Cryonics 3rd Quarter 2010
by Robert A. Freitas Jr.
It’s often quipped that getting cryopreserved is the second-worst thing that can happen to you — death without cryopreservation being the worst thing. But getting cryopreserved is actually the third-worst thing that can happen to you, not the second. The second-worst thing that can happen to you is getting cryopreserved by an organization that runs out of money before you can be revived, possibly resulting in your thawing without revival.
In early July 2010, Ralph Merkle and I were discussing his then-forthcoming article in Cryonics Magazine on “Funding Your Cryopreservation.” While Alcor is unquestionably the financially strongest organization in the cryonics industry, Ralph’s article noted that current members and services were underfunded in the long term and presented a long list of possible solutions. It occurred to me that it might be worthwhile to put together a quantitative model of Alcor’s finances that could be used as a testbed for considering various proposed solutions described in the article. Ralph agreed and asked me to proceed with the effort.
By early September 2010, I’d assembled an Excel spreadsheet and performed an objective analysis of Alcor finances using only publicly available information. Non-technical readers should be forewarned — some mathematical equations are involved! The spreadsheet provides a numerical model of income and expenses and explicitly incorporates most of the policy control levers available to the Board. The study also looks at the overall long-term effects on Alcor’s net revenues if you pull one or more of the levers, this way or that.
The analysis starts by creating a model of Alcor’s expenses using historical data from 1990-2008. Statistical correlation is employed to predict the expense data using three independent variables: number of members, number of cryopatients, and number of cryopreservations per year. Using various assumed growth rate scenarios for these three independent variables, Alcor expenses can be projected forward 30 years into the future. The analysis continues with the creation of a similar model of Alcor’s revenues based on historical data from 1990-2008. Statistical correlation is again employed to predict the revenue data using sub-models for each of Alcor’s five principal consolidated revenue sources: (1) dues, (2) standby fees, (3) proceeds from cryopreservations, (4) Patient Care Trust (PCT) earnings, and (5) grants, donations and bequests. Each revenue stream can be predicted using the same three independent variables as before. This allows Alcor’s revenues — and, after subtracting predicted expenses, any budget shortfalls or surpluses — to be projected forward 30 years into the future.
The analysis yielded several interesting conclusions and recommendations:
(1) Assuming dues/fees and required funding minimums are fixed at today’s levels, there are no adjustments made for inflation, and the informal “grandfathering” policy remains in place, then Alcor is apparently losing money on every new member. This loss is now being covered by donations or bequests. The deficit appears to be at least $700/yr per member in 2010.
(2) Immediately adding an annual cost-of-living adjustment for ongoing inflation (≈2%/yr in 2010) to Alcor dues, fees and funding minimums eliminates about one-third of the projected long-term (30-yr) budget shortfall.
(3) If inflation-adjusted dues/fees are ramped up over some reasonable period of time to a bit more than twice current levels, the other two-thirds of the projected long-term budget shortfall over the next 30 years can be eliminated. Members could be permanently “grandfathered” in this scenario.
(4) Alcor should immediately perform a bottom-up study of the actual cost of initially placing patients into cryostasis and the subsequent annual cost of long-term storage. The results of such a study would provide a rational basis for setting dues and cryopreservation funding minimums.
(5) Ideally, the bulk of Alcor’s basic core expenses should be supported by membership revenues. We should try to reserve donations, grants and bequests for long-term investments such as augmenting the patient care trust fund, creating a permanent endowment fund, and research aimed at making genuine medical progress such as improving cryopreservation techniques, biological and physical research, brain studies, and ultimately supporting and developing key strategies for revival.
Robert Freitas’s comprehensive document ‘Scenario Analysis using a Simple Econometric Model of Alcor Finances‘ is available on the Alcor website.