I’m cross posting this on my own blog from perspeculum.com. After writing it, I realized it is somewhat of a response to Ian Ayer’s book, Super Crunchers. And I haven’t read it yet, but I think I will. Once I’ve figured out what my own site is for, I’ll actually stop doing things like this – crossposting, I’m sure it is listed somewhere in Deuteronomy or the Koran as an abomination.

“PROSPER RETURNS BEAT THE S&P 500″! Who the hell is the S&P 500, anyway? Sounds impressive, and old. I probably need a lot of money to invest in that one. While I have the foggiest inkling of who the S&M 500 is, I have a better idea of who I’m lending money to through Prosper.com, a lending exchange that I have been lending through since June.

Face to face lending through the security glass of the internet is profitable and fun. While the thought of giving money to a complete stranger who rocked up to his computer with a loan request and a photo of his dog as title, may sound reckless to all y’all, I will simply continue to ask: who is the S&P 500 to you?

Since I started lending, I’ve been competing somewhat with a friend whose investment portfolio and bidding history are as completely open to public scrutiny through such tools as LendingStats and Eric’s Credit Community as my own. Every listing I have bid on and the status of my loans are there for all to see. I am an open book. Don’t like my investment choices, you have got the evidence to confront me.

LendingStats and Eric’s Credit Community manage my confessions. How good I am is for them to figure. All I have to do is take responsibility. And I have to take responsibility, because the internet will never forget. It has registered my contractual commitments. Oh, the Internet, it may just be a more belligerent grudge holder than the Holy Ghost.

But what do I have to hide? Not that many people actually care about individual lenders or borrowers. All the discourse I have encountered is concerned with understanding the crowds: the lenders, borrowers, and groups as wholes. Financial analysts don’t want to see the face of individual lenders and borrowers, they want to see the face of the whole.

While I see little wrong with that, I think us lenders need to make it more complicated for them to pin us down, and by that I mean we need to be able to unpin ourselves. P2P Loans need to become liquitable. Imagine an exchange for issued Prosper.com loans. There’s nothing inconceivable about it and it will only serve to benefit the market by giving it a security that is extra-theoretical.

The ability to transfer loans, that is to trade them for money, will give a better sense to lenders of the worth of their portfolio than would a comparison to statistical computed probability of loan defaults. Furthermore, it will increase the amount of money in the peer to peer market because more lenders will be attracted to the table by the ability to sell their loans if they happen to need cash for another investment. For borrowers that means there will be more lenders out there.

A different sort of analysis will then take place, instead of these discussions over the abstract groups of borrowers and lenders, specific interest will be taken in the lenders and borrowers themselves. If I prove to be a discerning lender, other lenders or even institutions may take note of me – for it may just prove to be of financial worth to buy a piece of my portfolio.

Transferability will be the challenge to Ian Ayres’s conclusion in Super Crunchers: “We are living in an age when dispersed discretion is on the wane.” Increased transferability will keep the tension between dispersed discretion and centralized authority.

The finance industry will be crowd sourced. And as it so remains by such developments as increased transparency and transferability, I will continue to have this choice, to refuse to sit here and be what I have become. I will be able to trade it.