X-Message-Number: 1150
Subject: re patient care funding
Date: Sun, 16 Aug 92 18:45:04 PDT

I would really prefer to stay out of the money arguments--but 
since I am on the board and am going to be responsible for the 
successes or debacles, I have no choice. 

First a little background so Eric and Perry have some idea of why 
board members (well, me anyway) feel very uncomfortable with the 
decisions we *must make* investing patient funds.  

The endowment fund is a lesser concern.  (We could lose it, and 
no one would thaw out.) 

None of the people involved in founding Alcor were investment 
gurus, and this is true of almost all the people deeply involved 
since then.  It is even worse than that.  Most of us have been 
doers with either an engineering or medical slant.  While I fully 
understand that there is a need for people to make investments 
and for others to spend their lives managing them, a lot of the 
doer class of folks considers investment managing to be a low 
class of parasite feeding off the doer's labor.  This attitude 
is dead wrong:  we need bean counters and folks who can make 
rational decisions as to where to put the beans.  But the 
attitude is hard to shake entirely. 

Alcor was, of course, founded by people who were really strong on 
getting things done, and this has tended to be perpetuated to 
this day because we get to know and trust people who get things 
done.  At various times in the past, membership on the suspension 
team was considered a necessity for being considered for board 

The Alcor founders (on whom Mike Darwin had a lot of influence) 
had some horrible examples before them of a number of suspensions 
terminated for lack of funding.  They made a number of rules in 
an attempt to assure that suspensions would be carried through.  
Among them was a *very* conservative attitude toward suspension 
funding.  Suspension funding was set at 100 times the yearly cost 
to keep a patient frozen.  It was their hope that real interest 
of two percent would be enough to keep the funding level up with 
inflation.  In addition, Alcor has a rule of diverting 10% of 
incoming money into the patient care fund.  We used to donate the 
patient care labor as well, but in recent years we have been 
charging the patient care fund for labor and other costs of 
taking care of them.  At the present this roughly balances.  If 
the rule is not modified, I expect slower growth in the cost of 
maintaining patients than Alcor's income and more money to go 
into the patient care fund in the future. 

Now, the effect of "overfunding" and the flow of money from Alcor 
general revenues into patient care funding makes it unnecessary 
to get maximum performance out of the patient care fund.  Right 
now, the rate on 30-year T-bills would be just fine to pay for 
LN2 and keep ahead of inflation.  Heck, we could do it on three- 
month T-bills! 

But it is always better to face the future with more money than 
less.  Thus, if we can do better *without* much more risk, we 
should.  Carlos has been working for years to bring the board 
around to this viewpoint.  At some point, we are well aware that 
it will be necessary to greatly diversify the fund.  And, in a 
high inflation, low interest environment, the fund would rapidly 
get into trouble if it were not somewhat invested in equities, 
real estate, and the like.  
I think both Eric and Perry misunderstood Carlos' comment about 
putting the patient care fund in the hands of *A* manager.  The
board would never stand for taking that kind of risk (in 
engineering terms, a single point failure).  Eventually part of 
the patient care fund will have to be in the hands of investment 
managers--several of them.  But newcomers like Perry and Eric 
need to understand just how difficult that is going to be.  (A 
working definition of a relative newcomer--like me--to cryonics 
is anyone who has not yet had to chip decomposed, dried human 
remains out of a dewar.  Ask Mike about this sometime.)  The last 
time Alcor entrusted about $100k to someone (at the time it was 
about a third of the patient care fund) we lost the whole works.  
I am not faulting the people who did this--they were under a lot 
of pressure and had excellent reasons to do what they did.  It 
just did not work out.  But please don't carp at us for being 
Incidentally, I think I know what I would look for in a person to 
put in charge of patient care funding investments.  First, they 
would have to be an Alcor member of *long* standing, 5-10 years 
for a starter.  Second, they would invest as if they were dealing 
with the *only* money they would ever have for their own 
suspension funding.  Even so, when that time comes, it is going 
be soul-searching time for the board to turn over large chunks of 
the fund, because *we will still be the responsible ones.* 

A few things about Eric Klein's posting . . . . it is hard for me 
to sort out how I feel about Eric and his investment advice.  
Cryonics has more than its fair share of really obnoxious people 
(though about par for a group of libertarians).  Eric rates well 
up into that group, though not at the top.  (Yeah, I am fairly 
hard to put up with too.)  The problem?  It is really hard to take 
advice from someone who is just itching for a chance to needle 

[much deleted]

>returns that Alcor was earning were criminally low.  These low 
>returns are the main reason that Alcor employees get paid so 
>pitifully little today.

Can you put numbers on this statement?  And, the patient care 
fund is off limits!

>>"But the fiduciary responsibility will always rest with the board of 
>This is an extremely stupid rule which I argued against in my money 
>update and at the board meeting.  

Eric, this is *not* a rule or a bylaw.  You are showing an 
extreme lack of understanding of the function of a corporate 
board.  We *are* the responsible ones, and this will always be 
the case.  There is no way we can escape from this burden, it is 
a legal *function* of the board.  We will still be responsible 
when we have a platoon of investment managers who make large 
financial decisions every day on their own (delegated) authority. 

Re Perry E. Metzger's note, when Alcor gets so large that it is 
investing in private offerings, I am sure it will have plenty of 
managers who can sign off on a tens of millions deal in an 
afternoon.   Who knows, he might be one of them! 

>4) The contention that a money manager will never be needed.

>When Alcor starts managing funds in the tens millions of dollars,
>which must of needs happen if Alcor grows sufficently, professionals
>will be needed to watch the money day to day. There will simply be no
>other way to deal with the volume of decisions that will need to be
>made. Assuming Alcor grows enough to become a professional
>organization with hundreds of patients in suspension, the patient care
>fund will grow to this size range and the board will have a fiduciary
>responsibility to relinquish day to day control; it will have no other
>choice, period.

I agree.  It is correct to educate us on this point, but expect 
that it is going to take years for this situation to come about.  
See my thoughts above on the qualifications I would like to see 
in managers. 

>I was expecting the board to come back with a response of the form "we
>are new at this and need to take time at first." This would have been
>a perfectly acceptable response, one that indicated that the board was
>merely being cautious because of inexperience.

That and having been burned badly.

> However, this doesn't
>seem to be the contention. It appears that the contention is that a
>month or even longer is needed to prudently evaluate securities
>transactions. This makes me fear greatly for the long term safety of
>the funds in question. As I've said twice and must emphasize yet again
>because of its importance, prudence does not mean delay. Safety is not
>purchased by procrastination.

Carlos is the only one on the board with a lot of financial 
experience.  Eric was asked to send his recommendations to him 
for vetting a week or so before the board meeting.  If the 
advisory committee makes a recommendation, and Carlos says it 
makes sense, and stays withing the established guidelines we can 
move on it at the meeting.  Using the bank statement dates as a 
reason to spring this on the board is just silly.  If you really 
need statements, we can get them made up for you any date of the 
month.  Besides, the accounts they look at don't have that much
activity anyway. 

By the way, Eric, have you looked at Florida Light and Power?  
They are among the best run at the engineering end of things. 

And, thanks, Perry.  If we need another investment committee 
member sometime, would you consider it? 

Keith Henson

Alcor board member, but speaking for himself.

(c) 1992 H. K. Henson (and if you even think of printing this and 
sending it to a few friends without my holy permission, I will be 
right there to sue your britches off.  ;-)  )

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