poly: Re:non-financial return on investments

From: d.brin <brin@cts.com>
Date: Sat Mar 21 1998 - 23:19:14 PST

Regarding the debate over interest rates and 'return' on investments, you
guys may be missing a point. Look historically at how and why bigtime
resource managers (from Pharaohs to Medicis) invested in big projects whose
'return' might only be seen long after their deaths. Their reasons -- and
the TYPE of expected return -- changed depending on the size of the project
and their own social status.

What we are talking about is 'satiability'... the tendency of sane human
beings to get enough of one kind of return and shift their attention onward
to other desires. If you measure the desires of an already wealthy
individual in strict monetary terms your model will start to diverge from
reality. At least a third -- and increasingly more -- or your subjects
will not behave according to predicted pattern... much in the same way that
members of the public do not regard RISK as game theorists at first
preached they should.

This only makes sense. Once access to resources is sufficient to eliminate
all previous worries, it is human to become obsessed with new concerns,
e.g. immortality. If unavailable directly, people have sought continuity
of 'name' or 'reputation' through ostensibly unselfish... or at least
noteworthy... acts. At some point this peculiar motivation for creating a
star probe will vastly outweigh any conceivable 'rate of return'
calculation you can come up with.

Now note the following: (1) Modern fear levels have been declining for a
long time. (2) The WWII generation currently owns a vast sum (see below)
that it can apply to other endeavors than simply leaving it to their
ungrateful ex-hippie kids. Hence an idea I've been pushing lately for how
to leverage this vast amount of capital toward worthy projects that have
only questionable rates of return.
        You will see that this suggested program is related glancingly to
the discussion of rate-of-return. I thought you'd be interested.
Comments are welcome.
        David Brin


                (A new take on Philanthropy)

Imagine you want to change the world but only have a measly $10 millions to
give. That won't let you accomplish an awful lot... unless you find a way
for it to leverage far bigger sums.
        Consider this -- We are about to experience the greatest
inter-generational transfer of wealth in human history, passing from the
World War Two generation to the clade of Baby Boomers. By some estimates,
this may amount to 12 TRILLION DOLLARS. The implications for capital flow,
investment and tax revenue need urgent consideration. Moreover, if just
one additional percent of this sum is diverted toward philanthropic ends,
it would imply an added endowment of $100 billions. Enough to take on
"projects" of a magnitude generally thought reserved to just a few
continental governments.
        Now imagine a major campaign hit the elite avenues, from Newport to
Rancho Santa Fe, persuading a passing generation "... not to leave it to
spoiled offspring. Instead, buy yourself immortality..."
        The same immortality won by the Medicis, or Pope Julius II, who
funded the Italian Renaissance.

In raising the philanthropy rate to a mere %10, this campaign might release
$1 Trillion for projects that bypass the short-investment horizons of both
markets and governments. New cities are built and named for a single
benefactor. ("Gatesograd"? "GatesTopia"?) With the $25 Billion that Sam
Walton left to just five people, he could instead have funded a Mars
mission in exchange for renaming Deimos "Waltonland". Sam missed that bet,
but it is likely that some other multi billionaire won't.
        One way to leverage this transformation would be to create a small
institution called the Eye of the Needle Foundation or "EON." (Its
symbol, a camel sailing easily through a needle's eye, makes a biblical
reference to helping rich folks reach heaven by means of well-targeted

How does it work? You start by gathering 100 or so pragmatic but
far-seeing individuals -- thinkers widely respected for their insight and
practical accomplishments -- and provide them with research resources,
enabling them to discuss and compare two lists:
        (1) widely acknowledged world problems,
        (2) speculative but plausible endeavors, potential solutions, which
have already been publicly discussed but failed to attract capital funding
from either government or industry.

THE GOAL of this conference is actually quite simple and well-defined -- to
create a very special (and uniquely expensive) Gift Catalog. Gilt-edged,
with platinum bindings.
        A 100 page register of ideas to change the world.

The objective? To sell these projects, one at a time, to the super-rich.
Projects that ill suit industry or government, but might attract a Walton
or Gates because they are gaudy, risky, and bold.
        The cheapest ("discount") project described in the catalog would
cost $100 million. The biggest might take a couple of Sam Waltons working
together... about 50 Billion dollars.
        In addition to a detailed prospectus outlining costs, social
benefits and time scales, each concept would come with three numbered
scores, representing the committee's estimate of --
        1) the project's likelihood of success, if fully funded.
        2) odds that success might someday turn around and result in new
fonts of commercial profitability.
        3) the likelihood that, in the event of success, the funder will
be remembered 500 years from now, on the same scale as the Medicis, or Pope
Julius II... or possibly Ferdinand and Isabella.

One unique feature of EON is that it unabashedly takes advantage of the
temptation to "buy immortality." It is deeply human and one of the chief
motivators of largesse in past cultures. (After all, what else is there to
purchase, when you already have everything?) In this case, our catalog
will tempt wealthy persons to fund projects with low success or
profitability scores... but potentially high payoffs in the good regard of
future generations. In other words, exactly the sorts of far-reaching
gambles that governments and/or investment capitalists must avoid.

Hypothetical example #1. A Freelance Mars Mission -- cost $15 Billion.
Chance of success, 50%.
Chance of profitability? Short term: 5% After a century: 20%
Likelihood of immortality to funder, in event of success; 95%.

Example #2. Build a city in the Third World from scratch -- cost $25 Billion.
Chance of success, 65%.
Chance of profitability? Short term: 25% After 50 years: 70%
Likelihood of immortality to funder, in event of success; 85%.

Of course the book would contain many ideas that are both cheaper and more
potentially profitable.

Example #3: The Wind Funnel Energy Tower -- cost $150 Million
Chance of success, 80%.
Chance of profitability? 70%
Likelihood of immortality to funder, in event of success? 15%.

A second requirement, almost as important as the catalog, would be just the
right sales force. The super rich are used to being swarmed over by
charities, so the EON Foundation must have a dozen or so representatives in
the class of people so famous that they walk through all doors. e.g. Walter
Cronkite. Robert Redford. This should be easy, since the 100 page catalog
is sure to have at least a few projects such people will be passionately
interested in.
        Chief sales advantage? The EON Foundation has no vested interest
in which project is selected. After drawing a .001% fee, the foundation
stands to gain nothing. It's less a self-interested institution than a
dating service -- between the rich and some attractive projects. Thus,
with an endowment of just a few millions, it might have leveraged effects
far beyond any other charitable endeavor.


David Brin - Ph.D. http://www.kithrup.com/brin/ Brin@cts.com
Received on Sun Mar 22 07:12:13 1998

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