Funding risk

Funding risk

Joined: September 24th, 2005, 6:53 pm

November 29th, 2008, 11:51 pm #1


Suppose someone aged 25 signs up using a whole life policy with $100,000 face value. Now suppose he lives fifty more years, which is his current life expectancy, more or less. And suppose $1 today will have only 97% of its value one year from now, and one year after that it will be worth 97% of 97%, and so on.

When this person dies his $100,000 insurance payout will be worth less than $22,000 in constant 2008 dollars.

What if inflation is just a little higher over that period? It certainly could be. Suppose $1 today is worth only 95% of its value one year from now--and so on, year after year. In this scenario the $100,000 will be worth less than $7,700 fifty years from now, in constant 2008 dollars!

But now let's be really pessimistic, which I suggest is the only ethical way for a cryonics organization to be. Suppose the US dollar diminishes to 90% of its previous value each year. Under these circumstances (which may be unlikely but are conceivable, since a sum of several trillion dollars appears to have been committed to the US money supply and has not even begun to work its way through as inflation) the eventual payout will be worth just $515 in constant 2008 dollars.

Here's a table that shows the outcomes for various inflation rates, assuming the same $100,000 face value for insurance purchased in 2008. Because of limitations in this text editor, I have used a monospaced font with character spaces to format the columns:
Annual reduction      Face value in 2058in value              in 2008 +dollars99%                   $60,50198%                   $36,41797%                   $21,80796%                   $12,98995%                   $ 7,69594%                   $ 4,53393%                   $ 2,65692%                   $ 1,54791%                   $   89690%                   $   515
Clearly the cryonics organization is taking a huge gamble on US monetary policy. But, our young person may feel a bit self-righteous about it. He is likely to complain, "I will have been a member for 50 years, paying life insurance premiums all that time. Therefore I deserve to be cryopreserved." Well, sure, he has paid a lot of money--to the insurance company. Thus the insurance company profits, while the cryonics organization loses.

(The cryonics organization will have received annual membership dues during that whole period, but that's a separate issue.)

Conclusion: The financial model used by cryonics organizations entails significant risk. Personally I see it as suffering from the same kind of optimistic assumption that is endemic in cryonics: That someone in the future will fix any mess that we create today.

Now for the confessional part. I have, to some extent, contributed to the mess, despite trying conscientiously to avoid doing so.

When I devised the terms for standby service through Suspended Animation, I wanted a minimum cash prepayment to guarantee three days of standby, plus a subsequent pay-as-you-go amount for each additional day. Result: Only one person signed under these terms, and the last time I inquired (about a year ago), only two people had ever accepted those terms. (The second of those people was me.)

Before I left SA, under some pressure from CI and from others at SA, I added a prepaid flat-rate plan, which would cover up to two "unlimited" deployments. That attracted no takers at all, so far as I know.

Under more pressure I added an option allowing people to set aside a portion of life insurance to cover up to two "unlimited" standby deployments. Yay! Dozens of people took that deal. So, I ended up using the same bad funding model as everyone else, because consumers would not accept anything else. However I included the following wording, which basically says that SA isn't going to grandfather people in, if rates go up:

"This figure cannot be guaranteed for the indefinite future. Clients are advised to obtain additional insurance, if possible, to protect themselves against the possibility of future increases due to inflation or the availability of new, more sophisticated procedures which may be offered as an extra-cost option."

(See <a href="http://www.cryonics.org/SA/SA_details.html" target="_new" rel="nofollow">http://www.cryonics.org/SA/SA_details.html</a> for more details.)

I doubt that more than a handful of people added insurance in response to this warning. My conclusion is that cryonicists don't much like the idea of paying for cryonics, and because cryonics organizations are always desperate for members, they have surrendered to the demands of the members.

Now, let me try to end on a more positive note. What could be done to clean up the mess? Two options come to mind:

a) If cryopreservation minimums increase from time to time, everyone should be affected. Someone who joined a couple of decades ago should have to pay the same, if he dies tomorrow, as someone who joined only one year ago. No one would be grandfathered in.

Or:

b) The younger you are, the more insurance you need. Someone who is 25 would have to have, say, $1 million in whole life insurance, to protect against inflation. The good news is that since someone aged 25 has such a small risk of death, a $1 million policy should still be affordable. Certainly it will not cost 10 times as much as a $100,000 policy.

As I understand it, some people have complained that option (b) would be incompatible with an organization's tax-exempt status, which requires cryopreservation minimums to be classified as donations rather than fees for service. Okay, if that's the case, then option (a) should be adopted, unless someone else can think of a third option.

The way things are right now, cryonics organizations are mortgaging their future, presumably on the assumption that rich benefactors will bail them out, just as rich benefactors always have. Since this entails the implicit threat that the organization may fail if the benefactor doesn't provide help, it sounds a bit like a protection racket. "Nice little cryonics organization you have here. Be a shame if something happened to it." And of course it is also a "soak the rich" policy.

Who would have thought that so many fiercely libertarian cryonicists would be so complacent about such a setup?

--Charles Platt
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Joined: July 12th, 2007, 3:45 pm

November 30th, 2008, 12:14 am #2

Charles: "Who would have thought that so many fiercely libertarian cryonicists would be so complacent about such a setup?"

So... The "deregulate Enron" movement has bad fiscal policy? Why does that surprise you?

"Deregulate home loans!!11!1" ...

Libertarians even voted for Bush in 2000 and 2004:

"the real news is 2004. The libertarian vote for Bush dropped from 72 to 59 percent"
-- http://cato.org/pub_display.php?pub_id=6735
Last edited by Edward-M on November 30th, 2008, 12:23 am, edited 1 time in total.
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Joined: September 24th, 2005, 6:53 pm

November 30th, 2008, 12:58 am #3

Suppose someone aged 25 signs up using a whole life policy with $100,000 face value. Now suppose he lives fifty more years, which is his current life expectancy, more or less. And suppose $1 today will have only 97% of its value one year from now, and one year after that it will be worth 97% of 97%, and so on.

When this person dies his $100,000 insurance payout will be worth less than $22,000 in constant 2008 dollars.

What if inflation is just a little higher over that period? It certainly could be. Suppose $1 today is worth only 95% of its value one year from now--and so on, year after year. In this scenario the $100,000 will be worth less than $7,700 fifty years from now, in constant 2008 dollars!

But now let's be really pessimistic, which I suggest is the only ethical way for a cryonics organization to be. Suppose the US dollar diminishes to 90% of its previous value each year. Under these circumstances (which may be unlikely but are conceivable, since a sum of several trillion dollars appears to have been committed to the US money supply and has not even begun to work its way through as inflation) the eventual payout will be worth just $515 in constant 2008 dollars.

Here's a table that shows the outcomes for various inflation rates, assuming the same $100,000 face value for insurance purchased in 2008. Because of limitations in this text editor, I have used a monospaced font with character spaces to format the columns:
Annual reduction      Face value in 2058in value              in 2008 +dollars99%                   $60,50198%                   $36,41797%                   $21,80796%                   $12,98995%                   $ 7,69594%                   $ 4,53393%                   $ 2,65692%                   $ 1,54791%                   $   89690%                   $   515
Clearly the cryonics organization is taking a huge gamble on US monetary policy. But, our young person may feel a bit self-righteous about it. He is likely to complain, "I will have been a member for 50 years, paying life insurance premiums all that time. Therefore I deserve to be cryopreserved." Well, sure, he has paid a lot of money--to the insurance company. Thus the insurance company profits, while the cryonics organization loses.

(The cryonics organization will have received annual membership dues during that whole period, but that's a separate issue.)

Conclusion: The financial model used by cryonics organizations entails significant risk. Personally I see it as suffering from the same kind of optimistic assumption that is endemic in cryonics: That someone in the future will fix any mess that we create today.

Now for the confessional part. I have, to some extent, contributed to the mess, despite trying conscientiously to avoid doing so.

When I devised the terms for standby service through Suspended Animation, I wanted a minimum cash prepayment to guarantee three days of standby, plus a subsequent pay-as-you-go amount for each additional day. Result: Only one person signed under these terms, and the last time I inquired (about a year ago), only two people had ever accepted those terms. (The second of those people was me.)

Before I left SA, under some pressure from CI and from others at SA, I added a prepaid flat-rate plan, which would cover up to two "unlimited" deployments. That attracted no takers at all, so far as I know.

Under more pressure I added an option allowing people to set aside a portion of life insurance to cover up to two "unlimited" standby deployments. Yay! Dozens of people took that deal. So, I ended up using the same bad funding model as everyone else, because consumers would not accept anything else. However I included the following wording, which basically says that SA isn't going to grandfather people in, if rates go up:

"This figure cannot be guaranteed for the indefinite future. Clients are advised to obtain additional insurance, if possible, to protect themselves against the possibility of future increases due to inflation or the availability of new, more sophisticated procedures which may be offered as an extra-cost option."

(See <a href="http://www.cryonics.org/SA/SA_details.html" target="_new" rel="nofollow">http://www.cryonics.org/SA/SA_details.html</a> for more details.)

I doubt that more than a handful of people added insurance in response to this warning. My conclusion is that cryonicists don't much like the idea of paying for cryonics, and because cryonics organizations are always desperate for members, they have surrendered to the demands of the members.

Now, let me try to end on a more positive note. What could be done to clean up the mess? Two options come to mind:

a) If cryopreservation minimums increase from time to time, everyone should be affected. Someone who joined a couple of decades ago should have to pay the same, if he dies tomorrow, as someone who joined only one year ago. No one would be grandfathered in.

Or:

b) The younger you are, the more insurance you need. Someone who is 25 would have to have, say, $1 million in whole life insurance, to protect against inflation. The good news is that since someone aged 25 has such a small risk of death, a $1 million policy should still be affordable. Certainly it will not cost 10 times as much as a $100,000 policy.

As I understand it, some people have complained that option (b) would be incompatible with an organization's tax-exempt status, which requires cryopreservation minimums to be classified as donations rather than fees for service. Okay, if that's the case, then option (a) should be adopted, unless someone else can think of a third option.

The way things are right now, cryonics organizations are mortgaging their future, presumably on the assumption that rich benefactors will bail them out, just as rich benefactors always have. Since this entails the implicit threat that the organization may fail if the benefactor doesn't provide help, it sounds a bit like a protection racket. "Nice little cryonics organization you have here. Be a shame if something happened to it." And of course it is also a "soak the rich" policy.

Who would have thought that so many fiercely libertarian cryonicists would be so complacent about such a setup?

--Charles Platt
The table in my orginal post wasn't formatted in Courier as specified. Let's try this.

 
  • Annual reduction      Face value in 2058 </li>
  • in value              in 2008 dollars </li>
  • </li>
  • 99%                   $60,501 </li>
  • 98%                   $36,417 </li>
  • 97%                   $21,807 </li>
  • 96%                   $12,989 </li>
  • 95%                   $ 7,695</li>
  • 94%                   $ 4,533 </li>
  • 93%                   $ 2,656 </li>
  • 92%                   $ 1,547 </li>
  • 91%                   $   896 </li>
  • 90%                   $   515 </li>
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Joined: October 6th, 2004, 6:46 pm

November 30th, 2008, 1:04 am #4

Suppose someone aged 25 signs up using a whole life policy with $100,000 face value. Now suppose he lives fifty more years, which is his current life expectancy, more or less. And suppose $1 today will have only 97% of its value one year from now, and one year after that it will be worth 97% of 97%, and so on.

When this person dies his $100,000 insurance payout will be worth less than $22,000 in constant 2008 dollars.

What if inflation is just a little higher over that period? It certainly could be. Suppose $1 today is worth only 95% of its value one year from now--and so on, year after year. In this scenario the $100,000 will be worth less than $7,700 fifty years from now, in constant 2008 dollars!

But now let's be really pessimistic, which I suggest is the only ethical way for a cryonics organization to be. Suppose the US dollar diminishes to 90% of its previous value each year. Under these circumstances (which may be unlikely but are conceivable, since a sum of several trillion dollars appears to have been committed to the US money supply and has not even begun to work its way through as inflation) the eventual payout will be worth just $515 in constant 2008 dollars.

Here's a table that shows the outcomes for various inflation rates, assuming the same $100,000 face value for insurance purchased in 2008. Because of limitations in this text editor, I have used a monospaced font with character spaces to format the columns:
Annual reduction      Face value in 2058in value              in 2008 +dollars99%                   $60,50198%                   $36,41797%                   $21,80796%                   $12,98995%                   $ 7,69594%                   $ 4,53393%                   $ 2,65692%                   $ 1,54791%                   $   89690%                   $   515
Clearly the cryonics organization is taking a huge gamble on US monetary policy. But, our young person may feel a bit self-righteous about it. He is likely to complain, "I will have been a member for 50 years, paying life insurance premiums all that time. Therefore I deserve to be cryopreserved." Well, sure, he has paid a lot of money--to the insurance company. Thus the insurance company profits, while the cryonics organization loses.

(The cryonics organization will have received annual membership dues during that whole period, but that's a separate issue.)

Conclusion: The financial model used by cryonics organizations entails significant risk. Personally I see it as suffering from the same kind of optimistic assumption that is endemic in cryonics: That someone in the future will fix any mess that we create today.

Now for the confessional part. I have, to some extent, contributed to the mess, despite trying conscientiously to avoid doing so.

When I devised the terms for standby service through Suspended Animation, I wanted a minimum cash prepayment to guarantee three days of standby, plus a subsequent pay-as-you-go amount for each additional day. Result: Only one person signed under these terms, and the last time I inquired (about a year ago), only two people had ever accepted those terms. (The second of those people was me.)

Before I left SA, under some pressure from CI and from others at SA, I added a prepaid flat-rate plan, which would cover up to two "unlimited" deployments. That attracted no takers at all, so far as I know.

Under more pressure I added an option allowing people to set aside a portion of life insurance to cover up to two "unlimited" standby deployments. Yay! Dozens of people took that deal. So, I ended up using the same bad funding model as everyone else, because consumers would not accept anything else. However I included the following wording, which basically says that SA isn't going to grandfather people in, if rates go up:

"This figure cannot be guaranteed for the indefinite future. Clients are advised to obtain additional insurance, if possible, to protect themselves against the possibility of future increases due to inflation or the availability of new, more sophisticated procedures which may be offered as an extra-cost option."

(See <a href="http://www.cryonics.org/SA/SA_details.html" target="_new" rel="nofollow">http://www.cryonics.org/SA/SA_details.html</a> for more details.)

I doubt that more than a handful of people added insurance in response to this warning. My conclusion is that cryonicists don't much like the idea of paying for cryonics, and because cryonics organizations are always desperate for members, they have surrendered to the demands of the members.

Now, let me try to end on a more positive note. What could be done to clean up the mess? Two options come to mind:

a) If cryopreservation minimums increase from time to time, everyone should be affected. Someone who joined a couple of decades ago should have to pay the same, if he dies tomorrow, as someone who joined only one year ago. No one would be grandfathered in.

Or:

b) The younger you are, the more insurance you need. Someone who is 25 would have to have, say, $1 million in whole life insurance, to protect against inflation. The good news is that since someone aged 25 has such a small risk of death, a $1 million policy should still be affordable. Certainly it will not cost 10 times as much as a $100,000 policy.

As I understand it, some people have complained that option (b) would be incompatible with an organization's tax-exempt status, which requires cryopreservation minimums to be classified as donations rather than fees for service. Okay, if that's the case, then option (a) should be adopted, unless someone else can think of a third option.

The way things are right now, cryonics organizations are mortgaging their future, presumably on the assumption that rich benefactors will bail them out, just as rich benefactors always have. Since this entails the implicit threat that the organization may fail if the benefactor doesn't provide help, it sounds a bit like a protection racket. "Nice little cryonics organization you have here. Be a shame if something happened to it." And of course it is also a "soak the rich" policy.

Who would have thought that so many fiercely libertarian cryonicists would be so complacent about such a setup?

--Charles Platt
that a cryonics organization charging $100,000. in 2008 will still be charging $100,000. in 2058?

Or if I sign up now and pay my dues, I get the 2008 rate in 2058?

What do my dues add up to, with compounded interest for the 50 years?
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Joined: September 24th, 2005, 6:53 pm

November 30th, 2008, 1:43 am #5


"that a cryonics organization charging $100,000. in 2008 will still be charging $100,000. in 2058?"

The current situation is that all Alcor members receive the same service when they die, including (for instance) members who joined 20 years ago and are funded with (say) $40,000 insurance--half the current minimum for a neuro. This is known as "grandfathering in" a pre-existing member at the old rate. Alcor has never promised to continue doing this but has never failed to do it. CI does not have this issue (yet) because its $28,000 fee has never increased (yet).

"Or if I sign up now and pay my dues, I get the 2008 rate in 2058?"

No one can answer this question. 

"What do my dues add up to, with compounded interest for the 50 years?"

Well TW that depends how much the dues increase during the next 50 years.
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Joined: October 2nd, 2004, 8:27 pm

November 30th, 2008, 3:47 am #6

Suppose someone aged 25 signs up using a whole life policy with $100,000 face value. Now suppose he lives fifty more years, which is his current life expectancy, more or less. And suppose $1 today will have only 97% of its value one year from now, and one year after that it will be worth 97% of 97%, and so on.

When this person dies his $100,000 insurance payout will be worth less than $22,000 in constant 2008 dollars.

What if inflation is just a little higher over that period? It certainly could be. Suppose $1 today is worth only 95% of its value one year from now--and so on, year after year. In this scenario the $100,000 will be worth less than $7,700 fifty years from now, in constant 2008 dollars!

But now let's be really pessimistic, which I suggest is the only ethical way for a cryonics organization to be. Suppose the US dollar diminishes to 90% of its previous value each year. Under these circumstances (which may be unlikely but are conceivable, since a sum of several trillion dollars appears to have been committed to the US money supply and has not even begun to work its way through as inflation) the eventual payout will be worth just $515 in constant 2008 dollars.

Here's a table that shows the outcomes for various inflation rates, assuming the same $100,000 face value for insurance purchased in 2008. Because of limitations in this text editor, I have used a monospaced font with character spaces to format the columns:
Annual reduction      Face value in 2058in value              in 2008 +dollars99%                   $60,50198%                   $36,41797%                   $21,80796%                   $12,98995%                   $ 7,69594%                   $ 4,53393%                   $ 2,65692%                   $ 1,54791%                   $   89690%                   $   515
Clearly the cryonics organization is taking a huge gamble on US monetary policy. But, our young person may feel a bit self-righteous about it. He is likely to complain, "I will have been a member for 50 years, paying life insurance premiums all that time. Therefore I deserve to be cryopreserved." Well, sure, he has paid a lot of money--to the insurance company. Thus the insurance company profits, while the cryonics organization loses.

(The cryonics organization will have received annual membership dues during that whole period, but that's a separate issue.)

Conclusion: The financial model used by cryonics organizations entails significant risk. Personally I see it as suffering from the same kind of optimistic assumption that is endemic in cryonics: That someone in the future will fix any mess that we create today.

Now for the confessional part. I have, to some extent, contributed to the mess, despite trying conscientiously to avoid doing so.

When I devised the terms for standby service through Suspended Animation, I wanted a minimum cash prepayment to guarantee three days of standby, plus a subsequent pay-as-you-go amount for each additional day. Result: Only one person signed under these terms, and the last time I inquired (about a year ago), only two people had ever accepted those terms. (The second of those people was me.)

Before I left SA, under some pressure from CI and from others at SA, I added a prepaid flat-rate plan, which would cover up to two "unlimited" deployments. That attracted no takers at all, so far as I know.

Under more pressure I added an option allowing people to set aside a portion of life insurance to cover up to two "unlimited" standby deployments. Yay! Dozens of people took that deal. So, I ended up using the same bad funding model as everyone else, because consumers would not accept anything else. However I included the following wording, which basically says that SA isn't going to grandfather people in, if rates go up:

"This figure cannot be guaranteed for the indefinite future. Clients are advised to obtain additional insurance, if possible, to protect themselves against the possibility of future increases due to inflation or the availability of new, more sophisticated procedures which may be offered as an extra-cost option."

(See <a href="http://www.cryonics.org/SA/SA_details.html" target="_new" rel="nofollow">http://www.cryonics.org/SA/SA_details.html</a> for more details.)

I doubt that more than a handful of people added insurance in response to this warning. My conclusion is that cryonicists don't much like the idea of paying for cryonics, and because cryonics organizations are always desperate for members, they have surrendered to the demands of the members.

Now, let me try to end on a more positive note. What could be done to clean up the mess? Two options come to mind:

a) If cryopreservation minimums increase from time to time, everyone should be affected. Someone who joined a couple of decades ago should have to pay the same, if he dies tomorrow, as someone who joined only one year ago. No one would be grandfathered in.

Or:

b) The younger you are, the more insurance you need. Someone who is 25 would have to have, say, $1 million in whole life insurance, to protect against inflation. The good news is that since someone aged 25 has such a small risk of death, a $1 million policy should still be affordable. Certainly it will not cost 10 times as much as a $100,000 policy.

As I understand it, some people have complained that option (b) would be incompatible with an organization's tax-exempt status, which requires cryopreservation minimums to be classified as donations rather than fees for service. Okay, if that's the case, then option (a) should be adopted, unless someone else can think of a third option.

The way things are right now, cryonics organizations are mortgaging their future, presumably on the assumption that rich benefactors will bail them out, just as rich benefactors always have. Since this entails the implicit threat that the organization may fail if the benefactor doesn't provide help, it sounds a bit like a protection racket. "Nice little cryonics organization you have here. Be a shame if something happened to it." And of course it is also a "soak the rich" policy.

Who would have thought that so many fiercely libertarian cryonicists would be so complacent about such a setup?

--Charles Platt
First, IF membership in cryo organizations increases, and newer members must pay more than older grandfathered in ones, enough to cover the costs of everyone, the problem is solved.

Second, IF economies of scale are found in the costs of materials and some other factors, due to increased technology and membership, the problem could be solved.

These are part of the "gamble" cryo orgs are taking, and I suppose we all are taking. Personally, I'd say the financial aspects of cryonics are far less an issue as to a gamble, than the whole thing of whether it will ever do us any good or not to get cryopreserved at all. Everything in cryonics seems to be a big gamble. Of course the alternative is certain and permanent death.

If you had a nickel, and had a choice of putting it into a machine that you are told already is certain to give you nothing back, and of putting it into one that gives you some percent chance of getting it back and maybe some more, which machine would you put your nickel into?

Mainstream society these days is putting their nickel into burial and cremation, the machine of certain death. If you know about cryonics, you are a fool not to put your nickel into the "machine" that gives you a chance, whether slim or more.

Unless you really don't care whether you live longer or not, and many folks are like that. Not me.

FD
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Joined: September 24th, 2005, 6:53 pm

November 30th, 2008, 2:13 pm #7


FD writes, "IF membership in cryo organizations increases, and newer members must pay more than older grandfathered in ones, enough to cover the costs of everyone, the problem is solved."

I would say that this is what is known as a "pyramid scheme," in which each new layer of customers pays for the predecessors who got in earlier. Sooner or later, you run out of customers, and the final bunch get nothing.

"Second, IF economies of scale are found in the costs of materials and some other factors, due to increased technology and membership, the problem could be solved."

For this to work indefinitely, the costs have to diminish indefinitely. Another pyramid scheme, so far as I can see.

"I'd say the financial aspects of cryonics are far less an issue as to a gamble, than the whole thing of whether it will ever do us any good or not to get cryopreserved at all."

The factors affecting the cryopreservation of each member are numerous and relatively difficult to control. The financial issues can be addressed by a change of policy. One board vote would do it.

"Mainstream society these days is putting their nickel into burial and cremation, the machine of certain death. If you know about cryonics, you are a fool not to put your nickel into the "machine" that gives you a chance, whether slim or more."

Fair enough, but this doesn't excuse a decision to base organizations on a financial model that entails unnecessary risk. If a hospital guaranteed to provide future treatment on the same basis that cryonics organizations use to guarantee future cryopreservation, the hospital would be widely regarded as financially reckless, and most discriminating consumers would avoid dealing with that hospital.
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Joined: April 30th, 2006, 1:38 am

November 30th, 2008, 4:17 pm #8

Suppose someone aged 25 signs up using a whole life policy with $100,000 face value. Now suppose he lives fifty more years, which is his current life expectancy, more or less. And suppose $1 today will have only 97% of its value one year from now, and one year after that it will be worth 97% of 97%, and so on.

When this person dies his $100,000 insurance payout will be worth less than $22,000 in constant 2008 dollars.

What if inflation is just a little higher over that period? It certainly could be. Suppose $1 today is worth only 95% of its value one year from now--and so on, year after year. In this scenario the $100,000 will be worth less than $7,700 fifty years from now, in constant 2008 dollars!

But now let's be really pessimistic, which I suggest is the only ethical way for a cryonics organization to be. Suppose the US dollar diminishes to 90% of its previous value each year. Under these circumstances (which may be unlikely but are conceivable, since a sum of several trillion dollars appears to have been committed to the US money supply and has not even begun to work its way through as inflation) the eventual payout will be worth just $515 in constant 2008 dollars.

Here's a table that shows the outcomes for various inflation rates, assuming the same $100,000 face value for insurance purchased in 2008. Because of limitations in this text editor, I have used a monospaced font with character spaces to format the columns:
Annual reduction      Face value in 2058in value              in 2008 +dollars99%                   $60,50198%                   $36,41797%                   $21,80796%                   $12,98995%                   $ 7,69594%                   $ 4,53393%                   $ 2,65692%                   $ 1,54791%                   $   89690%                   $   515
Clearly the cryonics organization is taking a huge gamble on US monetary policy. But, our young person may feel a bit self-righteous about it. He is likely to complain, "I will have been a member for 50 years, paying life insurance premiums all that time. Therefore I deserve to be cryopreserved." Well, sure, he has paid a lot of money--to the insurance company. Thus the insurance company profits, while the cryonics organization loses.

(The cryonics organization will have received annual membership dues during that whole period, but that's a separate issue.)

Conclusion: The financial model used by cryonics organizations entails significant risk. Personally I see it as suffering from the same kind of optimistic assumption that is endemic in cryonics: That someone in the future will fix any mess that we create today.

Now for the confessional part. I have, to some extent, contributed to the mess, despite trying conscientiously to avoid doing so.

When I devised the terms for standby service through Suspended Animation, I wanted a minimum cash prepayment to guarantee three days of standby, plus a subsequent pay-as-you-go amount for each additional day. Result: Only one person signed under these terms, and the last time I inquired (about a year ago), only two people had ever accepted those terms. (The second of those people was me.)

Before I left SA, under some pressure from CI and from others at SA, I added a prepaid flat-rate plan, which would cover up to two "unlimited" deployments. That attracted no takers at all, so far as I know.

Under more pressure I added an option allowing people to set aside a portion of life insurance to cover up to two "unlimited" standby deployments. Yay! Dozens of people took that deal. So, I ended up using the same bad funding model as everyone else, because consumers would not accept anything else. However I included the following wording, which basically says that SA isn't going to grandfather people in, if rates go up:

"This figure cannot be guaranteed for the indefinite future. Clients are advised to obtain additional insurance, if possible, to protect themselves against the possibility of future increases due to inflation or the availability of new, more sophisticated procedures which may be offered as an extra-cost option."

(See <a href="http://www.cryonics.org/SA/SA_details.html" target="_new" rel="nofollow">http://www.cryonics.org/SA/SA_details.html</a> for more details.)

I doubt that more than a handful of people added insurance in response to this warning. My conclusion is that cryonicists don't much like the idea of paying for cryonics, and because cryonics organizations are always desperate for members, they have surrendered to the demands of the members.

Now, let me try to end on a more positive note. What could be done to clean up the mess? Two options come to mind:

a) If cryopreservation minimums increase from time to time, everyone should be affected. Someone who joined a couple of decades ago should have to pay the same, if he dies tomorrow, as someone who joined only one year ago. No one would be grandfathered in.

Or:

b) The younger you are, the more insurance you need. Someone who is 25 would have to have, say, $1 million in whole life insurance, to protect against inflation. The good news is that since someone aged 25 has such a small risk of death, a $1 million policy should still be affordable. Certainly it will not cost 10 times as much as a $100,000 policy.

As I understand it, some people have complained that option (b) would be incompatible with an organization's tax-exempt status, which requires cryopreservation minimums to be classified as donations rather than fees for service. Okay, if that's the case, then option (a) should be adopted, unless someone else can think of a third option.

The way things are right now, cryonics organizations are mortgaging their future, presumably on the assumption that rich benefactors will bail them out, just as rich benefactors always have. Since this entails the implicit threat that the organization may fail if the benefactor doesn't provide help, it sounds a bit like a protection racket. "Nice little cryonics organization you have here. Be a shame if something happened to it." And of course it is also a "soak the rich" policy.

Who would have thought that so many fiercely libertarian cryonicists would be so complacent about such a setup?

--Charles Platt
Last year, Charles Platt sent three staff members of SA, whose medical experience was pretty much limited to the application of Bandaids, to perform the initial steps of a cryopreservation, for a CI member. Platt sent two people who were trained and experienced as fabricators, and one person who was a trained and experienced golf pro. As far as I know, none of these people had any significant education in relevant health science subjects, such as anatomy, physiology, or pharmacology. Platt, and others, will say these people had been trained at SA, but I was there, and I worked with them, up until about five months before the case. (Yes, I know many of you have read it all, before; my review is for impressionable newcomers to the forum.)

These people knew how to pack ice around a person, do some chest compressions, how to inject medications into an existing IV, and not much else. If the hospital had not left the IV's in place, it's doubtful ANY drugs would have been administered. They knew virtually nothing about the medications they were administering, or they would have known the drug they were using to prevent clotting has a relatively short half-life, and needs additional dosing, over time, (which they did not give). Worst of all, Steven B Harris MD, a physician associated with SA, (last we heard, he was a Director of SA), claimed he could talk these three people through performing perfusion, (whole body washout), OVER THE TELEPHONE. Only a total moron, an arrogant ass, or someone who doesn't really believe in the possibility of a successful reanimation, (and, therefore, doesn't care what happens to a cryonicist's brain), would do this. He's a doctor, he should have known better. Perfusion is a MIRACULOUS technology, but in inexperienced hands, it will most likely result in serious, irreversible, neurological (brain) damage.

SA patted themselves on the back for the "transparency" of their report, and "transparent" it was. I believe the report CLEARLY paints a glaring portrait of incompetence, with the most disturbing portion being the pressure issues associated with the perfusion (washout) procedure. The SA team had very low flows, with significantly high pressures, indicating something was SERIOUSLY wrong, and they had NO IDEA how to determine what the problem was, much less correct it. Ben Best, or any number of other cryonics "experts" can come here and attempt to defend SA, but any number of perfusionists, and physicians who work in heart surgery, (where perfusion is most frequently used), would interpret that report exactly as I, (a formally educated perfusionist with nearly a decade of experience), did. What was mind-boggling was SA's addendum to the report, which basically confirmed my interpretations. This strongly indicates no one associated with that case, or that report, understood enough about perfusion, (the medical technology that is the "backbone" of cryonics procedures), to even understand what they were writing in their own reports. If it weren't so tragic, it would be funny.

There are a number of other examples of the nearly-absolute incompetency of SA, in that report. There are thousands of words of padding, a lot of which consists of Platt's (what I consider to be lame) excuses for not calling certain people, and repetitive comments about the team not having any personality conflicts. Of course the SA team didn't have any conflicts...they were being paid 2-3 times as much as EMT's and paramedics, for "playing doctor" with a real patient, and trying to perform complex medical procedures they had no business even attempting. If you read between the lines, you'll realize that, (thanks to contracts written by Platt), NO ONE was actually required to show up for the case, and none of the professionals Platt had contracted with, did. Then, there was the added amusement of Platt carrying out his usual personal agendas of patting himself on the back, and finding ways to criticize people he doesn't like, (whether they were involved in the case, or not). Finally, there was Platt's description of the infamous spurt, which he later admitted was largely speculation. If you ask me, the report was more "creative writing" than the technical report it should have been. The entire case was a joke...medical procedures carried out by three non-professionals, and a report written by two more non-medical professionals, who didn't even witness the procedures. No wonder the general population thinks cryonics is a hoax, a scam, or a joke...it is. It shouldn't be...it doesn't have to be...but it is. In my opinion, it's people like Platt and Harris, (and Saul Kent, the man who trusts and pays them), who have made it that way.

One of SA team members wrote to me that he/she was proud for helping the patient get his wish for cryopreservation, and that everyone knows cryonics is "speculative." Ignorance really IS bliss...the only reason that person was proud was that he/she didn't have a clue what the report indicated they had done to the patient, and didn't understand the dangerous aspects of the procedures they attempted to perform. The people involved in cryonics need to accept that cryonics wouldn't be nearly as "speculative," if medical professionals were performing the procedures. Being well-intentioned is not a substitute for competency.

We believe the brain is "hard-wired" for memory and personality, and as such, can be preserved. For those of you who believe you will one day be able to take your hard drive out in the yard, beat it to pulp with a sledge hammer, pour gasoline on it and set it on fire, douse it with water to put the fire out, and then nanobots will be able to repair it, with all your files perfectly intact, then, by all means sign up to have a bunch a amateurs cryopreserve you, and depend on future technology to repair the damage they do. Personally, just as Aubrey de Grey, I believe in "Information Theoretic Death," meaning once a significant amount of damage has been done to a brain, it can never be repaired. I believe this amount of damage had probably been done to EVERY cryonics patient, as of this time. Even in the event large amounts of damage can be repaired, just remember, the brain is much more complex than a computer hard drive, and the more damage that is done, the longer it will take for technology sophisticated enough to perform complex repairs to become available. Every year, (or decade, or century), you spend in that Dewar, or cryostat, increases the risk that acts of man, mechanical failures, or acts of nature, will destroy you.

Other than minding a relatively simple, short-term budget, I'm fairly ignorant about matters of finance, and I don't really understand Charles' "Reformatted Version" chart, in this thread. How do you end up with less money, at a lower annual rate of reduction? And, when would there ever be an "Annual Reduction in Value" of 90%, or more? (I'm not stating there's anything wrong with Charles' calculations, I'm simply stating I don't understand.) Regardless, based on Charles' "Reformatted Version" of funding risks, I would say that, without evidence that "SA's 2007 Capabilities," have advanced, you wouldn't be getting your money's worth, at any of those figures, (unless all you're looking for is an alternative to burial or cremation).

(If you calculate the 2058 value of $100,000 in 2008, at a 3% inflation rate, you get approximately $22,811. <a href="http://www.calcpartner.com/csFutureDoll ... nframe.htm>)" target="_new" rel="nofollow">http://www.calcpartner.com/csFutureDoll ... nframe.htm>)</a>
Last edited by melmax on November 30th, 2008, 4:20 pm, edited 1 time in total.
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Joined: October 2nd, 2004, 8:27 pm

November 30th, 2008, 4:41 pm #9

FD writes, "IF membership in cryo organizations increases, and newer members must pay more than older grandfathered in ones, enough to cover the costs of everyone, the problem is solved."

I would say that this is what is known as a "pyramid scheme," in which each new layer of customers pays for the predecessors who got in earlier. Sooner or later, you run out of customers, and the final bunch get nothing.

"Second, IF economies of scale are found in the costs of materials and some other factors, due to increased technology and membership, the problem could be solved."

For this to work indefinitely, the costs have to diminish indefinitely. Another pyramid scheme, so far as I can see.

"I'd say the financial aspects of cryonics are far less an issue as to a gamble, than the whole thing of whether it will ever do us any good or not to get cryopreserved at all."

The factors affecting the cryopreservation of each member are numerous and relatively difficult to control. The financial issues can be addressed by a change of policy. One board vote would do it.

"Mainstream society these days is putting their nickel into burial and cremation, the machine of certain death. If you know about cryonics, you are a fool not to put your nickel into the "machine" that gives you a chance, whether slim or more."

Fair enough, but this doesn't excuse a decision to base organizations on a financial model that entails unnecessary risk. If a hospital guaranteed to provide future treatment on the same basis that cryonics organizations use to guarantee future cryopreservation, the hospital would be widely regarded as financially reckless, and most discriminating consumers would avoid dealing with that hospital.
The way cryonics organizations have operated thus far with their unofficial grandfathering policies, and even the way Medicare and Social Security work in the USA, differs in one important respect from a pyramid scheme. They run a span of decades and eventually the older participants who paid in less money, die off (or get cryopreserved). A pyramid scheme spans only a few months or years, runs out of new people when the market is saturated, and the earlier participants are still alive and well and richer, with the newer ones earning nothing and losing their investment. I grant that it is a gamble that cryonics will be sustainable in finding at least as many new people paying higher fees as there are older people who go into the cryostat/dewar, but it has a chance of working just fine, unlike a pyramid scheme. New people (prospective cryonics customers) are born every day,

As to changing policies, if cryonics organizations were to start raising prices on the longer-term members, most of whom are closer to the age where they are likely to need services, many would simply be forced out. The older one gets, the less able one is to generate a lot of new income or wealth, or to take out more life insurance. Then the person neither gets cryopreserved, nor does the cryo org get their money. Lose-lose situation there.

Of course that raises the Rudi type idea - well, buy a million dollars of life insurance. I suspect though that the more costly cryonics is perceived to be, the less members/customers cryo orgs are going to get. For cryonics to work there are going to have to be a lot of people involved in it, and working together cooperatively - from helping with standbys and suspensions, to being around in the future to help with reanimations. If 90% of current cryo org members are priced out, will there be enough cryonicists still around to help the wealthy with what they need?

On the possibility of economies of scale, you say "For this to work indefinitely, the costs have to diminish indefinitely. Another pyramid scheme..". I don't really see why. They just have to come down to a level commensurate with say, thousands of people buying in to cryonics, rather than hundreds. If cryonics eventually cost $15,000 instead of $150,000, it would be decades before the future value of that $15K surpassed the life insurance taken out by anyone, and no such persons would still be living (or not cryopreserved).

FD

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Joined: July 12th, 2007, 3:45 pm

November 30th, 2008, 4:56 pm #10

Ben Best: "CI does not guarantee that prices won't be increased nor does it guarantee that Members will be "grandfathered" at existing rates (with the exception that those who pre-pay will be "grandfathered" as long as they don't withdraw their money)."
-- CI forum
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