If I were a ratings agency I would....

Create a completely transparent ABS (asset backed security) market.

In my opinion, the financial crisis of 2008 was largely a transparency issue. You had people obtaining debt that that they could not afford and then you had investors trusting ratings agencies and investment banks at face value to declare how “safe” that debt was.

S&P is in a unique position, being one of the leaders in the ratings market that lies between the loan issuers and the investors. What if S&P developed a transparency system that could tie the pool of loans right back to each loan that was issued? They could take a Prosper-like (http://www.prosper.com/) approach while stripping out personal information to allow an investor to “drill” into each individual loan in the pool. This service could be linked to a visual display (http://newsmap.jp/) of the loan pool and allow for data exports, granting investors complete transparency of what they are purchasing. Investors could then create models off the data to determine if the price of the assets meets their individual investment risk expectations.

This service could be sold to the investors in addition to the traditional S&Ps ratings.

Someone could then take it one step further and allow individual investors to purchase part of the “asset backed” pool through a Prosper-like platform for asset backed securities.

Small farmer price “insurance”

Milk farmers have a serious problem. The prices of milk fluctuate above and below their COGS throughout the year, leaving the farmers’ incomes unstable and unpredictable. This problem is then aggravated by several other issues. First, the average milk farm only has ~120 cows, which results in a production amount too low to hedge with traditional futures and options. Even if the production was higher, though, milk farmers generally do not understand how to hedge, leaving them without a means to stabilize and predict their income.

This is a solvable issue if one takes a step back and looks at the problem in its whole rather than on an individual level. First, there are a few things to consider: For one, farmers do not need the price at a particular second like a trader may – they have a longer time horizon. Also, while farmers may not even understand the concept of hedging, they do understand insurance. Lastly, farmers are now becoming more and more computer literate (40% in 2009).

Evaluating these factors in combination, one arrives at a simple solution: an online platform that allows farmers to buy and manage “insurance” on their production. In the backend, a hedge would be created by grouping the farmers together and using existing markets to offset the risk.

About Me

My name is Justin DiPietro, I am a 23 year old Penn State grad in NYC. This blog will hold some of my business ideas and thoughts on solutions to known business problems.

Visit my LinkedIn to learn more about my professional background.

This is why I am not protecting the IP

There are a few factors to consider. First and foremost, as many have said, ideas are just ideas without execution. Second, it’s only possible for me to work on the execution of one or two ideas at a time. Lastly, I will be giving only the “gist” of the idea and the facts that support it.

Can I use one of your ideas to build a business?

If you have the technical skills or means to execute one of the ideas or solutions that you see on my blog contact me at justin.s.dipietro(at)gmail.com. Eventually, I may ask for 0-49% of equity depending only on how much you would like me to get involved.