X-Message-Number: 1155
Subject: Re: cryonics: #1151 - #1153
Date: Wed, 19 Aug 92 00:41:11 PDT

"Richard Schroeppel" <> writes:

>In #1150, Keith Henson writes ---
>>   (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.  ;-)  )
>I have no objection to HKH copyrighting fiction or instructional writing,
>but I find the idea of copyrighting a position paper ludicrous, and the
>threat of a lawsuit disturbing.

Hey Rich, lighten up!  the ;-) at the end of this obviously sarcastic 
postscript is called a "winkey face."  I don't know how I could have 
laid it on any thicker.  Besides, I made it specific by stating 
printing, i.e., you can reproduce it in electronic form till you run 
out of bits.  I hope you are not a "tree killer" like some I could 

>                                    But HKH is planning to be frozen,
>and will have his backups taking over the galaxy & organizing parties:
>His pearls of wisdom are copyright forever!

Now who is pulling our legs?  Or did the :-) get dropped in the bit 



Perry Metzger writes:


>>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.  
>Any decent fiduciary should feel cautious about dealing with other
>people's money. The feeling is only natural. However, just as with a
>surgeon, feeling so cautious that one is unable to make needed moves
>because of fear is not a good situation.


>>The endowment fund is a lesser concern.  (We could lose it, and 
>>no one would thaw out.) 
>Alcor's long term survival depends on having adequately funded overall
>operations. If it ends up just being a single caretaker and the
>existing patients, the long term survival of those patients may be
>called into question.  Given this, its important that the organization
>have as much funding as possible for all purposes; no money is
>"loseable", ever. This does not mean that an occasional trading loss
>will not occur, but it does mean that all money is very important.

Agreed.  However, we on the board do feel different about endowment vs 
patient care money.  There are significant legal differences as well. 

>>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. 
>I understand this concern. We are deeply indoctrinated in our society
>to believe that "making money off of money" is somehow evil. However,
>given that the board members have a fiduciary responsibility towards a
>large fund that will eventually get huge, its very important that they
>rid themselves of this feeling. I am not saying one should not be
>cautious; the investment community attracts its share of con men.

I think the investment community attracts considerably more than its 
share of con men.  The community is continuously weeding them out.  
And while they do a reasonable job, there are some spectacular cases.
Lincoln Savings comes to mind, not to mention what was done with junk 

>However, the way to avoid con men is not to be frightened of all
>investments but to do good due diligence on all investment decisions.
>Occasionally, one must expect some fraud to occur, but provided one
>is well diversified 

A *very* significant point.  The obvious problem is the overhead 
diversification causes in (relatively) small funds.  What *is* the 
smallest reasonable block of money for a single fund advisor to work 
with?  $100,000? A million?

>                    and has done good due diligence, it is likely
>that the associated costs of these frauds will be minimal. One of the
>reasons for wanting professionals running the ship is to make sure
>that good due diligence is exercised; the board likely will not have
>time to do good diligence work for all investments. Given that many
>board members would not know how to do this sort of thing on their
>own, a fund manager would be safer, not riskier, in this regard,
>provided that the board only made sure he was of reasonable competence
>and that no embezzlement was going on; naturally, these considerations
>apply even if the board is managing its own money.

The amount of work depends a lot on the investment vehicle, and how 
sound the management of (for example) a mutual fund is.  However, even 
some seemingly sound operations (insurance companies) have gone belly 
up from bad investments in the last few year.  Can we expect to do all 
that much better? 

>>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! 

>No, you couldn't. The reason is this: over long periods (20-50 years),
>treasury securities fairly consistently fail to keep up with
>inflation; over time, the losses can be significant. Furthermore, long
>term treasury securities are not "safe" in the sense that a rise in
>interest rates (almost inevitable in the longer term as we are near
>minimal interest rates now) means a loss in the value of one's bonds;
>longer term bonds naturally lose much more money. (For those not in
>the know, bonds trade such that at the price they are purchased on the
>open market they will achieve a particular interest rate in the long
>term; thus, bonds with coupon rates below current market rates trade at
>a discount and bonds with coupon rates above current market rates
>trade at a premium.) Given past behavior in the bond markets, bonds
>cannot be considered a low risk investment. Furthermore, many
>people, such as myself, are of the opinion that high inflation,
>possibly even hyperinflation, will eventually hit as the government
>desperately tries to pay off the national debt by printing money. This
>would drive the price of fixed income securities into the ground.

The operative word in what I wrote is "right now."  I fully agree with 
you on the long term problems with fixed rate securities. 

>There is no safety this side of the grave (to cryonicists, I suppose
>its "there is no safety this side of information theoretic death").
>There is no such thing as a safe capital preserving investment that
>requires no supervision, period. If you want to avoid watching
>something, you hire people to watch it for you, but you can't leave
>things alone, especially not in the long run. Even gold drops badly at
>times; the current price of gold is at multi-year lows and is even
>lower if you take inflation into account.

Does this mean we should buy gold?  :)

>>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.* 

>I know what I'd look for. I wouldn't pay any attention to whether the
>guy was involved in cryonics; that leaves a tiny pool of people. You
>wouldn't only buy dewars from cryonics people, you wouldn't only buy
>land from cryonics people, why only buy advice from cryonics people?
>This is a job, a profession, not a hobby; I would want to buy services
>from the best people around; devotion to cryonics is not a criterion.
>I'd look for a set of good fund managers who have survived at least
>two business cycles (most fund managers and other professional
>investors only survive one business cycle, not understanding how to
>invest in different phases of the cycle), have had good track records
>throughout business cycles, and who invest in a sensible manner. Good
>diversification, both within a market and between markets, is, as
>always, the best way to insure against significant losses.

By the time we need a platoon of these folks, the pool may be a lot 
larger than it is today.  But my reason for preferring cryonics folks 
(who I would hope also had the excellent qualification list Perry 
cites) is related to the Prisoner's Dilemma game.  Cryonicists are going 
to play the game with each other for *a very long time.*  This makes 
defecting (making off with the money) a very poor move. 

>>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! 

>I wouldn't trust anyone to sign off on a ten million dollar deal in an
>afternoon. Maybe to place orders for ten million dollars in fungible
>securities of some sort based on prior knowledge of the market, but
>with private placements even if you are knowledgeable it does take a
>few weeks between the time that you see an offer and decide its good
>and the time your private investigators have made sure the data you
>are working off of isn't fraudulent.

If you are right on inflation, by that time it may take $1000 to buy a 
hamburger.  :)  No, even I know that deals that large take time, and a 
lot of work on both sides of the deal.  (Though I have seen some of 
the most amazing deals work out here in Silicon Valley.  In one case, 
the investors got rid of the entire crew who had started a company-- 
and made it work.) 

>>>When Alcor starts managing funds in the tens millions of dollars,
>>>which must of needs happen if Alcor grows sufficiently, 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.  

>Why should it? We are only talking about a factor of 10 in terms of
>numbers of patients in suspension. If current growth curves continue,
>we are talking about something to worry about in only a few years;
>certainly all the mechanisms have to be in place to deal with that
>well in advance if the trends continue.

I agree we should have the mechanism in place to be activated when the 
patient care fund hits the level where it makes sense to use fund 
managers.  But, I sure *hope* it is going to take some time to reach a 
10 fold increase in suspensions (freezing the entire current 
membership would be a bummer--though it would certainly "cool off' the 
political hassles).  

Right now the (kind of noisy) data suggest a four year doubling time.  
(I just counted back 12 suspensions and it took me to 1988.)  A factor 
of 8 (close enough to 10) would be three of these doublings or about 
12 years.  To put really rough numbers to this rate, figure the 
patient care fund will have 2 million in four years, 4 million in 8, 
and 8-10 million in 12+ years.  I don't think we would want more than 
20% of it in the hands of any single manager. 

Your thoughts on when and how would be much appreciated.


[Sorry to have included all of the previous posting, but this stuff is 
hard to follow without it.] 

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