Fun fact: there is a financing trick called a "seller carryback", or just "seller financing". Where you buy a house/business/etc., with money borrowed from the house seller. Pretty popular in real estate and small business world, apparently. Here's how it works.
Suppose you see a small business, say, this car wash. It makes $80k a year. You think you could run it more efficiently, to produce say $120k a year. You want to buy it from the owner for say $2mil. However you don't have $2mil, you need financing Image
Suppose you can't find a bank to lend you money to buy the car wash. You can instead buy the car wash with money borrowed from the car wash owner. That is, you pay the owner $2mil, but you immediately borrow $1.5mil from them, that you pay off at, say, 4% annual interest or so
End result: you pay the owner $500k now, and $1.5mil over time. The loan is secured by the car wash, which the owner sold you.

From your perspective, you get financing, same as if you went to a bank.
From the owner's perspective, they transformed their risky business cash flow into some money upfront, and then a safe cashflow collateralized by the business. The owner's debt has seniority over your equity, so the owner is now paid as long as you don't go under
(Some things I glossed over for simplicity: apparently often owner financing will be combined with bank financing, so it won't be either-or. Also, I've heard anecdotes on these online, but don't have data on how prevalent)
It is kind of an interesting economic question why such a contract should exist. Why would financing occur in a decentralized manner, instead of through financial intermediaries who presumably have lower costs of monitoring, screening, contracting, financing?
Obvious guess is banks are old-fashioned, over-regulated, out-of-date and don't make profitable lending opportunities. But maybe another hypothesis is that decentralized contracting contributes to solving an information asymmetry.
When you buy the car wash, you don't know for sure whether it's any good. Could be going downhill, cooked books, etc.

The seller knows more than you do about whether the car wash is sound: there's an information asymmetry issue
By offering you financing, the seller gives you information about the quality of the collateral (the car wash). In particular, they're willing to get paid in the future, using revenues from the car wash.
If the car wash totally goes bust, you can theoretically stop paying the debt, default, walk away and leave the original owner with her car wash
So by offering you financing, the seller is essentially giving you a credible signal - by keeping some of the downside risk - that they expect the car wash to be able to produce eventually $1.5mil to pay down your debt to them! Potentially alleviating some of the info asymmetry
It may not eventually be worth anything more than that $1.5mil, but that's your problem buying it from the seller in the first place
LMK anyone if I got any of the details wrong. Not really a corp fin guy, just sharing + speculating about something fun I read about
@AYBodnaruk points out another good reason I missed: original owner has higher repossession value

Also see @stroebel_econ's paper on this in the residential mortgage market…

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More from @AnthonyLeeZhang

23 Feb
If you're in a top-10-ish US undergrad, there is a playbook which still gets you a good shot at top-10 econ PhD programs straight out of undergrad

(I think it's extremely unfair that this essentially only works for top US programs, but, info is info)
1. Major in math, or any major that lets you take hard math classes. Definitely take real analysis, and if possible a couple higher level classes (e.g. measure theory, stochastics, functional analysis, etc.)
2. Skip most of undergrad econ. Take a few classes in the PhD first year and get A's

3. RA for econ faculty, starting from around 2nd or 3rd year

4. Aim to have all this done by end of 3rd year/start of 4th year
Read 9 tweets
23 Feb
Hate to be a broken record but. Blockchain. Videogame. Skins! Do it! Artificial scarcity! Tokenize everything!…
There is a huge demand to non-fungible-ize things. Own a mass-produced watch, pass it down a few generations, and it becomes a family heirloom - different from every other identical watch coming off the same factory line. A physical NFT
Bottle up some grape juice, hire some famous artists to slap a label on it and it's worth thousands (wine folks, don't cancel me) Image
Read 5 tweets
21 Feb
This is good and basically a 5 minute read…
Quote. Applies for giving feedback on papers also. I find the most useful feedback comes from, put yourself in the author's shoes. What is something they _could realistically do_, which _they might also be interested in doing_, that they may have missed? Image
I think here are some "mistakes":

- Wishful thinking: wouldn't it be great if you used microdata instead of aggregate data (yes but I don't have it), wouldn't it be great if you had a perfect instrument (don't have it)
Read 4 tweets
20 Feb
Building on @ben_golub's about a field coffee-chat Slack group: what if we had Slack (or other chat) groups organized around commonly used datasets? e.g. a demographic data Slack (ACS, CPS, Census, PSID, etc.), or banking data (call reports, HMDA), etc
Goal being, essentially, to build a slightly more modern version of statalist. Or basically an econ data stackexchange, in chat form. It seems to me that Q&A-style social platforms are relatively easy to get going, compared to pure social platforms like Clubhouse
cc @arpitrage from the other thread. To be honest, a lot of the documentation issues might be better solved with a stackexchange than a big manual. Nobody reads big manuals, but everyone googles questions
Read 6 tweets
12 Feb
Random thought: there seems to be "hidden curriculum" stuff in many lines of work. Academia, of course, but also: how to schmooze your way into a tech internship/offer, how to get onto good projects, be visible, and get promoted quickly in tech,
What specific combination of extracurriculars gets you into Harvard without buying the fencing coach a house or winning the IMO, etc
My parents think this is a fairly "hidden curriculum-heavy" era. Perhaps they are biased by their experience, growing up in post-cultural-revolution China. Exams were newly re-established, basically meritocratic and without many loopholes. Maybe most eras look like our era
Read 18 tweets
9 Feb
Cool paper Image
Couple other NBER's I'm reading this week ImageImageImage
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