X-Message-Number: 9735
From: Ettinger <>
Date: Mon, 18 May 1998 14:41:33 EDT
Subject: Profit vs. NonProfit Cryonics

THIS IS A CORRECTION TO A PREVIOUS POST TODAY, WHICH I ASKED DR. BROWN TO
KILL.

Art Quaife's comparison of for-profit vs. non-profit cryonics was much too
narrow. 

Let's look first at the constituencies of a for-profit corporation, which in
general are five: shareholders, management, customers, labor, and society at
large. 

Shareholders in theory are to be the prime beneficiaries, with enhancement of
shareholder value a primary consideration in the policies of the corporation. 

Management, in practice, usually gets to skim the cream, sometimes by shafting
everyone else. Good management, of course, will balance all the interests,
while keeping those of shareholders paramount.

Customers in theory are the ultimate arbiters, since the company prospers only
as long as the customers keep buying; and in theory customers can switch
whenever they are dissatisfied. In practice, however, in many situations the
customers have little real choice and far from full information. For example,
banks/thrifts have failed on a large scale, or would have failed except for
massive taxpayer bailouts. There will not be any taxpayer bailouts for failed
cryonics companies, at least not in the foreseeable future.

Labor unions at times were a severe drag on the economy, and almost killed the
U.S. auto industry. Currently the labor issues seem minimal, but a cryonics
organization needs conscientious employes (as well as volunteers, if it is
non-profit), and reliable employes are not cheap.

Society exerts its influence through legislation, regulation, taxation, and
public relations. Jim Halperin thinks we should try to influence cryonics
legislation/regulation; I think we are far better off, for the foreseeable
future, if we are self-regulated and ignored by the legislatures. One benefit
of the slow growth of cryonics to date is that early predictions of massive
swindles and violent opposition have not come to pass. Continued moderate
growth and prudent policies may allow this climate to continue.

The important point is that these five constituencies of a for-profit
corporation have DIFFERENT PRIORITIES. For example, Trans Time (TT) is
currently a nominal cryonics organization, but, as Art has said, is in reality
at the moment primarily an investment holding company. If it goes public, the
majority of investors may (depending on prospectus etc) be interested in
profit (or enhancement of shareholder value) first (and maybe second and
third). The interests of patients may be subordinate. What prudent person
would want to be a prospective patient? 

The usual response is that enhancement of shareholder value depends upon
looking after patients, and the priorities are not in conflict. This is
totally disingenuous. Look at banks as an example. Depositors have often been
shafted and even ruined--even though, in theory, the depositors must be
satisfied in order for the bank to thrive.

NEXT, look at the record at TT. It has lost almost all of its customers,
mainly (as far as I can see) because its prices keep going up. Originally, if
I remember correctly, TT recommended a minimum trust fund of $50,000 to cover
all costs including maintenance; I think the currently recommended minimum is
$150,000. This implies that a prospective customer must rely on the managers
of his trust fund to GROW that fund at a rate at least equal to the rate of
growth of TT annual storage charges. But most customers want a high degree of
safety in their investments (protection of capital), which translates into a
low yield and low rate of growth of the fund, especially after management
fees. This seems to be an irreconcilable conflict. 

John de Rivaz keeps reminding us that technology investments are nearly
certain to do well in the long term, but relatively few people have the nerve
and the capital to act on this advice.

Art has done brilliantly in helping to manage TT investments. However, he
notes that his investment model (for a certain group of stocks), while
forecasting a mean return of 105%/year, had a standard deviation of 97%. This
means that there was roughly a 5% chance of losing your ENTIRE INVESTMENT in
one year (two standard deviations from the mean). With average luck, you would
be wiped out every 20 years or so. Hardly advisable. 

One of the main risks, from the point of view of a prospective customer of a
for-profit cryonics firm, is just that the firm may fold. If it loses too much
money for too long, presumably the shareholders will demand liquidation,
patients or no patients. (They knew the risks, didn't they?) Or, in the case
of TT, they might demand an end to cryonics services and a pure focus on
investments. 

At the moment there is (as far as I know) no clear indication that CryoSpan
(CS) is viable, or that BioTransport (BT) will be. CryoCare (CC), the non-
profit organization subcontracting storage to for-profit CS (and presumably
soon to subcontract preparation services to for-profit BT) will have a problem
if CS or BT folds or exits the field or is forced to raise prices
significantly. Does each trust for a CC member have enough reserve to move a
patient to a different storage facility, if one can be found? Long distance
transport in liquid nitrogen is expensive. Does it have enough to cover the
probable hikes in charges by BT or possible hikes in rates by CS?

Certainly non-profit organizations face some of the same problems, especially
that of rising costs for more complex suspension procedures. But they do not
face the same potential conflicts of interest. The "shareholders" and the
"management" and the "customers," and to some extent even the labor, are more
or less the same people, members who are prospective patients. This means (and
this is not just theory, but experience) that donations and bequests and free
labor and free recruitment help will come to non-profit organizations to help
build their strength, but much less to for-profit firms. 

Quite a few people in cryonics tend to be capitalist ideologues who detest any
taint of "altruism." I  tend myself to sympathize with that view. But reality
is reality, and remaining "pure" could cost you your carcass. 

Robert Ettinger
Cryonics Institute
Immortalist Society
http://www.cryonics.org

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