Quote from: JoelKatz on November 09, 2012, 11:32:30 PM

Quote from: Deprived on November 09, 2012, 11:12:10 PM

1. MP didn't know who PH's customers were.

True but how would that have made any difference?

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2. Those customers swore they weren't invested in pirate to PH, not to MP - more accurately, MP took PH's word that they'd said such - as MP COULD NOT verify that due to 1.

MP could not verify them even if she knew who they were. What would she have done other than ask them? You think they would lie to PH but tell the truth to MP? PH knew Patrick's methodology. If it was unsound or insufficient, that was a common mistake.

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3. PH had responsibility to assess the credibility of his customers' claims not to be invested in pirate because a) They were his customers, b) MP couldn't due to 1.

And Patrick did assess the credibility of his customers. It's not like his method was a secret.

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PH had either been told (or not told) by his customers that they weren't invested in pirate.
PH either did or did not do due diligence on those customers.

MP knew that PH claimed he was satisfied that his customers weren't invested in pirate.

MP's knowledge about the specific investments was limited to ONLY what PH divulged. There's no equality of information there.

There was nothing PH knew that would have changed MP's view. They agreed on the common set of facts and they both drew the same incorrect conclusion from those facts.

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"Everyone knew PH was invested indirectly in pirate"
"PH didn't know he was invested in pirate"
"MP didn't know PH was invested in pirate"

It's blatantly obvious that the first of those three statements directly contradicts the last two.

If everyone was rational, this would be quite correct. But when it comes to greed, people have a rather bizarre ability to compartmentalize and isolate their knowledge. With subtly different senes of knowing, all of these were true. It's just like how every gambler knows that the odds are against them and many gamblers believe they will be the exception.

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That lots of others also invested in PH also disproves your key assertion (that it was common knowledge PH was at risk to pirate exposure) - as noone who wanted pirate exposure would have invested at 1% per week.

It just shows what we all know, that a lot of people gamble stupidly. Everyone who invested in Pirate knew that what he was saying was too good to be true, yet in a sense those investors believed it.

Your key false assumption is that all people are fully rational and only hold logically consistent beliefs.

I just don't see how you can confidently say "There was nothing PH knew that would have changed MP's view. ". Do you actually KNOW who all PH's customers were at the time that deal was made? Do you actually KNOW what steps he took to ensure they weren't going to use the funds to invest in pirate? Unless YOU know EVERYTHING PH knew you can't possibly give any credible comment on how much of that someone else would have known.

Now IF PH's methodology was simply to ask people "Are you going to invest this money in pirate?" AND IF it was well known (KNOWN, not suspected) that was his entire methodology then you might have a point. Is this what you're claiming?

On the general issue that people gamble whilst (at least partially intentionally) ignoring the risks I have no argument. Most idiots (as opposed to rational people) look at pretty obvious ponzi schemes and try to look for reasons to believe they're legitimate - when they should, rationally, be looking for reasons to confirm they're NOT legitimate. So they get into a mind-set of effectively trying to persuade/tallk themselves into investing when they should be doing the opposite - and insisting that the operator give full disclosure, answer in detail all queries etc.

But that's neither here nor there in this specific case. MP wasn't investing in an obvious ponzi - in fact appeared to want to totally avoid pirate exposure. MP's biggest mistake was likely assuming PH was competent to run his business - which WAS an erroneous belief both parties had in common: however someone fooling others that they have more competence than they do has never been an issue which, on its own, will invalidate a contract.

When this deal occurred, I also shared the mistaken belief that PH was likely competent to run his business. When offering loans the most basic of skills needed is the ability to properly vet loan applications to determine ability to repay. This obviously includes assessing the general reliability of the individual but also includes determining the means for which the loan would be used. If your contention is that he wasn't doing that (or was just asking, not verifying) then obviously his business was just a disaster waiting to happen - but that doesn't mean that AT THAT TIME all and sundry knew that. Even if there's threads pointing this out (or suggesting it) that doesn't mean that everyone read those threads - or that those who did read them gave more weight to the views of the posters than to a pillar of the community like PH. Where's even ONE thread where there's general consensus that PH's investments MUST have heavy pirate exposure?

Just because YOU may have believed something at that time - which subsequently turned out to be correct - does not mean (or give you the right to assert) that everyone else should have realised the same thing. And it's still a big leap from "should have known" to "did know" - where the latter would be the relevant condition.

As for your claim that not knowing who PH's customers were was irrelevant, thta makes no sense. Are you asserting that EVERY customer of PH's invested the money in pirate and defaulted? If not, then you already accept that SOME people borrow money at PH's rates and DON'T invest in pirate/similar. So we then have two groups of people:

1. Those who borrow and invest in pirate/similar,
2. Those who borrow and don't invest in pirate/similar.

How do we find out how many of each? Either:

1. Investigate the customers,
2. Ask PH.

MP didn't have the list of customers, so had to use #2. PH was confident that pirate exposure was minimal/zero. PH should know - from whatever due diligence he performed before (and after) loaning. Doubting his word on that would make no sense - if you didn't believe him competent to undertake even the most basic requirements of successful loaning (doing enough due diligence to have decent confidence in repayment - which includes determining a use that isn't random gambling/spunking away on ponzis) then you shouldn't even be considering investing in him anyway.

I repeat in case you missed it. Unless you claim ALL borrowers from PH were pirate investors then you NEED the list to work out whether, at any point, his exposure to pirate is 0%,10%, 30%, 50% or 100%.

PH fooled people (including himself) that he was competent to run a lending business/bank. Your argument, at root, is that because people were stupid enough to be fooled by PH they deserve to lose out and that he shouldn't be punished for it. That's a scammer's charter - aside from anything else. You're basically saying that if you can talk people into an investment that, with full 20/20 hindsight vision, is clearly bad then they're as much as fault as the individual offering the investment (as both of them should have known it was too good to be true). You also massively over-rate the weight people give to whatever threads (at that time) supported your proposition that PH was incompetent, out of his depth and very clearly exposed to pirate.