June 7, 2011

Human Stock Market: Lumni Beat Us To It

Last Fall, this critical-thought community spent an entire week discussing practical next-steps for creating a human stock market. One in which you could invest in potential at the individual level. At the end of the week, despite great participation, I was still stumped.

But loyal reader and friend, Chris Stapel, came across a New York Times article by David Bornstein that highlights a company called Lumni, who is putting a similar idea into action.
In exchange for $8,530 in financing, [Columbian nursing student Jairo Sneider] agreed to repay 14 percent of his salary for 118 months after he graduated. At that point, regardless of how much he has paid, his obligation terminates. ... If he ends up earning the average salary for nurses in Colombia, he will end up paying the equivalent of an interest rate of 17 percent, which is the average rate in the country for a student loan. And if he ends up doing better, he will pay more, and Lumni will share in his success.
Lumni has made similar deals with 1,900 students to date. Fifty five percent of them are women and 90 percent are the first in their families to attend college. Most of these students would have otherwise been unable to pay for college. So far, the default rate is under 3 percent.

Genius. Lumni got around my hold-up with ensuring the student would pick a profitable career during the repayment period. (The individual retains the majority of the profits.) While this isn't as apples-to-apples as a true Human Stock Market, it's extraordinarily more practical, and I can't wait to figure out how to put my money behind something like this.
Why didn't we think of this, gang?