A Notecard Interview With SecondLife's Ginko Financial CEO, Nicholas Portocarrero

Mainly because of all the attention Ginko Financial of SecondLife has been getting, I figured I would ask Nicholas Portocarrero on some things I hadn't seen asked before. The interview was conducted by notecard; the questions were sent and Ginko Financial's CEO was kind enough to respond. Aside from formatting , this is exactly what was returned. The opinions expressed by Mr. Portocarrero are his own, your mileage may vary and this website and all the fun characters behind it aren't to be blamed if you have conniptions or other adverse effects, including disagreement in it's many forms.

NF is Nobody Fugazi (me), NP is Nicholas Portocarrero.

NF: Why did you start Ginko Financial, despite the risks which were quite obviously there and continue to be there?

NP: I wanted to leverage my operations, increase profits and this seemed like an interesting way to raise capital. I didn't really think I would be able to get 200k dollars in deposits, but it was more of an experiment than a business at the start and I really didn't require that much money in order to be profitable. I had just read the biography of a great banker, I think I was inspired by that.

NF: How do you see virtual banks such as Ginko Financial adding value to the SecondLife Economy and the members of the SecondLife community?

NP: People use our bank for all sorts of reasons. Some even deposit just so they refrain from spending the money on some silly toy. We're a service, just like any other. We provide value to the economy in the same way that any other merchant does.

NF: Have you ever had dissatisfied customers? If so, how did you deal with the situation(s)?

NP: What do you mean by dissatisfied? We have problems sometimes, sure. The system will drop a withdrawal or Linden Lab will shut down all scripts and people will complain. We do our best to solve all problems as they come along, there is not more we can do.

NF: What are the advantages you see - if any - of a bank within a virtual economy over a brick and mortar bank?

NP: Besides the fact we are unregulated?

NF: Do you think that, over time, regulation will come to the banking industries in virtual worlds - and if so, do you see these as self-regulatory through agreements with other banks or as something enforced on the bank by as yet to be determined external entity?

NP: If regulation comes, it will be from an external authority, most likely the U.S. government.

NF: If you could help create banking regulation in a virtual world, would you support it?

NP: Absolutely not.

NF: Are there plans to expand services for Ginko Financial?

Nothing specific.

NF: What is your vision of what role banking institutions (such as Ginko Financial) will have in the next 5 years? 10 years?

I don't know.

NF: Any additional comments?

NP: I saw that Philip talked about Grameen Bank. I think I have to comment on that. We did in our first few months offer loans, at extreme interest rates, without much of a guarantee. We also offered mortgages. The loans were all repaid, amazingly, yielding a huge profit. The problem is not that most people would abuse us, most people are honest and willing to pay back what they owe. The problem is that if a single person decided to abuse us, they could make use of alts to do so over and over again. Grameen Bank claims that 98% of loans are repaid, but at least with them, they can make sure the othe 2% of people (or rather, groups) do not get any new loans from them, ever. The mortgage system we worked out was very good in theory as it provided a somewhat solid guarantee, however, it was very labour intensive. A lot of work has to be done in order to receive interest on a loan equivalent to less than $50. It's just not worth it.

All that being said, from what I understand Grameen Bank is a government subsidized cult, not a profitable financial institution. I remember reading an article about it sometime ago.... let me see... here is a link. For those too lazy to read it, here is a brief summary. Grameen Bank gets subsidized (bellow market rate) loans from all sorts of institutions, which it then deposits at traditional, high yield banks. It makes a lot of money from this "arbitrage", which it then uses to finance the lending business. The lending is used as a way to trap people into the Grameen cult, which includes putting the borrower's children in Grameen schools, to be taught the Grameen ideology. Because the lending is done in groups, they "outsource" the collection service to it's borrowers. A person that does not pay, faces serious risk from the others in his group as that dramaticaly increases the debt of the others in the group. It's not something to be copied, by any stretch of the imagination.

http://www.mises.org/freemarket_detail.asp?control=215&sortorder=articledate

NF: Thanks for your time, Nicholas. I think there's much here for future discussion.