Buying shares in People

[Slevin]

It looks like Purdue University is seriously engaged in a program where you can now buy shares in a student's future . I'm pretty sure that they used to have a word for this -- indentured servitude . What's your opinion? Would you invest in it?

[jacob]

The only difference between this and slavery is that with the "modern program", the investor assumes all the risk, and with the "slavery program", the slave assumed all the risk. It's the difference between bonds and equity.

To summarize, NO!!

[cmonkey]

So investors are getting so hungry for ROI/consumer's money they want it before they even earn it now.

I'm alright lending money to folks with jobs. No job, no money. This article smells like a PR article and I'm sure its making the rounds and will be for a while due to the student loan bubble as a perceived hurdle to folks entering college and then the work force. Reduced income for 30 years looks much better the day you sign the papers than a $30,000 loan even though math favors the latter.

[Tyler9000]

Never underestimate academia's willingness to mortgage the future of their students to subsidize their own lifestyles today. In a sane world, reducing tuition to a reasonable rate would be the proper response to prospective students finding college increasingly unaffordable. Instead, we get indentured servitude pitched as the "innovative" alternative to crushing debt. They clearly had their best and brightest minds on that one.

[Slevin]

Never underestimate academia's willingness to mortgage the future of their students to subsidize their own lifestyles today. In a sane world, reducing tuition to a reasonable rate would be the proper response to prospective students finding college increasingly unaffordable. Instead, we get indentured servitude pitched as the "innovative" alternative to crushing debt. They clearly had their best and brightest minds on that one.

The problem here is that the good (education) is perceived as so necessary to the future of the consumer, that they will willingly pay any cost that seems like it might justify itself. As we see today, kids are paying 100k+ for degrees in english and the social scientists from highly acclaimed universities, with the expectation that the end (a high paying job) will justify the means. This is not happening at all, but the social narrative keeps on churning this story in order to make bigger and bigger profits...

The wealth drives the education, but most get it backwards and think the education drives the wealth!

[black_son_of_gray]

Student loans are already very difficult to discharge (even in bankruptcy), and creditors can garnish up to 15% of your take-home, so in some ways we already have similar system in the US, no?

[Slevin]

Student loans are already very difficult to discharge (even in bankruptcy), and creditors can garnish up to 15% of your take-home, so in some ways we already have similar system in the US, no?

Somewhat similar. The biggest difference is in the bounds. With the student loans now, you know exactly how much you are going to be paying over lifetime of the loan, where with the investment side, you don't. There is a large potential upside for the investor, where in the extreme cases the ROI for the investor over ten or so years would be enormous. This mostly applies to the more entrepeneurial students who go bust or boom... the payout from engineers would be relatively predictable and much more stable.

[Tyler9000]

I'm also not sure how this will survive the inevitable Title IX gender discrimination legal battle. Since women are statistically more likely to stay home with children at some point in their life (depressing their future earning potential and subsequent shareholder return for the same investment), rational investors will screen for gender and prioritize individual shares in males or funds with higher percentages of males. That won't last very long before the lawyers gut it.

[7Wannabe5]

This scheme seems dubious, but I have often thought that hiring a very good general-purpose personal assistant might prove to be a good investment for a Renaissance Person. For instance, spending extra money to buy processed food is different than spending extra money to pay somebody to process food under your direction. By investing in the stock market you are choosing to indirectly leverage the labor of others, so why not choose to do it in a direct manner under your direct control at the margin?

[GandK]

Reminds me of this recent thread: How To Legally Own Another Person [pdf]

This whole line of thinking gives me the willies.

[7Wannabe5]

GandK said: This whole line of thinking gives me the willies.

Well, what if you won a year of free nanny service in a raffle? I think you could make good use of it, right? It's really just a matter of developing the perspective that if you don't take full advantage of your own time and life energy somebody will from both sides of the equation. Because I have been the owner of a micro-business, I briefly was the legal part-time employer of several individuals. It's funny how purchasing somebody else's energy-over-time can make you more aware of your own. Like if you were a participant in a reality show where you were given 3 full-time employees and some pittance in start-up funds and you had to come up with a business plan to take advantage of the labor you were given.

[OldPro]

To me, there is something seriously wrong with this picture.

I was brought up understanding that it was the responsibility of PARENTS to pay for their children's education if they continued beyond the schooling provided by their tax dollars. I was also brought up understanding that you didn't have children until you could afford to have children and that included being able to expect to pay for their further education if/when that day came.

What I am reading here is that now, parents expect either the taxpayer to pay for that education or the children to pay for it themselves.

My older Son and Daughter-in-law are in the last year of paying for their 3 children to attend university. All 3 in overlapping years. Each has cost them roughly $25k per year for 4 years. All 3 attended well regarded Canadian universities, one in law, one a double degree in criminology/psychology and one in engineering. All 3 understood that their parents would not be paying for any 'fluff' degrees but if they wanted a real degree, the money would be there. As responsible parents, they had been setting money aside for years.

If anyone is going to have to take a loan out or become an indentured servant, why isn't it the PARENTS? After all, it is their failure to meet their obligations as a parent that is causing the problem. Being a parent comes with responsibilities and the education of your children is one of those responsibilities.

I understand that in some cases, circumstances can conspire to de-rail the best laid plans and intentions. In those cases, I am in favour of scholarships (but not in fluff degrees) being available for students whose grades and ambitions warrant it. But I don't think any could or would try to tell me that those cases equal the percentage of students who take student loans. Not all those parents got de-railed, they were never on the tracks to begin with. And just to be fair to parents, not all children deserve to attend a university. Any who are content to take a fluff degree being obvious examples.

[GandK]

What I am reading here is that now, parents expect either the taxpayer to pay for that education or the children to pay for it themselves.

At the point at which a child is no longer a child - whatever age we all agree for that to be - I believe he ought to become responsible for his own education. If you're old enough to have and support your own family (work full time, vote, fight in a war to defend them if need be, etc.), to me you have lost the label of "child" for yourself, and also lost the right to be supported financially by Mom and Dad. If Mom and Dad feel like paying for your school after that point, awesome. But I can't personally call it a parental responsibility at that point, even if Junior is not done with his college degree yet.

The price of college being ludicrous, to the point that the logic of even going is now regularly debated, is of course another story.

[GandK]

GandK said: This whole line of thinking gives me the willies.

Well, what if you won a year of free nanny service in a raffle? I think you could make good use of it, right? It's really just a matter of developing the perspective that if you don't take full advantage of your own time and life energy somebody will from both sides of the equation.

I think my problem with it is the potential for abuse. The "what could possibly go wrong?" list seems endless to me. How, for example, do you accurately measure someone's worth as a potential investment? What other uses might that measurement be put to? What would you do as an investor if you feel that someone you invested in wasn't living up to his potential? What recourse(s) might you have or demand? What would the consequences be?

Part of the problem of living in a post-cultural society is that there is no longer any commonly agreed upon definition of right and wrong. The substitution of private moral judgment for public has opened up many new freedoms for previously marginalized groups. That's a good thing. But it has also increased the negative behavioral possibilities for those who wish to exploit people. I think there's a solid case for the slippery slope argument here. I can't see anything but exploitation coming out of this idea being taken two or three degrees beyond its current state.

[jacob]

The specific program seems to an equity like financial product which has a 15% income cap and a 30 year term limit which is junior and less restrictive than the government student loan program.

IOW, it's kinda like subprime for housing (leading up to 2008) and cars (the current lead-up, because if it didn't work for housing, maybe it works for cars; hey it hasn't failed yet!) ... but for people (maybe something to try when subprime autoloans fail?).

Expect the product price (education) to increase to meet the new demand. (If you can't figure out how credit works, you probably can't figure out how education works.) Expect investment banks to package these people contracts and sold into tranches which will be bought by various funds. Expect IBs to sell swaps (short) the subprime people sector. Next time the economy crashes, these would be the riskiest junk products out there.

Long education. Long IB. Short student junk. Divert some profit towards building a defensible compound insofar the crash doesn't go over so well. It's one thing to lose a house or a car. Freedom is a bit more touchy.

[Ego]

Have I mentioned how much I enjoy peering into other people's finances? . Roughly half of the moderately high income Millennials applying for apartments here have traditional jobs (bio, drug or engineering cogs) while the other half are scrappy cash-business types who struggle to officially "prove" that they earn what they claim on the application.

In-home hairdressers, masseuses, wait staff at expensive restaurants, musicians, open-market vendors, home-automation sub-sub-contractors, and a pretty casino-host who entices marks to make big bets. I'm amazed at the cash they are claiming to haul in. Those who find a way to get around the application process are able to pay the rent so there must be some truth to it.

It seems that the blossoming of independent-contractors has also encouraged the blossoming of under-the-table. A 15% share of the $15K they are claiming on their taxes isn't going to recoup the investment.

I get the feeling this is going to turn into another micro-investment scam with exceedingly low repayment rates.

[OldPro]

What I am reading here is that now, parents expect either the taxpayer to pay for that education or the children to pay for it themselves.

At the point at which a child is no longer a child - whatever age we all agree for that to be - I believe he ought to become responsible for his own education. If you're old enough to have and support your own family (work full time, vote, fight in a war to defend them if need be, etc.), to me you have lost the label of "child" for yourself, and also lost the right to be supported financially by Mom and Dad. If Mom and Dad feel like paying for your school after that point, awesome. But I can't personally call it a parental responsibility at that point, even if Junior is not done with his college degree yet.

We can agree to disagree on that GandK. I call that a cop-out. It has nothing to do with whatever age we agree someone is no longer a child. It has everything to do with being a parent and the responsibility that brings with it. Look at it in a simple way.

In the very old days, a responsible parent taught their children how to make fire, hunt and gather, etc. They made sure their children had the skills necessary to make their own way in the world. In today's world, IF you believe that in order for your child to make their way in the world they need a university degree, then that is what you make sure they get. You may no longer be able to teach them everything yourself anymore but you can still insure they have the skills and tools they need.

[bryan]

I've touched on this idea myself for quite some time. Seems it could be great as both an buyer or seller. When I consider it, I see it as providing someone with either an income or lump sum payment.

As a seller of my own shares, it wouldn't be too bad to basically retire and spend my efforts in the directions that excite me. Though, there is something to the idea that the struggle results in better results (at least I think that's an idea in the art/creative world). Then again, I could easily imagine me knowing my worth but the potential buyers of shares lacking information to give me an acceptable offer.

As a buyer of shares, I would imagine the asset would be extremely attractive. You could either try and cherry-pick winners, or diversify across the population. Imagine auto manufacturing or the banking sector to go bust? Sell some of your person-shares of those that work at the most risky auto companies or banking structures. Basically you get a very fine grained control of exposure.

Also, there is a quip that investors invest in the (startup) based on the person or team, not necessarily the business or idea...

I think my problem with it is the potential for abuse. The "what could possibly go wrong?" list seems endless to me

Unfortunately, I agree.

In practice I guess you would see the rich folks trying to really optimize the deals they get from younger folks or folks in a bind for cash? So maybe make that bit illegal.. not sure if it is at possible to protect freedom but also allow you to sell some of it.

Maybe this is truly where a government is handy... a basic income with a basic tax.


If you had a good lawyer/accountant, could you in practice do this sort of thing now? Like form a shell LLC, my person agrees to some debt from the LLC, the LLC sells the debt to another party for the real cash, which siphons back to my person? (basically.. lawyer and accountant paid to make it work; what is the cost?)

This topic kind of reminds me of the (old?) requirement to be an accredited investor to invest directly in businesses; what a lame, regressive policy!

[JamesR]

I haven't read the article.

I wanted to mention that in the poker world, it's common to back or "stake" players for some percentage of their entry cost for the same percentage of their winnings - if the player fails to win, the backer does not get any of the stake back.

If you followed that model, you could perhaps stake a Harvard law student 20% of their 4 years degree in return for 20% of the next 8 years of their salary?

[JonathanJ]

People becoming property? Abolished in mid 1800's.

What ever next, property becoming people. Oh I forgot. This is recognised in company law. Stupidly in the UK the courts have even determined that companies can bring proceedings under the Human Rights Act.