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Would you sell life equity?
- goofygrin 18y agoThere was a commercial that had something to do with insurance or something, where families were traded like stocks on an exchange. There have been numerous occasions where I've thought about making something like this. How do you determine the value of a person or family? Would people be open to exposing so much details about their lives in order to increase the "value" of their family/person (like a public company has to open their books)?
- zellunit 18y agoYea really it is a great question. The valuation is one aspect. The other is the fact that your incentive to succeed goes down once you get money so the very moment you get it, you're expected future earnings go down. It's fascinating to think about though.
- gojomo 18y agoUS Fedgov Corp. already has a claim on 10-35% of my life income! I didn't even sign any contracts.
- quellhorst 18y agoYour parents did that for you when they signed the birth certificate. :)
- mixmax 18y agoYou got a good deal - the federal claim on my income is more like 60%
- immad 18y agoThe problem seems to be that life is a long time and most people who invest want to see returns in a short time. I guess banks could do it, but it seems unlikely that they would be the one to start. I once met someone who claimed to be an entrepreneur and said they would be a mentor to promising entrepreneurs for a promise of equity in everything that entrepreneur did for his life. It sounded a bit ridiculous to me at the time, and it sounds even more ridiculous now that I know more about investing.
- sanswork 18y agoMost people want returns in a short time does not mean all good investments make returns in a short time nor does it imply all good investors look just for short term returns.
- cperciva 18y agoThis is exactly the business model which most private US universities work with, except with the minor difference that people are not required to give money back to their alma mater. As high as the cost of tuition fees may be, it's much less than what it costs universities to provide that education; the difference is made up by the fact that over their lives, many Americans donate significant fractions of their income to the institutions which educated them. (A more macabre version of this calculation is done at universities which provide free education to seniors because experience tells them that this is a good way to be written into someone's will.) And of course we shouldn't forget governments: By providing free primary and secondary education, and (in most developed countries) free health care, governments provide per-capita funding on the order of hundreds of thousands of dollars -- and then call their annual dividends on equity "taxes".
- xlnt 18y agotaxes aren't dividends, they are taken by force. they decide how much they feel like taking this year, and you pay or go to jail. it's not a business transaction. and of course they still take tax money from people who never went to their schools.
- wanorris 18y agoAs far as I know, there are countries that still accept immigrants if you feel that the social contract of the nation you are currently inhabiting is unreasonable. Failing that, there's always working for political change, or even armed insurrection. Or you could just log on to a website and complain about it. Hey -- done!
- xlnt 18y agoYou have no idea if I am working for political change, or not. Why be a jerk making a personal attack? i made a statement about what i think is true, and you respond with made up comments about how i'm not living up to something. also advocating violence against Americans is pretty awful.
- ejs 18y agoSure I'll take a million right now, you can have 5%... if invested wisely the interest on that is enough for me to live on...
- quellhorst 18y agoWarren Buffet mentioned something similar... If you were to invest in the future success or bet on the failure of someone, what traits do they have? You probably wouldn't pick the smartest or dumbest and the traits are probably habits. You can learn good habits and unlearn bad ones.
- dissenter 18y agoI once read this suggestion and was very surprised by the result when I applied it. My 'equity valuation' of someone was often in direct contrast to my 'general appreciation' of them as a person, and to such an extent that it was difficult to keep two such incongruous ideas in my head at the same time. What was surprising was not the overriding tendency to appreciate people for economically unrelated traits, but the gross effectiveness with which I could evaluate someone as soon as I viewed them purely in terms of financial opportunity. I was reminded of the experience I had had with the Socratic method. When first presented as an idea---"You just ask questions"---the Socratic method is comically simple, almost ripe for derision, and easy to dismiss. But applying it, and seeing it applied, you notice that it has a powerful effect. The thoughts we arrive at on our own are immeasurably more meaningful than the thoughts pressed on us by others. By the same token, this method of evaluation was unexpectedly effective. As long as I was thinking critically about who I would buy stock in, I had a clear picture of who the most valuable people were. But just as soon as my own assets faded from consideration the ordering became very different.
- mrtron 18y agoI swear you guys read my email. Please stop. Apr 11 (11 days ago) for what amount would you sell 1% of your future income? i should set up a stock market for individuals.... lets say how much would you sell 1% of your next 10 years income Response: Haha that would be interesting. Of course if someone sells more than 90% of their income, then they probably won't earn anything :)
- byrneseyeview 18y agoPerhaps they were reading my mind when I was thirteen, too. And then they planted it in Milton Friedman's Capitalism and Freedom, which somehow has a copyright date from several decades ago.
- dangoldin 18y agoI had the same discussion with a good friend a while back. We were thinking of starting an entire new market where people can sell some shares in themselves and then those shares can be traded. Some issues that we though about (I'll add more as I remember them): - As author mentions, once you get paid you have less incentive to work. - In order to make an investment, you would need access to confidential information - risk of diseases, test scores, etc. Not sure the ethical/privacy implications of this. - The type of people willing to sell may likely be the people who don't have faith in themselves - why would you want to support that?
- byrneseyeview 18y agoCan you tell me how these objections do not apply to buying shares of IBM? Clearly, the people who work for IBM would work a lot harder if they owned the company -- and yet billions of dollars ride on the assumption that they will work hard anyway! You can probably decide on which information to disclose in advance. This is how it works with OTC securities -- some companies don't give any information in their annual report, and others will tell you down to the last dollar how much they spent on their secretary last year. Unfortunately, if the government somehow allowed this, it would almost certainly mandate consistent disclosure, making this a market for people who have whatever cookie-cutter preferences the first bureaucrat thought up. Oh well. Maybe if you list people in Dubai you'll have better luck. They seem friendlier to new financial products.
- dangoldin 18y agoWell they are compensated by the managers who have an incentive to make them be as productive as possible, otherwise they'll get replaced by the shareholders. I'm sure there's some way to structure this to make it legitimate - maybe if we can tax it!
- ambition 18y agoWhen someone invests in something there is an implicit assumption on both sides: As a buyer/investor, I assume that your present value is greater than your price. This is what happens when people buy undervalued stocks. In better cases, I assume that your value after investment is greater than your present value by more than the amount of the investment. That is, by investing in you, I add more value than the amount of the investment. This is what Y Combinator does. As a seller, you make the inverse assumption. Either you have lost faith in the value of what you sell, or you believe that with the investment, you'll be able to make more than you would otherwise. In the case of life equity, the first case is tough to see. If you believed in your life equity's enough to sell it, you wouldn't sell it. So, you must be seeking the second case: If only I had more money now, I could make more money later, greater than the percentage of the funds I need to give back to my investor. From this we can assume that a potential investor would want a justification of how you will earn that money. We're effectively reduced to the same venture funding and loan structures that already exist today. The only other way life equity would work would be as a scam: If life equity investors took advantage of bad-at-math or desperate sellers. This is actually the same as third-world loan sharks, only we're calling it an investment instead of a loan.
- edw519 18y agoThis reminds me of the woman in France who, in her eighties, sold her house to a man in his fifties. He had to pay her every month until she died and then he would get the house. She lived to be 122. He paid for the house 4 times and then died first.
- elai 18y agoHow is this an advantage over loans, bonds, scholarships, patrons, angel investors and all the other investment options people have? Most people don't want to get a perpetuity as a loan when there are much better options out there!
- ken 18y agoI've heard that some college fraternities do this, but it may have been just a rumor.
- dkokelley 18y agoSome colleges encourage something similar. The Acton MBA program encourages alumni to sponsor new students so that their education is free (and based entirely on their ability to be accepted into the program). Once these students graduate, they are encouraged to turn around and to the same thing for the students behind them (out of a percentage of their earnings over the following years, until it is repaid). It's not exactly the same model, but it does represent a take money now and payback out of future earnings template.The thing is A: repayment is encouraged, but not required, and B: the amount taken out of your future earnings is fixed and will end once paid.
- ken 18y agoThat sounds a bit different. There's no real risk. The exchange is voluntary, after-the-fact, and if you make $10B the school doesn't (necessarily) get a percentage. That's basically a loan: you get school paid for now, and you pay it back over the next several years. One or two fraternities, I'd heard, actually have you sign over some small percentage of your salary (1-2%?) for life. That's equity.
- redorb 18y agoI would personally take a minimum to not worry ($1mm) and give out up to 10-15% ... guess I'm a sell out.
- byrneseyeview 18y agoI'd sell it if I had an option to buy it back. All of the unresolved questions you have also apply to equity in corporations. Except that corporations live forever, rather than for seventy years, so the uncertainty is compounded. I don't understand the 'corrupt' argument. Do you worry about this with regard to stocks, too? Does owning AMZN make you 'corrupt' when you ignore Barnes & Noble?
- Alex3917 18y agoSomeone offered to do this for me a couple years ago. There was an ethical conflict of interest though so I never actually considered it seriously. I don't remember what the actual proposal was, but I think it involved an apartment in Boston with a running tab for a couple years in exchange for some percentage of whatever I made for the next five or so years.
- hollerith 18y agoBesides MyRichUncle, who offered money mostly for college, yours is the only report I know of someone actually being offered money for a percentage of future income.
- vlad 18y agoYou know, this already existed for 6 years. http://en.wikipedia.org/wiki/MyRichUncle http://en.wikipedia.org/wiki/MyRichUncle They had to change their business model because they became way too popular.
- hollerith 18y agoLet me clarify that. The Wikipedia article says that MyRichUncle become a traditional maker of student loans "following an unsuccessful attempt to secure greater financing". In other words, although they had plenty of young people who wanted to sell a fraction of their future earnings in exchange for money now, they could not match those young people up with investors. They began trying to match young people up with investors for a fraction of future earnings in 1999 and began making traditional student loans in 2005, which is where the "6 years" comes in, but during those 6 years they might have had to turn away most of the young people who wanted money now.
- deleted 18y ago[deleted]
- Hexstream 18y agoI'd have a hard time selling my life equity without thinking: "k, I'm officially someone's bitch."
- rrival 18y agoIs there shorting? Can I short sell?
- nazgulnarsil 18y agosure, I doubt i'd disclose how early i'm planning on retiring though.