this post was submitted on 04 Apr 2024
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Compound interest.
Let’s say you need to borrow 5000 € for your first car, but you have only 700 €. First, you’ll need to find a lender who is willing to share the risk with you. Then, you form a joint stock company (Tom’s Volvo C30 2008 incorporated), where you own 7/50 of the car and the other party owns the rest. When you have some more money, you can buy some more stocks. One day, you’ll own the whole car and the lender has all of their money back.
So...instead of loans, you're advocating that people form corporations where shares are bought over time instead?
You'll still have to pay some interest to motivate the other party to invest, all you've really done is generate a bunch of extra paperwork to spin up a corporation.
The idea is to avoid the expense spiraling out of control due to exponential growth.
In order to motivate your business partner, you should have a contract that defines the price of the stocks in a favorable way. It’s like buying and selling really. The lender pays 4300 € for the car, and sells it at a higher price, such as 4600 €.