The aging cryonics population (bringing problems similar to those of the aging of the population for social security and similar measures) seems especially important for estimates of cryonics sustainability.
Thanks for posting this. This is quite useful. It sounds like neuropreservation patients are not generally underfunded, so I find that at least slightly encouraging.
Indeed. That's one of the options I didn't quote: converting the underfunded whole-body patients to neuropreservation. (Apparently Alcor's agreements lets it do that, which makes sense - it can't take a huge bath, but it'd be even worse to let a member go completely unpreserved.)
It would set a disconcerting precedence. I'm more likely to get neurpreservation at the moment, but if I do, would Alcor be willing to downgrade me to something I can't even conceive of yet, that would be entirely degrading and perhaps set me up for an incomprehensibly miserable future?
Also, I wish I could understand this article. But all the numbers are so intimidating. I wish there was a for dummies version of this.
Also I don't get how Alcor patients can still get insurance. Or how their insurance agents make money on their deal...
I thought it might be a good idea to shift to a career in paramedicine becaues it's the only job Alcor is recruiting for (and has for some time). I thought it may be a good way to move closer to their facilities. Jobs outside Alcor or the Cryonics Institute are very limited since they have minimal competitive advantages as location economically.
In the same way other people do? I don't see how it would be more difficult for Alcor members. They don't die any sooner than the general population.
While this is important info for estimating the sustainability of cryonics orgs (reducing benefits in the cost-benefit analysis), I don't think it shows that cost estimates are wrong: membership fees are on an annual basis, and can be terminated if you decide to stop using the service, and the life insurance proceeds can be reallocated from cryonics to other applications if you terminate membership. I.e. as estimates of the cost of a few years' cryonics insurance to an individual today, current estimates are right. As estimates of lifetime expenditures if one wants cryonics protection no matter how expensive it becomes, they are too low.
Their Patient Care Trust has the same vulnerabilities as pensions and personal retirement accounts. They have to take enough risk to beat inflation. In the long-term, that is ... risky.
They only have to beat inflation in cryopreservation costs, though, which, like other technologies, is likely to get cheaper over time. The only exception to that, I think, would be property taxes on the facility (which will increase with general inflation), and perhaps wages for any unavoidable human labor.
The technology hasn't got much cheaper in the last few decades, partly because of its small scale.
But the question isn't really whether it's got cheaper, the question is whether it's risen sufficiently slowly relative to inflation that sufficiently low-risk investments can safely (enough) cover it over the long term. Getting much cheaper is sufficient for that, of course, but not necessary. Any idea how it looks from that perspective?
Timely article!! I've looked into cryonics twice in the past when I had less income (2001 and 2005) and in each case the expected value calculation came out negative and I passed. Lately I've decided that I should probably sign up, but I'm running into logistical problems figuring how to build a retirement/cryonics/singularity portfolio that optimizes and hedges over a variety of pragmatic concerns.
Things I'm trying to figure out how to optimize over include: (1) the mainstream model of a relatively stable economy combined with personal decline into old age and death around 70 which suggests relatively normal retirement/estate planning, (2) the possibility of early death which can be hedged with insurance, (3) the potential for inflation or hyper-inflation due to government insolvency and/or war, (4) the possibility of a singularity based deflationary economic boom where I'd want high liquidity to stay nimble in hopes of "riding the curve up" with the possibility of never needing the cryo-policy in the first place. My impression is that I'll need to invest in a variety of things over time to ensure a reasonably good position no matter what actually happens.
One thing that I would be interested in as a part of such a strategy is a term life insurance policy that lasts for about 25 years with very low counter party risk and an index to inflation that's relatively immune to political shenanigans. Anyone know of a good place to buy such a policy? Another thing I've been thinking of is creating a private trust to optimize estate taxes and lawsuits. It seems likely that other people here would be interested in the same sort of instruments for similar reasons, which suggests an opportunity for a group to get together and bargain collectively with lawyers and insurance companies to make the transactions cheaper due to economies of scale. If we had enough interest it seems like we should be able to get a group life policy with better rates. Is anyone interested in such a cooperative venture?
One thing that I would be interested in as a part of such a strategy is a term life insurance policy that lasts for about 25 years with very low counter party risk and an index to inflation that's relatively immune to political shenanigans.
I've never seen inflation-indexed life insurance. If you expect 4% inflation to continue throughout the course of your 25 year term, it might be easier to just buy a bit more than double the amount you need. The more initially expensive option would be to get universal life, which you could set up to allow expanded benefits with more payments; and which you can fund enough to be self-sustaining. That has obvious benefits in comparison to term if you're expecting to die old, after years on a fixed income with indeterminate medical expenses.
Do you have a suggestion for what to do if I'm trying to hedge against a scenario where the fed manages inflation at less than 6% for most years (as it has done since 1983), but then a debt crisis (or whatever) produces N years of 10%-100% inflation between now and the time I would need the money?
I've thought of just insuring for like $3M to be safe, but that costs more and gives me a giant pile of money in scenarios where I have no striking need for the giant pile of money (and it doesn't even hedge against counter-party risk in the event that things get ugly and the ugliness bankrupts a business-as-usual insurance company I had relied on to survive). I'd prefer to transfer excess life insurance payouts from futures that avoided hyperinflation to other futures where no financial crisis happens and instead nimble investment money is important for participating in the benefits technological growth. "Just buying more insurance" seems like an expensive way to accomplish less than half of what I'm interested in.
It seems an insurance company staffed with financial wizkids should be able to invest in a thoughtfully chosen package of TIPS, oil futures, renminbi, and similar instruments to provide exactly the kind of life insurance that I want, but I don't know where to shop for such a service if it already exists and I don't yet have the pragmatic financial knowledge to create such a service by my own initiative if it doesn't.
I'm not sure how to interpret this information. So there's recognition that there's a problem, at least. Should this encourage or discourage me from signing up?
This is an excellent point and seems like it reflects one of the deeper problems with human institutions. Namely that honest appraisals are often taken as a sign of weakness.
This worries me. I'm already unable to afford to sign up with Alcor like I want to. If it gets more expensive...
I attended CI's Annual General Meeting in September. As far as I know their prices have never risen, mostly due to extremely low overhead. Their assets are relatively meager compared to Alcor, and they are currently somewhat dependent on charity from members (especially in the form of bequests from patients). They have several responsible people watching over the financials, and they are quite aware of the Alcor's difficulties. I got the sense that the board may be consider a fee hike, which IIRC would not be grandfathered in (according to the terms of their patient contract).
You can dig in to past financial statements here -> http://cryonics.org/financials.html
I'm not sure I understand the problem completely, the primary cost is in the preservation process itself correct? Why can't higher levels of life insurance bear the cost? I'm unclear as to why alcor's membership fees need to increase if their primary funding is from life insurance policies.
See also "Considering Appropriate Cryopreservation Funding" by Russell Cheney in the January-February 2012 issue of Cryonics, pgs 16-17.
A reply on NewCryonet: http://tech.groups.yahoo.com/group/New_Cryonet/message/1390
(As if LN2 was the only cost involved, even for the already cryopreserved! All of storage is only something like a quarter of the costs.)
How do I know if I can I afford to sign up for cryonics with Alcor without investing what I predict to be a long time understanding their prospectus or risking signing up in staged payments till the point I can't pay. I don't know anyone personally who's signed up upon which I can infer my relative capacity to pay. And, none of the top 2 recommended Alcor insurers have high quality websites for me to be confident in the quality of advice they may be able to give, particularly given that I'm based in Australia and there presumably would be extra costs associated with flying my dead body away.
The most obvious solution to me would seem to be to try to target people who have a lot of money and are interested in non-standard or transhumaists technologies. Peter Thiel would be an obvious example.
From the website version, here's the quote from Merkle that gwern alluded to:
Some Alcor members have wondered why rich Alcor members have not donated more money to Alcor. The major reason is that rich Alcor members are rich because they know how to manage money, and they know that Alcor traditionally has managed money poorly. Why give any significant amount of money to an organization that has no fiscal discipline? It will just spend it, and put itself right back into the same financial hole it’s already in.
As a case in point, consider Alcor’s efforts over the year to create an “endowment fund” to stabilize its operating budget. These efforts have always ended with Alcor spending the money on various useful activities. These range from research projects to subsidizing our existing members — raising dues and minimums is a painful thing to do, and the Board is always reluctant to do this even when the financial data is clear. While each such project is individually worthy and has merit, collectively the result has been to thwart the effort to create a lasting endowment and leave Alcor in a financially weak position.
That has never worked before. Incidentally, Ralph Merkle contributed an appendix discussing the endowment and saying something to the effect that rich people will not donate (more than they are already doing so which has kept Alcor afloat these past decades) because they see little return on their donation and that Alcor is not fiscally responsible, but follow his views on not dipping into the endowment and maybe then they will come to trust Alcor more with their money.
What prevents the organization of X number of rich donors, who spend some of their time and money soliciting pledges from other donors for an Alcor endowment, that Alcor only ever sees if it signs a contract to spend the donation on a endowment and nothing else?
Money is fungible. If you distrust Alcor that much, why do you expect Alcor to not, say, immediately cut additional funding to the endowment to a minimum or 0; or run up debts expecting to repay them from the endowment once the period expires - etc. etc. etc. This is a classic principal-agent issue and why people want to signal honesty rather than just signing detailed contracts: there are many ways to cheat or violate the spirit of an agreement.
One of the sticking points for cryonics is how expensive it is. Unfortunately, the estimates on LW (eg. in Normal Cryonics) are likely to be low as they are current costs. This is starting to come to a head for Alcor, with Alcor's low growth rate meaning it faces a rising tide of aging members (hence that emphasis on young cryonicists) and fundamental flaws in its prices; the official word has come down in the latest issue of Cryonics, issue 2011 q4:
The cryonics economies anticipated by Robert Ettinger in 1965 were never realized. By the 1970s, the cost of whole body cryopreservation as offered by TransTime and Soma (the for-profit arm of IABS, which later merged with Alcor) was $60,000 (1). As shown in Fig. 1, the nominal dollar cost of cryonics has risen steadily with Consumer Price Index (CPI) inflation since then. By 2011, the minimum funding for whole body cryopreservation with Alcor was $200,000. Even this large number has not kept pace with inflation, so another increase will be necessary soon.
Whenever Alcor has increased cryopreservation minimums, it has traditionally only required new members to meet new minimum funding requirements. Existing members were “grandfathered,” and allowed to remain members even if their cryopreservation funding fell below new minimums. This was and is believed to be important for members who due to age or disability become uninsurable, and would otherwise have to leave Alcor after many years of supporting the organization.
...The sustainability of this has been questioned on numerous occasions. In 1991, Ben Best and others expressed concerns about grandfathering in a series of articles and letters in Cryonics magazine (2,3,4). Ideas for addressing the inflation problem were sought (5), but none were implemented. There was renewed public concern in 2009 when Charles Platt published an article about inflation and cryonics funding in Cryonics magazine (6), followed by a critical article on CryoNet in 2010 that accused Alcor of negligently ignoring the grandfathering problem (7,8). That same year Rob Freitas published a detailed quantitative analysis of Alcor finances based on publicly available information, and concluded that grandfathering was a serious long-term problem (9,10). Ralph Merkle subsequently published an article on cryopreservation funding that outlined 14 possible options for addressing the grandfathering problem (11). In 2011, the Alcor Board of Directors undertook its own quantitative analysis of grandfathering using internal data. The results of that analysis are below.
As of August, 2011, 944 members were signed up in expectation of Alcor performing cryopreservations costing $142.6 million as measured by 2011 funding minimums. 533 members were signed up for whole body cryopreservation, and 411 members were signed up for neuropreservation. The total cryopreservation funding of those members was $122.2 million, a funding shortfall of $19.4 million. This net $19.4 million shortfall consists of the total underfunding ($32.6 million due to 641 under-minimum funded members) adjusted for the total over-minimum funding ($13.2 million due to 229 over-minimum funded members). Most of this over-minimum funding was from 173 members signed up for neuropreservation with $9.7 million in funding greater than minimum.
...In 2011, as a group, neuropreservation members were not underfunded. Underfunding is a much more serious problem for whole body members. 444 whole body members were underfunded with underfunding totaling $27 million. The problem is worsened by the fact that Alcor has failed to increase whole body minimums sufficiently to keep pace with inflation over the past two decades, so another increase in whole body minimums is necessary soon.
Ordinary inflation of 3% per year will increase the $142.6 million 2011 cost of cryopreservation procedures for Alcor's 944 members by $4.3 million per year. This is an unfunded liability that will grow for decades until underfunded members are cryopreserved. (Most Alcor members are middle-aged as seen in Fig. 4.) The effects of this are already being felt. Actuarial analysis indicates that Alcor in 2011 can expect 9 cases per year, of which 7 will be underfunded by a total of $380,000. This would be offset by an expected $70,000 per year from cases with above-minimum funding, still leaving an expected case funding deficit of $310,000 per year. This annual deficit will grow with time.
...The effects of this can be insidious because in absence of careful monitoring, chronic underfunding of the Patient Care Trust (PCT) might not become obvious for years. For example, by 2010 Alcor was drawing on the PCT at a rate of 5% per year to pay the costs of maintaining its patients in cryopreservation. The PCT draw grew to this unsustainable percentage because underfunded cases led to the PCT principal not being as large as it should have been. The draw only retreated to 2.5% in 2011 after an unforeseen bequest fortuitously doubled the value of the PCT in late 2010.
What to do?
Option 6: Increase Membership Dues to Cover Grandfathering
In his 2010 econometric analysis of Alcor finances (10), Rob Freitas calculated that dues and CMS fees would have to be increased to $1500 - $1850 per year for every Alcor member to sustain the practice of grandfathering. This is likely unaffordable for most present Alcor members. Such a practice might even worsen the underfunding problem by disincentivizing members from providing any more funding than minimum at time of signup. Indeed, most members would need the savings in insurance premiums to pay such high membership dues.
...Option 10: Establish an Underfunding Reserve Account Funded by Underfunding Charges
After extensive consideration and study, the Alcor board and management believes this is the best idea so far for coping with cryonics cost inflation. An Underfunding Reserve Account would be established. Whenever an underfunded cryopreservation was performed, the Underfunding Reserve would be drawn upon as necessary to pay the PCT, CMS fund, and Operations accounts the amounts they require according to current minimums.
The Underfunding Reserve Account would be funded by annual charges to members proportional to the extent of their underfunding. In the first year of implementation, the charge would be 0.33% of the member underfunding amount (e.g. $165 for a member underfunded by $50,000). The charge would escalate to 0.67% in the second year, and finally to 1% of the underfunding amount in the third year and thereafter. If by the third year no members changed their funding or cryopreservation method, charges collected from all underfunded members would generate $320,000 per year. This would be a sufficient contribution to the Underfunding Reserve Account to cover the actuarial expectation of underfunded case expenses for the present time. In the longer term, it is hoped that this charge would be an incentive for members to increase their funding with inflation if they are able to do so, and for new members to plan funding according to life expectancy.
Hope the old grandfathered members like Mike Darwin (who predicted this, in the February and March 1988 issues of Cryonics) can afford that.
On a parting note, I read somewhere that CI's low prices have rarely risen. I wonder what their projections look like...