Economics professor Muhammad Yunus felt like a fraud...
The year was 1974, and Bangladesh was on the brink of collapse. It had recently emerged from a brutal war for independence. Millions of folks were just barely scraping by.
Yunus was teaching elegant theories. But outside the classroom, people were going hungry. That didn't sit right with him.
So he left the lecture hall. He took his students to the nearby village of Jobra for some firsthand experience...
And what they saw didn't just stun the university students. It shocked Yunus himself...
The first person they met was a young woman weaving bamboo stools...
Her work was beautiful... durable... and it should have been marketable. But she earned the equivalent of only two pennies for each stool.
In order to buy bamboo from a local lender, the woman borrowed 5 taka, or about 9 cents. When she sold her finished stools, she had to repay that loan with interest.
Her take-home earnings came to just 2 cents per stool. And she wasn't alone...
Yunus surveyed 42 of the poorest villagers in Jobra. He found they owed a total of 856 taka – roughly $27 at the time – to various informal lenders. That was all it took to keep them trapped in poverty.
The professor reached into his own pocket and paid off those loans. He offered the same villagers interest-free loans instead, to be paid back whenever they could.
And within a year, every single one of those borrowers repaid him.
Yunus' experience convinced him that traditional banking had it backward...
Banks insisted the poor were "unbankable." But in Jobra, the poorest villagers repaid their debts in full. All they needed was a fair shot.
When Yunus brought his idea to local bankers, they laughed him out of the room. So in 1983, he launched his own bank instead...
Grameen Bank began issuing microloans to small groups of women across rural Bangladesh. They used the loans to buy cows, plant mustard seeds, and even start microtelecom businesses.
The model was simple: Loans started small and were grown with trust. Borrowers were assigned to small groups. And as members paid their loans consistently, the entire group could access more loans.
The group structure encouraged accountability. Grameen's repayment rate hovered around 99%.
As the years went on, Grameen flourished. It grew from Yunus' $27 act of trust to serving more than 10 million borrowers... and disbursing more than $37 billion in loans.
Grameen ignited a global movement and kick-started the idea of microcredit.
But the real takeaway from Yunus' story is about how we measure risk...
The banking system failed to serve Jobra's villagers. But it wasn't because these people weren't creditworthy. It was because it used the wrong criteria to judge them.
That same misalignment exists in the modern credit market. Millions of Americans are locked out of fair credit terms simply because their FICO scores are thin or nonexistent.
They're not irresponsible. The system just doesn't have the right tools to evaluate them. Most lenders haven't figured out how to lend to more people while keeping default rates low.
But Upstart (UPST) isn't "most lenders." It's a lending platform that's changing the credit world using advanced AI.
Upstart evaluates consumers based on dozens of unconventional factors...
It looks at everything from college major to job history, income trajectory, and even how someone fills out an application.
It identifies people who have the means and discipline to repay, even if their credit file says otherwise. These are the same insights Yunus had in Jobra, only with deeper data and smarter algorithms.
The business went public in 2020. It was an early hit thanks to the economic boom at the time. Shares rose as much as 1,200% within the first 10 months.
But inflation and interest rates pummeled the consumer in 2022... dragging Upstart's stock down, too. It hasn't recovered.
Regular readers know we've gotten more bullish on the consumer. A combination of fading tariff headwinds, falling interest rates, and bigger tax rebates should help improve spending power.
For Upstart, that means a boost in loan volume... which could help revitalize the stock.
Regards,
Joel Litman
January 26, 2026
P.S. I'm excited to announce that tomorrow at 12 p.m. Eastern time, I'll be going live for our first Master Class of 2026...
In this month's session, I'm looking beyond surface-level ratings and headlines to examine a question most investors never ask: If Wall Street research has such a poor public track record, why does it still matter? And why do investors continue to rely on it?
This Master Class is designed to help evaluate Wall Street research, distinguish real signals from noise, and elevate the way you make investment decisions.
Keep in mind, our Master Class series is free for existing Altimeter Pro subscribers. You should have received your invitation via e-mail on Friday, January 23.
If you're not a subscriber yet, we're offering a 30-day free trial of the Altimeter Pro – including all 17 previously recorded Master Class videos (and access to tomorrow's session). Full details here.
