Payday loans probably are superior to some I-can't-believe-it-isn't-credit options in terms of APR: for example, if you're about to miss a utility payment, get the power turned off, and get hit with a $50 fee for getting it turned back on again N days later, then a payday loan strictly dominates the implicit APR of getting credit extended by your utility company and the lights stay on and you suffer no social embarrassment. You could come up with similar examples for automobile breakdowns (best alternative to getting a loan: losing your job), bouncing rent checks, paying overdraft fees at a real financial institution, etc etc.
I still would go back to cleaning oil pipes with a toothbrush prior to working for them, though, regardless of how much money they were prepared to throw at me. Like Thomas mentions below, they are a loathsome industry.
I strongly believe there is an opportunity here: just like FICO and credit cards made short-term loans effectively free for much of the middle class or like how competition and technology has brought the price of remittances to Mexico to below the cost of a Big Mac, I think there is some combination of technology and innovative products which should bring the cost of short-term loans down by more than an order of magnitude for the poor. Maybe it resembles a credit union account. Maybe it is something weird, like cell phone companies moving further into the consumer credit space. (It might not be obvious, but cell phone contracts are economically equivalent to an extension of credit, and they're made to work profitably among populations that no sane financial institution would touch.) But we can do this better.
Yeah, when I was a high school student, to save up money for college I got a job under the table from my sister's friend's father. His business was in processing scrap components (everything from buttons for factory machines to the aforementioned oil pipes) and reselling them. This involved a lot of manual labor sorting e.g. a pile of 10,000 switches into functioning and broken ones, then sorting by color, or in cleaning oil pipes using a toothbrush and some solvent (motor oil, as I recall).
I learned an important lesson from that job: when someone tells you he doesn't want to have you on the books because of "OSHA and the IRS and all that rot", that is a leading indicator you can use for "not someone you want to work for" prior to getting a 20 lb oil pipe thrown at your head close enough to move your hair.
I thought running cable through plenum ducts was a crappy job. You win.
On a more serious note: gangsters used to give free turkeys away to the neighborhoods. Just managing to be of some use to somebody sometime doesn't make one less of a predator.
I think crappy jobs correlate with awesome people. Lots of successful people I know washed dishes, cleaned pipes, did construction, or something equally "blue-collar." It builds character and makes you yearn for a better life.
It suggests that the awesome people with backgrounds in crappy jobs got out of the crappy jobs because they're awesome, rather than being awesome because they did crappy jobs.
If you only look at the set of people who work in white collar jobs, I would wager those who previously had blue-collar jobs exhibit some positive characteristics.
I don't think that the set of all people who have had or currently have a blue-collar job is particularly relevant to the argument, other than as a backdrop for speculation.
Correlation is not causation. You could just as easily interpret his statement as P(CJ|A) > P(CJ|~A): the conditional probability that someone had a crappy job at some point in their life given that they're awesome is higher than the conditional probability they did given that they aren't.
No, it doesn't. Correlation is not causation. If awesome people have worked crappy jobs more often than not, there can still be a positive correlation between the two variables even if there are dramatically fewer awesome people than people who have worked crappy jobs.
Yes, it does. Crappy jobs won't be correlated with awesome people -- which was andrewljohnson's original claim -- to any meaningful degree given the billions of unawesome people. Since correlation is symmetric, awesome people will not be meaningfully correlated with crappy jobs, either.
Plot every person in the world on a two dimension grid. Dimension x is awesomeness, dimension y is crappiness of crappiest job. Vast majority of people will be clustered around top left of graph (unawesome people with crappy jobs). But if the mean y value fluctuates upwards as you move to the right along x, then there's a positive correlation, regardless of whether or not there are significantly fewer data points further to the right. Read the "Correlation and linearity" section of the Wikipedia article:
> cell phone contracts are economically equivalent to an extension of credit
Except isn't the big way that cell phones are expanding into the poorer marketplace is through prepaid cell phones like Boost Mobile?
I'm moderately skeptical that the price of payday loans is far from the cost of making them, though willing to be convinced otherwise, and I agree with you about my likelihood of participating in that industry.
Yes, but "Have this $500 phone, don't worry, we know you're good for it because we will end your social life if you aren't" still happens with people who couldn't get $500 cash from a bank to save their lives.
I still would go back to cleaning oil pipes with a toothbrush prior to working for them, though, regardless of how much money they were prepared to throw at me. Like Thomas mentions below, they are a loathsome industry.
I strongly believe there is an opportunity here: just like FICO and credit cards made short-term loans effectively free for much of the middle class or like how competition and technology has brought the price of remittances to Mexico to below the cost of a Big Mac, I think there is some combination of technology and innovative products which should bring the cost of short-term loans down by more than an order of magnitude for the poor. Maybe it resembles a credit union account. Maybe it is something weird, like cell phone companies moving further into the consumer credit space. (It might not be obvious, but cell phone contracts are economically equivalent to an extension of credit, and they're made to work profitably among populations that no sane financial institution would touch.) But we can do this better.