Home Loan Switching Charges & Floating Interest Rate

Why do they exist in the first place? They conflict with the basics of capitalistic society. The basic idea of capitalism is free trade. I want a product or service and I will pay for it. The fair price is decided by market forces. If someone else provides the same product or service at a cheaper price, I would like to buy from other player. Home Loan Switching charges create a barrier in making such a choice. If this was allowed we would see lot of Home Loan Switching and perhaps better interest rates. Basically make the market fair at least.

Floating Interest Rate is another faux. It is decided by the bank. It can vary from customer to customer. It looks nice to negotiate 8% at the start of home loan, but three months down the line bank is free to make it 11%.  If it were a function of loan amount or duration, I would understand it, but making it an arbitrary measure which is solely control by bank is as stupid as banking can be or as smart as banking can be, depending upon how you look at it.

Come to think of it, I don't like the concept of loan at all. Yes I know how good it is because it lets you buy house and stuff and it will take you long time to save enough money if you do it without loan, etc. The place I am coming from is not their should be no loans, but loans of different variety. Investment is a better word. This is how I believe this should work.

1. Banks can invest in my home.
2. They get a share of the house. To start with it could be 80%-90% depending upon the "investment amount" 
3. If I sell the house before construction is complete or at any point in time decided by me, bank get money proportional to their share in the house.
4. I can always buy back home shares from the bank by paying money to the bank any time I want and as much as I want.  The price for share depends on the current price of the property.
5. Until the time I pay back the full amount, bank gets the percentage share of the rental income I get or I can get from the property.

This approach solves few problems.

1. No interest.
2. Banks take higher risks and get higher returns and so do I.
3. Unless sold, the real value of the property is rental. That is all that I have to pay to the bank (as per their percentage)
4. If at any point, I feel that the property is not working out for me, I can easily sell it off and bank will help me with this, so that both me and bank can have comfortable exits. If the property rates crash, banks suffer as much as me.
5. Property rates will be reasonable. If the value of property is 10 lakhs, banks don't care it you buy it at 15 or 20 or 50 lakhs. The more the better, because they get more money. When banks end up owning 90% of the property, they will work with the builder to get better prices for the customer.

Hope government makes it a regulation or someone with enough money decided to do it this way. Their is lot to do to make this habitable.

Related - Where is money? and Frequency of choice and Reinventing money

Science & Observation

This is how science works:
1) do experiment  & observe the results
2) develop a hypothesis which explains the results
3) done...until someone observes something that cannot be explained

What if we cannot do the experiment? Like switching from democracy to something else? Or making drugs legal? etc. What if the duration of impact of the experiment spans lifetime of an individual and makes it impossible to observe. Any experience whose patterns "size" is bigger than the amount of time we spend in that experience would remain a mystery for us. While stuck in a traffic jam we can wonder what is causing it, but we cannot really know what happened because we will only be able to see anything when the jam is over.  Does a software rewrite makes sense for a startup? If the startup runs out of funds before completing the rewrite or never does a rewrite because of fear that it will run out of funds, the experiment remains incomplete.

The only way to understand such patterns is via communication.  I am using the word communication in the extreme sense. Not restricted to just people talking, but newspaper, history, journals, blogs, tweets, etc. Don't know how theory of relativity looks when we add the extra element of communication between observers into it.

Agriculture

Agriculture is a high risk business. It is probably also low returns business. And most of rural India does agriculture for living.

1. Loan from Government (Private Banks don't give loans to small farmers)
2. Weather predictions, untimely rains
3. Lock in, can only grow one thing at one time
4. Access to electricity, water, quality seeds,  fertilizers, etc
5. No access to global demand/supply patterns. No collaboration.
6. Intermediaries involved in final sale. 
7. Transportation costs, storage costs.

So many things can go wrong in a single cultivation cycle and even if that doesn't happens other conditions  can cause losses. Every (few) years, government ends up waving off the loans to support farmers. Diesel prices are kept artificially low to help farmers. No income tax on income from agriculture. In Punjab government gives free electricity to farmers. It is magical at in spite of all these measures, farmers continue to live miserable lives. Agriculture is an important and big business and yet the farmers who takes all the risk and government pays all the loans from tax payers money and it is the intermediaries who make all the money.

I believe we can do this better. Agriculture Micro VC - AMVC

1. Like any high risk business, agriculture should be driven by investment and not loan. AMVC invests in farmers every season. The funding depends upon final share of the output. If the final produce is less, AMVC bears the loss. If produce is good, both farmer and AMVC makes money. 
2. To make it high return business, we need AMVC who could operate at a large scale to cut out the intermediaries. The difference between price to farmer and price to final consumer is anywhere between 3X to 6X. AMVC should represent its member farmers to operate as a BIG farmer who could have much more negotiating power than individual farmers. Moreover the time of harvesting could be decided subjected to deals/sales to cut out the storage requirements and unnecessary transportation. 
3. AMVC should have access to what the local/global requirements are can control what is cultivated and in how much quantity. Every body cultivating the same thing, only brings prices down and losses for farmers. By helping farmers decide on what to cultivate based on what others are cultivating, farmers can cut down their losses because of high supply/low demand problems.
4. Since it is AMVC whose money is at stake all the time, it becomes its responsibility to do everything necessary to make sure that farmers are successful, because that is the only way for AMVC to be successful.

I don't know the specifics of the agriculture industry, but I feel AMVC model can help in uplifting farmers and reducing the risk burden they carry all the time. 

Probabilistic Voting

Voting based on majority has one problem. Majority wins, always.

This is not a good thing as the whole idea of voting is representation. Majority based voting will always cut out the minority. Instead, consider probabilistic voting. Instead of making the decision based on majority, if the votes only decide the probability of decision, then the final outcome can be anything except that majority decision will be chosen with high probability. This ensures representation of all classes and over a reasonable number of decisions each class gets probabilistic representation.

e-Voting

Over the last few years we have seen use of IT in the voting. We now have e-voting machines. Some people also talk about online voting and then their are tons of debates about security of such mechanisms.

Lets assume for a while that security concerns will be addressed sometime in the future. That just leaves us with the same old democracy just happening online. I think the next level of democracy should not be limited to just "automation" of the voting process. Technology can play a vital role in defining what democracy of the future looks like. Think of why we have to choose our representatives and why only once in five years? It is a technical problem. You can't have a billion people come together and sit under one roof and decide about their future. The machinery was designed to solve this very problem. family, small villages and corporate boardrooms don't have representatives, they don't need as all stake holders can fit in one room.

In next four five years everyone in India will have a mobile phone (if they don't have it already). All reality shows are doing voting using SMS to choose their top stars and making money along the way. If people can vote for their favorite starts every week, why can't they choose their representatives every week. Why can't they suspend their vote for the representative for a week and choose to participate directly in the law making.

Today many people in India will be willing to cast their vote in favor of a candidate for may be Rs 500 - Rs 1000. Since a single winner is elected per constituency, depending upon number of candidates in election, all you need is may be 10%-20% votes to get elected. For a five year term, per day cost of vote is less than a rupee.

What If:

• Their were no elections
• You could vote using SMS, any time of the day, week, month, year
• You could change your vote anytime
• You could split your vote 
• You could loan your vote to someone who you think can better decide how you use your vote
• If their was no parliament, everything happens over Goto-Meeting and as many people who want to participate directly or through their representatives could participate. 

Basically the whole election process becomes flexible in terms of time (duration of being a representative) and in space (number of representatives). Think of it like a stock exchange for politics. A true representative of public's political sentiments.


What do we get:

• People who sell their vote, get a better price throughout their lives
• People are always in control, politicians are always on toes
• Much better participation of people. Everyone can find time to send one SMS (from anywhere)
• The whole disconnect of "people" and "government" goes away as people are government - all the time. 
• No need for nominations. Anyone can make anybody else their representative and let them choose their representative or participate themselves. 
• If you want to do good for the country, convince people first