Sunday, September 30, 2007

Prime investing with Prosper

Leading P2P lender Prosper has executed an impressive $90 million in loans through its marketplace but continues to remain appropriate only for those wishing to invest in high prime credit quality consumer debt.

10% of the roughly 2,500 loans listed on the site at any time are in the high prime tier (credit ratings AA, A and B), in fact, most of the listed loans do not fund. About a third of the loans that fund and become active and billed are in the high prime credit tier.

The graph below shows an ROI comparison of Prosper's total loan portfolio by credit rating in two time snapshots, August 30, 2005 - August 30, 3006 in blue and August 30, 2006 - August 30, 3007 in yellow. In the last year, AA, A and B loans funded at 11-15% and have an ROI of 6.5-9.5% once adjusted for default.

Source: Prosper performance data. Note: the default view which specifies 0 delinquencies and 0-2 credit checks in the last 6 months should be removed to view the total loan portfolio.

Acceptable Returns?
Is 6.5-9.5% an appropriate return? It depends on a full consideration of the risk and return profile of the investment. Theoretically, high prime consumer credit loans are low risk; the historical default rate for Prosper loans has been 2% for AA and A loans and 4% for B loans. As compared with the stock market, which has on average for the last 80 years delivered a pre-tax return of 8% with a higher level of risk, Prosper loans look more attractive. 6.5-9.5% also provides a healthy risk premium over risk-free t-bills or money market funds and CDs which are currently yielding about 4.5%.

Sunday, September 23, 2007


Many human characteristics are normally distributed including height, weight, intelligence, nose size, irritability, friendliness, compassion and hormone levels.

If people could choose…
If individuals were given the ability to choose the settings of their personal characteristics and analytes by using an analog of the Edit Preferences menu slider, either on a one-time or ongoing basis, what would they be likely to do? Would most people opt to stay the same, move closer to the median or experiment by selecting an outlier position?

The drive to normalize, people choose brown…

Despite the current demonizing and illegality of human enhancement in athletics, the practice is widespread. In other venues, there are also observable examples of the embracement of mindmodding and Stephen Jay Gould seems to be wrong again, this time in the claim that the median is not the message. Where selection possibilities exist, so far individuals have been reaching for the deep herd in the middle of the bell curve, often acquiescing unthinkingly to corporate marketing.

1. Hormone replacement therapy
Prescriptions continue to increase for both estrogen replacement therapy and testosterone replacement therapy despite medical studies indicating increased heart disease and other risks for women and no realized physical benefit of testosterone therapies for men. As they have for eons, people will pay for and take health risks to “enhance” their physical state to some perceived ideal, even when contradictory medical evidence exists.

It seems likely that more hormone management therapies with improved risk and efficacy profiles will be offered over time. One example is those of Dr. Louann Brizendine’s Women's Mood and Hormone Clinic at UCSF which are focused on ongoing state management for all ages. Hormone management such as continually suppressed menstruation can be useful in normalizing personal levels during the course of the day, week or month, diminishing rather than enhancing the effects of hormones.

Distinctly different flavors of anti-aging can be envisioned: the disastrous scenario of senescent male heads of state running around with the testosterone levels of 20 year olds hastening existential risk for all of humanity contrasted against the beneficent scenario of Aubrey de Grey’s mitochondrial DNA mutation restoration, Alzheimer’s plaque remediation biotechnology and other SENS approaches.

2. Virtual Worlds
Another example of what people actually do when given the opportunity to modify physical characteristics is visible in the thousands of avatars residing in the virtual world Second Life. All aspects of avatar representation can be modified, however, a huge cluster of brown (e.g.; average) can be seen in the age, height and muscle tone of avatars, with a much smaller cluster for furries and a few longtail outliers for unique appearance.

Should people be allowed to choose…
As long as personal characteristic modification is not injurious of the self or others, it would be difficult to conclude other than that it is an acceptable personal freedom. The only tempering aspect seems to be the usual income dispersion argument as only higher income tiers can initially afford these therapies as they are not covered by insurance. The world of the future will probably be like virtual worlds, with setting modification built into or adjunct to physical corporeality.

Is there any role for regulation?
What if someone wanted to play with a very high aggression setting? People can actually do this now except that cultural and societal norms prevent more divergent behavior. In fact, the ability to manage chemical and personality settings would vastly improve communicating with others and being productive in a group setting for some people. What about experimenting with and getting stuck in a lethal cocktail of depression, low esteem and remorse? Default resets would probably kick in before real harm could occur and these types of experiments could be interesting virtual reality experiences for individuals and a useful neurological tool for researchers.

Cure vs. enhancement and the evolving health system
A fundamental change is occurring as the role of the medical industry and medical professional is shifting from curing health impairments to providing enhancements. As enhancement therapies proliferate, there is a clear opportunity for new fields of enhancement counseling, customizing and habituation training to develop.

Sunday, September 09, 2007


Would you still feel like yourself if you modified your body or tried on a different body? Would you have the same sexual appetites and desires? Would it feel the same to be with your partner sexually if you were in a different body? If he/she were in a different body? If you were both in different bodies?

Selecting different bodies would separate the physical and mental aspects of sex. Pheromonal and other elemental physical chemistry might be surprisingly different in different bodies (as Richard Morgan explores in Altered Carbon). There is probably a wide dispersion in people's preferred mix of physical and mental sexual characteristics.

Consider for example senescent seniors trying on teenage bodies for a sexual romp. Should it be illegal to have sex with a body aged below the age of consent if it is inhabited by an adult?

The range of sexual issues that are challenging to discuss in relationships now could explode. Current issues regarding virtual world sex are just a warm-up, for example, is it cheating to have virtual sex with an avatar inhabited by someone other than your partner?

My partner wants to be someone else
How should I feel if my lover wants to experience being in a different body? What if I don't want to have sex with the person he/she wants to try being?

My partner wants me to be someone else
How should I feel if my lover wants me to be in a different body? Is self-agency diminished in inhabiting a body picked by my partner or is it just a more extreme form of doing what I know my partner enjoys? Would I or should I feel rejection pangs if my lover wants me to wear the Angelina Jolie body or would it be fun? Then of course the respite to the novelty could be the really wild - lets just wear ourselves tonight...

Its all about partner is a sexual substrate
Would sex disappear as a special interaction amongst partners in favor of a way to explore individual desires? How could I be desiring my partner if I want him/her to wear someone else's body? Do I still desire my partner or is he/she just a sexual substrate if I can have sex with him/her as Brad Pitt one night, as Angelina Jolie the next, etc.? Does it matter if we are both wearing each others fantasy bodies? How could turning current fantasies into reality be achieved in a healthy way that doesn't hurt feelings but rather opens up new doors to fun and exploration?

We generally don't expect our partners to mind if we engage in other means of entertainment and relaxation with others, could an evolved understanding of sex be as casual? As possibilities increase, the possessiveness of sex probably diminishes.

Does it depend on whose body?
Is it different if it is another real person's body (the Brad Pitt) vs. a fictional body (the anonymous Pleasure Bob model)? In an advanced society, there should be no difference in the connotation of a partner's desire for the Brad Pitt body, the anonymous pleasure model, the Next Door Neighbor or the Guy from Work that you met at Happy Hour.

What would the world be like if we could all have sex with our neighbors, co-workers, celebrities and politicians via a filter worn by our partners? Ironically this could strengthen monogamous or polyamorous bonds and allow relationships to revolve around non-sexual aspects.

It could be that the Brad Pitt model is actually not that well-endowed, and would need to be modified mid-stream, or switched to the Johnny Depp or the Marilyn Monroe model, or become a rotating kaleidoscope of morphing physicality.

How should I feel if my lover wants two copies of me simultaneously? This is actually a new concept of having sex with yourself. Would I want a threesome or foursome with multiple copies of my lover? How would I expect my lover to feel if I wanted to experience a multiple-some with copies of him/her?

Presumably sexual options will eventually extend at minimum to wearing a neuro-experience filter mapping real or imagined partner behavior to personalized sensors and magnitudes, experiencing your partner wearing someone else or having sex with humanoid robots.

If different bodies can be tried on, sex is but one area for discovery, ethics and imagination.

Sunday, September 02, 2007

Virtual currency and the attention economy

Market mechanisms are being increasingly introduced for more efficient exchange of capital and other resources (example: P2P lending marketplaces), for knowledge or opinion sharing, reputation building and preference indicating (example: prediction markets) and for now value attribution and broadcast in their latest launch, the enterprise email venue.

Seriosity, the Palo Alto CA-based serious gaming startup, initially reported to be focusing on enterprise applications in a World of Warcraft-like setting has now launched a virtual currency for the attention economy. The attention economy refers to the modern problem of information overload competing for a person's scarce attention. So far, the serios can only be used with Microsoft Outlook email, the sender applying a number of serios from their finite supply to indicate importance to the recipient and/or to vote on ideas, projects, etc.

The Serio Economy in Practice
The purpose of the serio economy is two-fold, directly indicating value and preference and also allowing meta relationships amongst participants to be seen. However, the importance of email is already generally known, by the sender or by the sender indicating urgency. Having serios attached to email may actually exacerbate the attention economy problem by encouraging people to read and evaluate emails they traditionally ignored. An interesting use case for serios would be charging for emails sent, thus perhaps limiting the number of people cc'd on email.

Regarding visibility into meta-relationships, Seriosity has an early study showing that serio economy relationship webs are different from those elucidated in traditional social networking email studies but it is not clear what new information or value this provides. Unlike prediction markets which have been shown to contribute important new information when appropriately executed, such as with anonymity, the serio economy is not anonymous and so is likely to do little more than codify the existing importance hierarchy and visible power relationships. If observed, people are likely to vote more serios in support of a supervisor's idea or for anyone else with whom a game theory relationship exists.

Since Seriosity is the central bank of the serio economy, issuing serios to market participants, some interesting future situations could arise if serios are transferable between organizations. For example, an individual could finally hedge their job, their long human capital exposure by taking an opposing position in the serios of a competitor or industry basket, similar to the way regional interest rate futures now allow individuals to hedge their long exposure in home-ownership real estate. SEC-attention attracting situations could also arise as individuals take arbitrage positions based on inside information.

There are a myriad of other interesting uses for virtual currencies, for example...

1) Work assignment facilitated by micro-economies
Virtual currencies could help workgroup micro-economies to develop, where arbitrary work assignment would be replaced by an economy. Managers could post projects to the micro-economy with assigned serio loads indicating project importance, drudgery acknowledgment, timeframes and requirements. Individuals and teams could signal available time, skills and interests and bid for tasks. The market mechanism could also reorganize schedules dynamically as priorities shift. Not only would a micro-economy more effectively clear supply and demand for work assignments but would also provide the side benefit of transparency, offering visibility into the direction and progress of the workgroup, sub-teams and individuals.

2) More effective shared resource allocation
Individuals and workgroups could use virtual currency allocations to more effectively allocate scarce resources such as conference rooms, office seating, computers and other supplies, food and drink preferences, vacation scheduling, etc. in a bidding process. Interesting workgroup cultural attributes could emerge from allocation behavior such as the engineering team putting all of their currency towards new computer resources while the marketing team puts more emphasis on conference rooms.

3) Information modulated with value
Just as there should be a rating system for all Internet content, a digg or "Was this helpful?" functionality for all news articles, blog posts, reviews and comments, either as a binary yes/no or as a quantitative rating, so there should be a rating system for an organization's internal and customer support forums. Readers could evaluate posts and postings could then be sorted by value, providing a means of distinguishing the usefulness of information and navigating the ever-growing sea of content that includes forum posts, blog comments, etc. Information modulation would be a higher order step in resolving the attention economy challenge.

4) Preference indication on organizational policies
Having a vote on organizational issues would be an important step in increasing individual inclusion and agency. Virtual currency (anonymously voted or not per the user) on the intranet would be an efficient way to discover majority preferences on issues ranging from preferred holidays, vacation policy, travel policies, preferred health care plans, 401k plans, degree of organization-wide executive communications and supply ordering to more sensitive situations such as lay-offs and salary decreases.