How To Bet Money On Your Future Success 188
waderoush writes "Say you're in your early 20s, you're finishing college or graduate school, and you're smart but poor — and you've got some big student loans hanging over you. You're pretty sure that within 10 years you'll be selling your first startup or earning a high-six-figure salary. But you need some money *now* so that you can actually start the company, and avoid taking a corporate job. Shouldn't there be a way to calculate how much you'll be worth, and borrow against that promise of future success? Upstart, a new Palo Alto investing operation founded by a group of ex-Google employees, thinks the answer is yes. In a new spin on the crowdfunding model, the organization gathers data from recent graduates such as schools attended, academic transcripts, job offers, and credit scores. Its 'pricing engine,' based partly on techniques developed to assess job applicants at Google, determines how much each aspiring 'upstart' should be allowed to raise from investors per each percentage point of their future income. Upstart has already helped 35 young people raise amounts varying from $10,000 to $170,000; the upstarts, who must pay the money back over a 10-year period, say they're using the funds mainly to retire student debt or bootstrap startups. 'We can look at a 25-year-old and very quickly assess whether he or she would be successful at Google,' says Upstart founder Dave Girouard, formerly the head of Googles $1 billion enterprise apps division. 'My whole thesis was, if you could use the same algorithms to predict whether he or she would be successful beyond that, in the business world, that would be pretty useful.'"
This is the dumbest idea (Score:5, Insightful)
The position this person is in is that they are mortgaged to the hilt, have no income and are too young to know what life is about and they want to borrow even more?
Why not just sell yourself into slavery?
Google employees (Score:5, Insightful)
Must be getting a lot dumber. I'm willing to bet an insane amount of money relative to my income that the credit cards companies are FAR FAR better at predicting who to loan money too than any Googler. They have the advantage of having Googler level employees, years of experience, and financial greed driving them.
You can not predict what they will be worth in 10 years, they don't have any idea what they'll even like NEXT YEAR, let alone 10 years.
Once you get a little older you realize that the person you were when you got out of school is entirely different than the person you are 10 years later. Its well accepted fact that no one under 25 knows who they are, and no one under 30 is really sure who they are.
Re:This is the dumbest idea (Score:2, Insightful)
Want to pay my Wife's?
7% interest is not low.
Systemic Prejudice (Score:5, Insightful)
I'm faced with a dilemma here: I'm an algorithmist, and believe most questions can be more accurately be answered, in the long run at least, by a well developed algorithm than even the most skilled human being. This should be a good thing, then, finding a better answer for funding projects, and accurately determining loans.
Where I became concerned, is that a lot of success is then predicated on some system determining that you'd be successful, and might therefor create a systemic problem sorting the undeserving into future success, by virtue of predicting it, and leaving those who have the spirit to succeed, but not the resources, to languish without recourse. It seems it could make the rich richer, and the poor poorer, even more than our current system, which already does so.
I feel this approach fails to account for its own effect upon the market. A world where you get divided into upper class and lower class on factors beyond your own control should scare just about anyone.
On the other hand... (Score:4, Insightful)
You're pretty sure that within 10 years you'll be selling your first startup or earning a high -six-figure salary.
Ya, many may be "pretty sure" of all that, but most are not that smart, inventive, resourceful, connected, and/or lucky.
Re:Google employees (Score:4, Insightful)
Must be getting a lot dumber. I'm willing to bet an insane amount of money relative to my income that the credit cards companies are FAR FAR better at predicting who to loan money too than any Googler. They have the advantage of having Googler level employees, years of experience, and financial greed driving them.
You can not predict what they will be worth in 10 years, they don't have any idea what they'll even like NEXT YEAR, let alone 10 years.
Once you get a little older you realize that the person you were when you got out of school is entirely different than the person you are 10 years later. Its well accepted fact that no one under 25 knows who they are, and no one under 30 is really sure who they are.
The thing is, a credit card company is really only trying to find and/or convince customers to borrow to the point where they have too much debt to fully repay at any point in the near or medium term, and then charge just enough interest to keep them paying instead of filing for some sort of debt relief or bankruptcy. To think that credit card companies are in the business of only giving credit to those most worthy/capable of repaying is to completely miss the nature of the global banking/debt industry. Quite the opposite, if you are in a position to easily repay credit card debt you aren't a sought after customer. The model for that is certainly different compared to one whose intention is to find candidates who will be relatively successful and capable of full repaying at some medium-term point (10 years) and yield a comfortably high return for the investors.
Re:Google employees (Score:4, Insightful)
To be fair, this is "crowdfunding" idea comes from someone whom Google spat out ...
I guess thats the point really, they were smart enough to get rid of them.
Re:Systemic Prejudice (Score:2, Insightful)
even in the USA 50-75 years ago if you were born into the wrong family you had almost ZERO chance of going to college.
But back then you didn't need a degree to qualify for a job making coffee.
The more people who have qualifications, the more qualifications the HR industry demands. Pretty soon the coffee shops will require a PhD before they'll even look at your resume.
Re:This is the dumbest idea (Score:4, Insightful)
If the startup goes broke, you owe nothing. If they turn into the next facebook, yer SCREWED. (Buy hey, that's pretty rare)
No worries, zuckerberg didn't finish college so he would have never been given money to make facebook by this place. Neither did bill gates or steve jobs.
Re:This is the dumbest idea (Score:5, Insightful)
" You're pretty sure that within 10 years you'll be selling your first startup or earning a high-six-figure salary."
In other words, this plan is for delusional people.