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Burrito Now, Pay Later

enterprisevalue.substack.com

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Re: Burrito Now, Pay Later

#161

Post by phyzix5761 »

wronglebowski wrote: post #147
ChadNauseam wrote: post #123

Earlier quoted context omitted.

Food is a basic human need, paying someone to make a burrito for you and then hand deliver it to your house is not. There is no shortage of food in america. In brazil, many people don’t eat meat because it’s too expensive, and get the vast majority of their calories from beans and rice. you can also do this in america, but almost no one does outside of college students because food is cheap enough relative to wages t…

I agree entirely with this sentiment. It almost feels like it's our ages "Keeping up with the Joneses". Even if 30-50% of your social circle can afford it without incurring debt if it becomes the social norm we'll all keep doing it. It's unfortunate but I don't know how this generation learns this lesson.

Because its driven by something that transcends generations: human desire. Its a very powerful emotion that drives us to act (as is aversion). But, we can train ourselves not to react to this emotion and over time it does become weaker and, eventually, completely subsides. It does take time and practice though which most people are not willing to put in because they don't see desire as a problem.

Re: Burrito Now, Pay Later

#162

Post by dalmo3 »

calmbonsai wrote: post #113

"This logic doesn’t change just because the thing being financed is a burrito." Yes, it absolutely _does_ change. One might as well go all the way and start offering Oxygen or Water bonds. The immorality masking as morality here is insulting--not related, mortgage-backed CDOs during the financial crisis and "Pay Day" loans. There are many, many fundamental individual needs and items (economic "utility") that, while f…

You're right, financing a burrito is amoral. So what?

Re: Burrito Now, Pay Later

#163

Post by inkyoto »

bcoates wrote: post #81
zug_zug wrote: post #12

I think this would be more informative if it dropped all moral pretense and just talked about the economics objectively. If we’re gonna call a spade a spade, bnpl is one of a dozen services that extracts money from those whose judgment we doubt (like gambling, lottery, junk food?, drugs, overpriced status-symbol vehicles, or even “digital goods”).

But if you read the article, it doesn’t? bnpl makes its money off charging merchants a few points higher service fees than cards, which for a lot of merchants is worth it to close the deal. (Unstated in the article is that richer people with better credit have regular access to no-interest/negative fee consumer loans on the order of 6-18 mos., so they have no reason to use BNPL)

> bnpl makes its money off charging merchants a few points higher service fees than cards

Restaurant food is a low to very low profit margin business that takes years to break even – with a good strategy and management.

Charging the merchant, i.e. the burrito service provider, means that they will inevitably have to pass costs onto the burrito consumer at the consumer's disadvantage.

Re: Burrito Now, Pay Later

#164

Post by akoboldfrying »

shermantanktop wrote: post #143
ChadNauseam wrote: post #123

Earlier quoted context omitted.

Food is a basic human need, paying someone to make a burrito for you and then hand deliver it to your house is not. There is no shortage of food in america. In brazil, many people don’t eat meat because it’s too expensive, and get the vast majority of their calories from beans and rice. you can also do this in america, but almost no one does outside of college students because food is cheap enough relative to wages t…

“Fear of sounding patronizing” sounds like a cocktail party problem. If that’s stopping someone - being made fun of by another member of their elite class - that’s a recipe for failure.

Being careful not to sound patronising towards the poor in public is one of the most ironclad unstated rules of wealthy social groups in the West. Breaking it immediately reveals one to be a member of the outgroup ("gauche"/"nouveau riche"/"tasteless"/"a philistine"), which will cause other wealthy people to break ties for fear of being tarnished by association. Since relationships with other wealthy people are a cornerstone of becoming and remaining wealthy, there is a massive incentive not to do this.

I think the underlying reason is that being patronised is very antagonising, and the poor generally outnumber the rich, who must ultimately depend on them in a variety of ways.

Re: Burrito Now, Pay Later

#165

Post by ivanbalepin »

Enjoyed the article, but the author was correctly questioned in the substack comments how is this any different than a credit card for the borrower and what justifies the "interest-free" myth here, since the BNPL payoff period largely overlaps with the CC grace period. To which the author responds:

> Credit card float only lasts if you pay the full statement balance by the due date

but that is identical to BNPL, it's only interest free if you pay it off, just like a credit card past grace period. So why repeat the "interest free" marketing slogan? yes, initially it is, and so is the CC grace period.

> consumers have to only forecast the next six weeks of their life

yeah, good luck managing timing on the payments if you have 12+ of these, and it's not uncommon to have that many! Especially if, as author mentioned, you are living paycheck-to-paycheck.

I guess a marginal benefit for consumer is soft-forcing them to pay it off instead of revolving. Another one, correctly, was less hit to the credit score unless and until the bureaus get their hands on all BNPL data at some point in the future. But there is really no magic here for the consumer.

Re: Burrito Now, Pay Later

#166

Post by rybosome »

ary wrote: post #17

> Despite skepticism from Volcker and Buffet, financial innovation has been and will continue to be a massive net positive for humanity. Juxtaposing yourself with Warren Buffet and then hand-waving away his wisdom is probably the reddest of flags when discussing finance (not that Buffet is always right). "Innovation" in payday loans is akin to inventing new ways to feed living, breathing things into a meat grinder. I…

> Is financing your lunch a sign of societal decay? Maybe, maybe not. But it’s definitely an evolution in Market Completion.

Yeah this is a fucking crazy statement, as if the “but” justifies the former statement because it touches a Proper Noun.

“Is getting beaten to death in broad daylight a sign of societal decay? Maybe, maybe not. But it’s definitely an evolution in Practical Fitness.”

Re: Burrito Now, Pay Later

#167

Post by aaaaaaabbbbbb »

ivanbalepin wrote: post #165

Enjoyed the article, but the author was correctly questioned in the substack comments how is this any different than a credit card for the borrower and what justifies the "interest-free" myth here, since the BNPL payoff period largely overlaps with the CC grace period. To which the author responds: > Credit card float only lasts if you pay the full statement balance by the due date but that is identical to BNPL, it's…

Assuming one has access to a credit card and is financially literate, I agree that using BNPL is a hard sell (never having used it myself). But there is a large population--the unbanked--that lacks access to credit cards. For that population, the choice is not between credit card and BNPL, but BNPL and cash.

I found the article's description of how BNPL structurally differs from credit cards interesting, as it is a reasonable explanation for how BNPL can serve the unbanked and still have functioning credit risk models:

> Even with adverse selection for BNPL, the underwriting is for each transaction, not for all monthly spending like that in credit cards; so if a consumer misses a payment, the BNPL provider can stop lending immediately, as opposed to the credit card company which has to underwrite the person’s full ability and willingness to repay their debts. This tech-enabled granularity allows for legibility and hence greater precision and predictability.

Re: Burrito Now, Pay Later

#168

Post by rybosome »

nighthawk454 wrote: post #34

This is blatantly just increasing debt load. What does a business do if they need forever growth, but can’t increase their prices further without losing net revenue? Raise prices anyway and push people to finance it. This is broadly not good for people. Financing things like your food or your rent (seriously - that’s a thing here) doesn’t help if they’re recurring. It’s not like people are gonna need to just finance…

Thank you for clearly and concisely articulating why this is dangerous from the securities aspect.

I think the immorality of it for consumers is obvious on the surface, but the backend financial stupidity of it is slightly less obvious. At least to me, I felt that it was risky but couldn’t clearly articulate why until reading this.

The only difference may be how many people buy into these. I don’t imagine BNPL securities to have the reach of 2008 for a few reasons, but perhaps I’m being naive.

Re: Burrito Now, Pay Later

#169

Post by rtpg »

simplify wrote: post #160
rtpg wrote: post #155

Earlier quoted context omitted.

I'm just saying I doubt that zug_zug has actually unlocked some chain of reasoning to say that all that stuff is objectively bad. If they did, what's stopping everyone else from doing it? I am expressing doubt. Like if someone showed up and said "I can predict lottery numbers". Maybe I'm talking to someone who has figured it out. Maybe I'm talking to someone who is wrong. This isn't at the same level but the claim to…

> If they did, what's stopping everyone else from doing it? I am expressing doubt. This is a pretty interesting topic on human nature. Chain of reasoning doesn't always result in proper action. For example, my cousin has been having a lot of health problems lately. Logically he knows that alcohol is contributing to them. Yet, when he's out with his friends, he can't help but drink anyway, despite knowing (and likely…

Right, totally see what you're saying. In the junk food example (assuming fast food a la McDs...) it feels fairly noncontroversial to say there's health costs. Just then you get into convenience discussions (or even just enjoyment discussions) and now you're weighing health vs convenience and these are totally not fungible quantities. So you're already veering into subjectivity if you're saying "on balance it's bad".

There has to be a point at which you pull in preferences. But at least then you can split the "objective" from the subjective, and think about the details in earnest. Even when conclusions differ.

Re: Burrito Now, Pay Later

#170

Post by ivanbalepin »

aaaaaaabbbbbb wrote: post #167
ivanbalepin wrote: post #165

Enjoyed the article, but the author was correctly questioned in the substack comments how is this any different than a credit card for the borrower and what justifies the "interest-free" myth here, since the BNPL payoff period largely overlaps with the CC grace period. To which the author responds: > Credit card float only lasts if you pay the full statement balance by the due date but that is identical to BNPL, it's…

Assuming one has access to a credit card and is financially literate, I agree that using BNPL is a hard sell (never having used it myself). But there is a large population--the unbanked--that lacks access to credit cards. For that population, the choice is not between credit card and BNPL, but BNPL and cash. I found the article's description of how BNPL structurally differs from credit cards interesting, as it is a r…

Yes, that's a good point. However, how much of this finer-grain lending flexibility translates into more favorable underwriting (to help cover the unbanked) is not clear. The author did not mention any data to that effect.
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