X-Message-Number: 9729
From:
Date: Sun, 17 May 1998 20:34:28 -0700 (PDT)
Subject: Resignation
I am posting this letter to our shareholders (lightly revised)
because I believe it is of broader interest.
----------------------
Date: May 13, 1998
To: Trans Time Shareholders
From: Art Quaife
Effective April 30, 1998 I resigned as President of Trans Time,
and also resigned from the Trans Time Board of Directors.
This was a difficult decision for me to make, since I have been
the only President of Trans Time in its 26-year history. Let me
explain my reasons, and give a short overview of Trans Time's
progress during my presidency.
Reasons for Resignation
1. Disagreements with the Board
I have a Ph.D. in Mathematics, and have been a successful
investor for 30 years. In the past six years I have devoted a
substantial amount of time to learning more of the academic
theory of investing. I wrote ten articles on the subject for our
former newsletter The Trans Times. I have written a computer
program with 13,000 lines of C++ code that I use for my personal
investing, which is producing increasingly large returns. (Dr.
Edward Thorp has given me much valuable input over the past dozen
years.)
I was easily the best informed Board member on the subject of
investing; indeed I had spent more time studying investment
theory than all the rest of the Board combined. Yet when Trans
Time had money to invest, year after year I lost more votes on
Board resolutions than I won. The votes I lost have cost Trans
Time quite a bit of money.
As of our August 17, 1997 Board meeting, Trans Time had
$1,080,736 available to invest. Prior to that meeting I sent
Directors a seven-page memorandum detailing my recommended
investment portfolio. The memorandum was supported by three pages
of data and another six-page article I had written explaining
some of the mathematics used in the analysis. In brief summary, I
combined the Kelly criterion with the Sharpe-Markowitz procedure
to optimize the investments in several stocks that Trans Time
holds or has held. The mean return forecast by my model was a
105% per year return!!, with a standard deviation of 97%.
The Board did not adopt my recommendation at the August 17, 1997
meeting. Indeed, one authoritative attendee labeled my
calculations as "gobbledy-gook", even though both Sharpe and
Markowitz won the Nobel prize, in part for just this portfolio
theory. I brought my recommendation up again at the August 28,
November 13, and January 23, 1988 meetings, and every time my
proposal was not adopted. Finally on February 9, a watered-down
version of it was adopted.
Now from August 17, 1997 to March 31, 1998 our actual investment
portfolio increased from $1,080,736 to $1,875,443. This was a
tremendous return; it amounts to 143% per year compounded yearly.
However, if the Board had adopted my proposal at the August 17
meeting, the portfolio would have increased to about $3,235,269.
(The exact amount depends upon the details of ongoing
rebalancing). This is a *stupendous* return; it amounts to 486%
per year compounded yearly!
Trans Time lost about $1,359,826 in these seven months by not
adopting my recommendation. Of course this return is well above
the mean amount I forecast. But the argument for my model was so
strong that it is pure tragedy, and foolishness on the part of
the Board, that Trans Time does not now have that money.
Even in spite of these results, it is clear that I have no hope
of convincing the Board to adopt anything near optimal investment
procedures. This is the main reason I resigned.
Three of Trans Time's five Board members are also principals of
BioTime, and frequently vote as a block. This has been to the
detriment of Trans Time on various investment decisions. However,
these same people have been instrumental in forming both
Cryomedical Sciences and BioTime, and taking them public. Trans
Time has bene fitted substantially from our stock ownership in
those companies. These same people also hope to eventually take
Trans Time public. However, there can be no assurance as to when,
or even if, this will happen.
2. Enjoyment of Life
I have served as Trans Time President for 26 years now, ever
since our inception. I have been president of a cryonics service
organization for longer than anyone in history.
I have been involved in my full share of hassles over the years,
which have taken their toll on me. Since beginning my bout with
colon cancer more than two years ago, I no longer have the energy
and drive to work my former 12 hour days, or even half that time.
I have given my best shot to running a cryonics organization, and
it's time to move on to something less stressful and more fun.
Life is for enjoyment, not for hassling.
Successor
The Board has not yet elected a successor President. In the
interim John Rodriguez, our Controller, has been named Acting
President.
Trans Time Stock
Almost all of our shareholders had two purposes in purchasing our
stock, not necessarily in this order: (1) make money on the
investment, and (2) support a cryonics company that might be
responsible for their own suspension. How well have our
shareholders done?
1. Stock Value Appreciation
Trans Time has made a number of offerings of its stock over the
past twenty-three years. The first issue of Trans Time shares was
on March 15, 1975, at $.20 per share (adjusted for a later
split). About ten years ago, in October 1987, one of the later
offerings was made at $.30 per share. There is still no public
market for these shares, so it is quite difficult for
shareholders wishing to cash out to do so. But as of December 31,
1997, the shares had book value of $2.19. Let us compare this
performance with returns on other securities:
Percent Return Compounded Yearly
Interest and Dividends Reinvested
_Security_ _23 yrs._ _10 yrs._
U.S. Treasury Bills 7.0 5.4
Long-Term Corporate Bonds 10.4 10.8
S&P 500 16.6 18.0
Trans Time 11.1 21.4
Source: Stocks, Bonds, Bills, and Inflation 1998 Yearbook,
Ibbotson Associates, 1998.
Over the last 10 years our return has handily beat the S&P 500.
The S&P 500 in turn outperformed about 90% of equity mutual funds
over
that period.
So depending upon just which offering(s) you have purchased, your
investment has done from well to very well. I am not aware of any
other cryonics stock corporation, in existence now or previously,
that has ever shown a positive return for its shareholders. In a
very tough "industry" where customers remain very scarce, we have
done *extremely* well. And even though it is difficult to cash
out now at book value, shareholders *can* use the book value of
their stock to purchase suspension services from Trans Time.
2. Suspension Services
Since our inception, Trans Time has been responsible for the
initial suspension or for the long term storage of 18 patients.
Of these, 16 patients have since been transferred to other
facilities and are still in suspension, as far as I know. Trans
Time is still maintaining two patients in suspension. Relatives
of one patient, who had sponsored his suspension and were paying
the yearly bills, required us to remove the patient from storage
and ship him back for burial.
At our height around 1990, we had emergency responsibility for
more than 100 patients. While happily almost all of them did not
die, they all had the benefit of having our company prepared to
place them in suspension if necessary.
Let me relate two high points, and one low point, of our history.
a. High Point 1
In 1977 we established contact with Jerry Leaf, a researcher
in the Department of Thoracic Surgery at the UCLA School of
Medicine. Jerry had exceptional skills as a surgeon and
perfusionist, and as a teacher of suspension skills. Trans
Time personnel engaged in a weekend of experimentation with
Jerry in which we attempted to duplicate the success of Dr.
Gerald Klebanoff in reviving dogs after profound cooling and
total body washout. We did very well for a first try -- the
dog came back to life, but died 17 hours later from
pulmonary edema.
Jerry agreed to become the head of Trans Time's suspension
team. We paid suspension personnel in Trans Time stock to
undergo training from Jerry. He was the head surgeon on a
number of Trans Time suspensions in the late 1970s and early
1980s.
Later Trans Time and Jerry Leaf went their separate ways. We
then located a Professor of Surgery at UC Davis to head up
our team. He acted as head surgeon on a number of
suspensions in the late 1980s and early 1990s.
We brought cryonic suspension procedures out of the dark
ages of relying solely on morticians with embalming pumps,
to using state-of-the-art surgical procedures as used in
cardio-pulmonary bypass operations.
b. High Point 2
Beginning in the late 1970s, researchers Drs. Paul Segall,
Harold Waitz, and later Hal Sternberg began experiments
attempting to revive hamsters that had been cooled to near
the ice point where they had no heartbeat or respiration.
Beginning with the washout solution used by Dr. Klebanoff,
they gradually evolved their own plasma volume expander
which is now known as Hextend. By 1986 they were ready to
try their solution on a dog. Miles the beagle survived total
washout of his blood, cooling to below 38oF, and reinfusion
of blood. Twelve years later Miles is still alive, a pet of
the Segall family.
The success of this experiment generated tremendous
publicity, including a page in People magazine. It also led
to the formation of Cryomedical Sciences, a public
corporation formed to continue developing their hypothermic
blood replacement fluid for mainstream medical use in
surgery and transplantation. Trans Time was among the
initial shareholders of Cryomedical.
Our colleagues later left Cryomedical Sciences, and along
with others formed BioTime as a public corporation to
continue development of the solution. We were again among
the initial investors in BioTime. Trans Time has done very
well with this investment, although BioTime stock (BTIM on
the NASDAQ) has been wildly volatile.
c. Low Point
In 1986 we moved into a new location in Oakland. The
building initially had sufficient space for us, but it was
in a rundown area of town. As soon as we received $500,000
from the buyout of our Cryomedical stock, we began looking
for a better facility.
In 1992, Trans Time participated in the purchase of a
Sunnyvale, CA building that was to be our new home. Other
people, mainly associated with the American Cryonics
Society, were among the buyers. The purchase was a disaster
from the beginning. Trans Time was the only party to live up
to its obligations under the cotenancy purchase agreement.
The parties found themselves at war with each other, and
Trans Time never moved into the building.
The cotenancy ownership of the building limped along, barely
staying ahead of foreclosure, until Trans Time sued to force
sale of the building. That suit ended in virtually a
complete victory for Trans Time. The building was sold, and
our share of the proceeds was $844,081.94. Jim Yount paid us
$32,500 to settle our claims against him for fraud and
malicious prosecution. In addition, he and Annie Yount had
to turn over all of their 16,600 shares of Trans Time stock
to Norm Lewis, to be held in trust until July 17, 2000. The
Younts no longer have any ownership rights in the stock. If
Trans Time becomes a publicly traded corporation before that
date, the stock will revert to the Younts; otherwise, the
stock will revert to Trans Time. At the time of settlement,
the stock they placed in trust had a book value of about
$27,000.
However, no financial recovery could be worth the strife,
and the destruction of Northern California cryonics
activity, brought about by our principal antagonist. Almost
all of the patients we were maintaining in suspension have
now been transferred to other organizations (none of whom
are in as solid financial shape as we are), most transferred
under the authority of this antagonist.
It has been over five years since we conducted a suspension.
Only a few people maintain completed suspension arrangements
with Trans Time.
In summary: There are 16 patients in suspension now, partly due
to our services, who have a chance for future revival. But over
the past half-dozen years, we have evolved from a cryonics
service company into an investment holding company. We still have
all of the equipment and supplies to place patients in
suspension, but dearly need to beef up our trained suspension
personnel.
Non-Profit versus For-Profit Cryonics
At present the leading cryonics organization, in terms of
membership and number of patients in suspension, is Alcor. Alcor
is a very fine organization which is non-profit. Nonetheless, I
continue to believe that the future of cryonics lies with the
for-profit organizations.
Suppose you are a cryonicist who wants to improve the quality of
services that will be delivered to you upon your deanimation.
Suppose your cryonics organization says it needs money to buy a
useful Gizmo (a new heart-lung machine, an ambulance, etc.), or
to conduct research to improve the Service (suspension
procedures). In a simplified comparison, suppose:
A. You have suspension arrangements with a non-profit
organization. Then you can heed their continued rattling of
the tin can and cough up $1,000 donation toward purchase of
the Gizmo or support of the research. Your rewards:
i. Your organization has a Gizmo or Service that you share
with all of its members.
ii. You get a charitable tax deduction; your $1,000 of
donation is now worth about $300.
B. You have suspension arrangements with a for-profit cryonics
organization. Your investment of $1,000 will yield the
rewards:
i. Your organization has a Gizmo or Service that will be
used by all of its clients.
ii. If this is a useful Gizmo or salable Service, it will
increase the value of the organization through
increased sales and/or lower costs. Your $1,000 stock
investment may be worth $1,100 or more a year from now.
All else being equal, the choice is quite clear.
Trans Time's Future
In 1997 Trans Time moved into a nice building in a pleasant
neighborhood. We can bring potential customers here with pride.
There is much unused space in the back room for expanded
operations.
I leave Trans Time in solid financial condition. As of 12/31/97,
almost all of our $1,878,571 of shareholders' equity was in
liquid investments. With proper management of these investment
funds, and the right President, Trans Time has the potential to
rebuild a first-class and stable cryonic suspension and
maintenance operation.
Efforts are currently underway to form a new cryonics service
corporation called BioTransport, to be responsible for emergency
response and suspension but not long-term storage. BioTransport
is being formed as a stock corporation. It is possible that Trans
Time may wind up working with BioTransport to provide services,
especially in the San Francisco Bay Area.
My Future
I have many ideas for refining my computer investment program,
which is producing increasingly spectacular returns -- even
beyond those provided by the rip-roaring bull market of the past
16 years.
I also expect to reinvolve myself in automated reasoning
research. The research I did for my Ph.D. was the most fun I have
had in recent years. For those interested, my work has been
published as Automated Development of Fundamental Mathematical
Theories, Art Quaife, Kluwer Academic Publishers, 1992. In the
Preface I explain the application I see of automated reasoning
research to the achievement of physical immortality.
Although I am unhappy with certain Board policies and decisions,
I leave on good terms with the Board members. My resignation does
NOT signify any loss of interest in cryonics on my part. I have
cryonic suspension arrangements for myself firmly in place, and
will maintain them. Cryonics remains the only game in town for
those of us who believe our their lives are worth saving and
extending as far as possible into the future. I expect to be an
investor in various cryonics for-profit organizations focused on
delivering best possible services today, and toward improving the
quality of services offered tomorrow. I still want it ALL. But I
have eliminated my day-to-day responsibility for the success of a
cryonics organization.
My Health
More than two years ago I had surgery for colon cancer, followed
by one year of chemotherapy. My doctors currently do not find any
sign that cancer is still present in my body. I am cautiously
optimistic that I have beaten the cancer. There are also
promising drugs under development, such as the recently
publicized angiostatin-endostatin duo, that might turn into
effective clinical therapies in a few years.
I am deeply appreciative of the support that Trans Time
personnel, along with other family and friends, have given me in
my battle against cancer -- especially during the surgery and
recovery period. Trans Time personnel stood by in the waiting
room while I was in surgery. Thank you all very much.
Looking forward to reuniting with all of our shareholders at our
200th anniversary party, I remain
Evermore,
Art Quaife, Ph.D.
Former President
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