cites this:
It’s long been an open secret in the travel hacking community that US Bank credit cards which have “charity” as a bonus category also bonus loans make through the micro-lending site Kiva.org. This is one of the first hacks that I took advantage of, since if you’re using a US Bank Flexperks Travel Rewards credit card you can earn 3% cash back or 6% back in paid airfare by making Kiva loans. Many of those loans have repayment periods between 4 and 6 months, so if you have cash that you’re willing to tie up in these loans, you can earn a decent annualized return, even if you’re just redeeming your Flexpoints for cash back, instead of airline tickets.
I can hear the gears churning. No shit, you can make better than average returns for proven safe investments—Kiva has lent out $785 million with an average loss of under 1%—while helping the exact sorts of people that need help where they are, and it’s not handouts that just perpetuate dependance.
There’s even some question as to your returns being taxable, since generally, credit cards rewards are seen as discounts, not income (but, of course, if this catches on, the kleptomaniacs will put a stop to that).
Let’s run through a scenario I cooked up. Suppose you have a substantial, diversified investment portfolio? What if you took $100K and devoted it to Kiva? There’s even a platform to help make lots of loans in batches. So, you get that US Bank CC, fund $100K of loans with it, pay the bill with your investment account, then get $5,000 back.
As the loans are being paid back, you fund new loans with the credit card while you pay the bill with your proceeds. Alternatively, you could pick loans with short payback periods of 4-6 months, and end up paying some interest on your CC, offset by the cash you get back.
The bottom line is that this is a clear means towards helping people where they actually are, doing great, and making a little money at it, and somewhat forgetting about the whole immigration deal, save for the relatively few refugee and hardship cases.
Put a think on it.