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They Buy Gold: A Brief History of Pawn Shops

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You see them littering strip malls, and you know they allegedly pay top dollar for scrap gold. How well do you know the history and nuances of your local pawn shops, though? Let’s take a look behind the pawnbroker’s counter.

© Owaki/Kulla/Corbis

Pawning Some History

Pawnbroking may not be known as the world’s oldest profession, but it certainly belongs in the discussion. Chinese records show that the practice of securing loans on property date back all the way to the dawn of the Western Han Dynasty in 206 BC.

These Chinese pawn shops were considerably more softhearted than their modern Western counterparts; borrowers could take up to three years to pay off their loans at modest three-percent interest rates.

Meanwhile, European pawnbroking began to flourish during the Middle Ages. The Norman Conquest introduced the practice to England, and the Lombardy region of northern Italy was another hotbed of pawnbroking. In fact, pawnbroking became so strongly identified with Lombardy throughout Europe that the term “Lombard” gradually became synonymous with “pawn shop” and “Lombard banking” was a widespread term for pawnbroking.

Anyone who turns to a pawnbroker to scare up some quick cash is in good historical company. Pope Leo X, a notoriously free spender, once had to pawn his own palace furniture and silver to cover his luxurious lifestyle and patronage of the arts. (It’s no surprise, then, that Leo X was at the helm of the Church when it gave the practice of pawnbroking the official thumbs-up in 1515.) In 1338 King Edward III hocked his jewels to raise funds for the English military at the dawn of what would become the Hundred Years’ War.

Pawning your possessions wasn’t just for the nobility, though. Many early pawnbroking efforts came in the guise of aid to the poor. The Catholic Church approved of pawn shops on the condition that they lend money to the poor at reasonable interest rates. England’s biggest pawnbroking operation in the 18th century was the Charitable Corporation, which was chartered in 1707 “to lend money at legal interest to the poor upon small pledges.” Within 25 years, though, widespread fraud and embezzlement from within the corporation bankrupted it.

Despite these high-profile customers and ostensibly noble aims, the spread of pawnbroking throughout Europe wasn’t an entirely smooth process. By the 17th century, pawnbrokers had developed shabby reputations as outlets for stolen merchandise, and starting in 1785 England began tightly regulating the industry. A London pawnbroker had to shell out £10 for a license and could only charge 0.5-percent interest rates, a figure that gradually climbed over the next few decades.

Where’s the Profit?

The mechanics of a typical pawn transaction are pretty simple. A customer brings in an item and uses it as collateral to obtain a relatively small cash loan. The customer than has a fixed period of time, usually a few months, in which he can return to the shop to pay off the loan with interest and retrieve the item. If the customer doesn’t pay off the loan, the item becomes the property of the pawnbroker, who then sells it in his retail shop.

Most people actually return to pay off their loans and pick up the item they pawned; in industry slang this process is known as “redemption.” Pawn Shops Today, which advertises itself as “The National Voice of the Pawn Industry,” pegs the national redemption rate on pawn loans at around 80 percent. Other stores like New York’s Pawn Shop of America claim redemption rates as high as 95%.

How are pawn shops staying in business if so little of the merchandise they bring in is hitting the stores’ shelves? The loans they’re making have pretty hefty interest rates. American pawn shops have their interest rates set at the state level, but they’re all fairly stout. In New York, for example, the rate is 4 percent per month, which adds up to a 48 percent annual rate. In North Carolina, the number is 2 percent per month, but additional storage and handling fees can be tacked on to raise the total to a staggering 20 percent per month.

Moreover, when loans go unredeemed pawnbrokers get their retail merchandise at bargain rates. A typical pawn loan is only for a quarter to a third of an item’s resale value, so there’s a pretty nice margin built into any item that ends up going out for sale in the shop.

The Story Behind the Symbol

If you’ve ever set foot in a pawn shop, you’ll recognize the pawnbroker’s familiar symbol of three gold balls suspended from a bar. The symbol is often attributed to the famed Medici family of Florence, but the real explanation is a bit trickier than that. Some sources simply attribute the three gold balls to a sign that Lombard merchants hung outside their shops; as “Lombard” gradually became synonymous with “pawnbroker” throughout Europe, the symbol took on a new meaning.

Another story traces the symbol’s origins back to the patron saint of pawnbrokers, Saint Nicholas. (Yup, the Santa Claus guy is also looking out for your local pawn shop.) According to folklore, St. Nicholas once gave three small bags of gold to a peasant so the man wouldn’t have to sell his three daughters into slavery. The three bags of gold became stylized as three gold balls, and the symbol stuck to the saint’s beloved pawnbrokers.

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iStock // Ekaterina Minaeva
Man Buys Two Metric Tons of LEGO Bricks; Sorts Them Via Machine Learning
May 21, 2017
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iStock // Ekaterina Minaeva

Jacques Mattheij made a small, but awesome, mistake. He went on eBay one evening and bid on a bunch of bulk LEGO brick auctions, then went to sleep. Upon waking, he discovered that he was the high bidder on many, and was now the proud owner of two tons of LEGO bricks. (This is about 4400 pounds.) He wrote, "[L]esson 1: if you win almost all bids you are bidding too high."

Mattheij had noticed that bulk, unsorted bricks sell for something like €10/kilogram, whereas sets are roughly €40/kg and rare parts go for up to €100/kg. Much of the value of the bricks is in their sorting. If he could reduce the entropy of these bins of unsorted bricks, he could make a tidy profit. While many people do this work by hand, the problem is enormous—just the kind of challenge for a computer. Mattheij writes:

There are 38000+ shapes and there are 100+ possible shades of color (you can roughly tell how old someone is by asking them what lego colors they remember from their youth).

In the following months, Mattheij built a proof-of-concept sorting system using, of course, LEGO. He broke the problem down into a series of sub-problems (including "feeding LEGO reliably from a hopper is surprisingly hard," one of those facts of nature that will stymie even the best system design). After tinkering with the prototype at length, he expanded the system to a surprisingly complex system of conveyer belts (powered by a home treadmill), various pieces of cabinetry, and "copious quantities of crazy glue."

Here's a video showing the current system running at low speed:

The key part of the system was running the bricks past a camera paired with a computer running a neural net-based image classifier. That allows the computer (when sufficiently trained on brick images) to recognize bricks and thus categorize them by color, shape, or other parameters. Remember that as bricks pass by, they can be in any orientation, can be dirty, can even be stuck to other pieces. So having a flexible software system is key to recognizing—in a fraction of a second—what a given brick is, in order to sort it out. When a match is found, a jet of compressed air pops the piece off the conveyer belt and into a waiting bin.

After much experimentation, Mattheij rewrote the software (several times in fact) to accomplish a variety of basic tasks. At its core, the system takes images from a webcam and feeds them to a neural network to do the classification. Of course, the neural net needs to be "trained" by showing it lots of images, and telling it what those images represent. Mattheij's breakthrough was allowing the machine to effectively train itself, with guidance: Running pieces through allows the system to take its own photos, make a guess, and build on that guess. As long as Mattheij corrects the incorrect guesses, he ends up with a decent (and self-reinforcing) corpus of training data. As the machine continues running, it can rack up more training, allowing it to recognize a broad variety of pieces on the fly.

Here's another video, focusing on how the pieces move on conveyer belts (running at slow speed so puny humans can follow). You can also see the air jets in action:

In an email interview, Mattheij told Mental Floss that the system currently sorts LEGO bricks into more than 50 categories. It can also be run in a color-sorting mode to bin the parts across 12 color groups. (Thus at present you'd likely do a two-pass sort on the bricks: once for shape, then a separate pass for color.) He continues to refine the system, with a focus on making its recognition abilities faster. At some point down the line, he plans to make the software portion open source. You're on your own as far as building conveyer belts, bins, and so forth.

Check out Mattheij's writeup in two parts for more information. It starts with an overview of the story, followed up with a deep dive on the software. He's also tweeting about the project (among other things). And if you look around a bit, you'll find bulk LEGO brick auctions online—it's definitely a thing!

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Nick Briggs/Comic Relief
What Happened to Jamie and Aurelia From Love Actually?
May 26, 2017
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Nick Briggs/Comic Relief

Fans of the romantic-comedy Love Actually recently got a bonus reunion in the form of Red Nose Day Actually, a short charity special that gave audiences a peek at where their favorite characters ended up almost 15 years later.

One of the most improbable pairings from the original film was between Jamie (Colin Firth) and Aurelia (Lúcia Moniz), who fell in love despite almost no shared vocabulary. Jamie is English, and Aurelia is Portuguese, and they know just enough of each other’s native tongues for Jamie to propose and Aurelia to accept.

A decade and a half on, they have both improved their knowledge of each other’s languages—if not perfectly, in Jamie’s case. But apparently, their love is much stronger than his grasp on Portuguese grammar, because they’ve got three bilingual kids and another on the way. (And still enjoy having important romantic moments in the car.)

In 2015, Love Actually script editor Emma Freud revealed via Twitter what happened between Karen and Harry (Emma Thompson and Alan Rickman, who passed away last year). Most of the other couples get happy endings in the short—even if Hugh Grant's character hasn't gotten any better at dancing.

[h/t TV Guide]