Cryonics Costs Money, Other Line Items Follow From That

Long-standing businesses must index everything they do to the changing - almost always falling - value of their regional currency, but very few smaller businesses do this in any sort of a deterministic way. Your average talented and determined fellow willing to start a company knows a lot about the business itself, but generally isn't very knowledgeable regarding currencies, inflation, finance, and so forth. That sort of expertise doesn't emerge in a company as a matter of course until it becomes much larger. So smaller businesses deal with the falling value of money by raising their prices as best they can on an ad hoc basis, but this is ever a challenge for products that involve very long memberships. Trying to raise rates on existing customers is, frankly, one of the hardest things a business can do. But raise rates they must, as modern paper currencies have long been set on a relentless spiral of devaluation.

This happens because politicians and government bureaucrats can use the strategic devaluation of their national fiat currency as a way to generate significantly more revenue for a given level of public upheaval than can be achieved through direct taxation - so of course they tend to do exactly that. This is why inflation exists, and is arguably why fiat currencies continue to enjoy such wide, legally-enforced use. So fiat currencies are somewhat systematically, somewhat opportunistically devalued over time in ways that result in a transfer of wealth from the public at large and into the control of politicians, bureaucrats, and their close supporters.

This is one of a number of processes that make long-term prognostication on future costs a challenge. Others include assumptions on the economies of scale that will emerge with success in development, or success in popularity of a product - successful products invariably become much cheaper as they become more widespread. This happens because competitors figure out more effective means of building the product, and because it is usually cheaper on a per-unit cost to build a hundred widgets rather than ten widgets.

The cryonics industry is presently running into a number of these issues. It offers products that are commonly paid for over decades, or where decades might elapse between the ink drying on a contract and the actual provision of service. The industry is decades old, but never grew to the point at which experience in managing the consequences of currency devaluation and other long-term strategic issues would naturally emerge amongst the major players in a field. At Alcor, this manifests as a growing underfunding issue, and to the credit of the present management they are openly publishing their current thinking on the matter:

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. 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. ... However the main way that Alcor coped with grandfathering was by just taking the loss on what was historically a small number of underfunded cases. There was never a quantitative analysis of the impact of grandfathering, or a specific financial plan for dealing with it. ... The sustainability of this has been questioned on numerous occasions.

You should read the whole thing; it outlines the problem, puts numbers to it to show the size, and presents a range of possible solutions, along with discussion of their merits.

The bottom line is that businesses must act like businesses, even when they have their roots in the non-profit space, research, advocacy, and saving the world, as is the case for most of the ongoing cryonics concerns. There's no such thing as a free lunch, and the cost of providing a service has to be met somehow - if it isn't, then the whole product structure and relationship with the customer has to be rethought. The challenges of managing business agreements across decades have to be addressed by cryonics providers one way or another, such as by continually and clearly indexing against inflation for customers, or by using specialized financial instruments akin to futures contracts, as is the practice in many industries that have to make very long-term commitments and want to shield their customers from the complexity inherent in doing that.

In practice, things are always more complicated and intricate than the sweeping statements I give above, but I think an organization willing to put out a document that talks through their issues in this way is an organization with the right mindset to come to a solution. Openness is a virtue in this modern world, and I think that it is a very beneficial approach to customer relations when those relations have to extend across decades. Many of the most successful companies can be said to have communities as much as they have customers, and I don't see that as being a bad thing for the cryonics industry.

Comments

Steve Jobs has died.

It's sad that he couldn't overcome the deathist «meaning of life» thinking paradigm:(

Such people musn't die, they should be put on hold to give us all hope.

Posted by: User at October 5th, 2011 11:29 PM

In my eyes they should require diversified commodity baskets as payment. It's ridiculous to believe that we will stay at 2-3% inflation per year with all the debt we have and all the obligations that are coming. Unless Ron Paul gets president or the FED is abolished, even the collapse of the dollar cannot be excluded.

Posted by: Waverunner at October 6th, 2011 1:04 AM

Thank you, Reason, for this thoughtful analysis of the challenges of long term solid funding of cryonics and cryonics protocols.

Of course, it is helpful to realize that nearly everyone funds their cryonics with life insurance. But the amounts of this life insurance fact amount (death benefit) need to reflect the actual cost charged by their cryonics organization upon actual need...i.e. when they actually "die."

Relevant to this, a helpful tool to acknowledge the power of compounded inflation is the so called "rule of 72". While not taught in every high school math class as it probably should be, this simple rule says "assets will double by the result of taking a compound interest rate into the number "72."

For instance, when talking with folks about amounts of life insurance to consider, if medical inflation average 7.2% a year, costs double every ten years.

If it costs $200,000 for a state of the art cryopreservation today, ten years from now it could cost $400,000. Ten years from then, $800,000.

We typically fund for this with a combination of permanent guaranteed level universal life and renewable upgradable term policies.

The reality is that even forward thinking cryonicists have a hard time appreciating and funding for the eventual cost of cryonics. Given both inflation AND technological enhancements, it helps to have a BUNCH of life insurance coverage.

I personally have 2.3 million dollars of coverage on my life. It involves a substantial investment. But, for serious cryonicists, life insurance is the smartest, best leveraged investment possible.

Concerns about inflation or hyperinflation are legitimate, and further compound this problem.

Some of us in the cryonics community are trying to deal with these uncomfortable, awkward, expensive realities instead of quietly ignoring them.

Thanks for acknowledging a difficult but rational process that is occurring at Alcor, as we honestly and transparently figure out high integrity funding options.

Rudi Hoffman CFP CLU ChFC

Posted by: Rudi Hoffman at October 6th, 2011 11:08 AM

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