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The Atomic Unit of Happiness = Futures Markets for Individuals Q1: If we could provide health + education for every individual at birth, what is impact to lifetime GDP? 10x? 100X? Q2: If you could invest in this asset class, what is the ROI? Example: Big Pharma swap of AIDS drugs for upside in some derivative F (future earnings of Botswana) Assertion : this is a $X00T asset class, with opportunity for substantial ROI over a 10-20 year period.

Published in: Business, Economy & Finance
  • This is a very interesting way to approach this concept, and one that will appeal to many, I believe. I might suggest adding 'Intangible Assets' by Baruch Lev to your list. He's a finance professor at Stern.

    Also, I'd highly recommend The New Financial Order: Risk in the 21st Century (by Robert Shiller).

    Last, if you're not familiar with it, I should mention Jed Emerson's work on how in the philanthropic world, using one's endowment in alignment with mission only makes sense - it may be the most powerful tool at a non-profit's disposal.

    I do agree that sometimes the best way to value intangible assets is to understand the risks they mitigate.

    Does this mean you'll be at Social Capital 09? (#SoCap09)
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  • @guest2f6844: there is always going to be a moral hazard issue. however, your assumption is 1) that we do it at the individual level, not at the aggregated level for a group, and 2) that we securitize ALL of a person's market cap, and give it to them.

    just like with companies, there is no need to float 100% of the market cap. many companies only float 10-40% of their market cap. similarly if we created market structures for individuals, you could regulate the market so that only a limited % of a person's capital is available at any particular age. (perhaps only 10% at birth, another 10% as a teenager or young adult, larger amounts once in the workforce). in any case, those who squander the amounts will be dealt with by the market, and moral hazard can effectiely be handled via filtering for other behaviors such as education, work history, etc in the same way that FICO scores work.

    Second, there is no reason you have to do this at the individual level. most likely, it will first occur in larger aggregated groups -- based on either geography, education, or other group characteristics. as with the housing market, it is important to aggregate enough individual sample points to reduce risk.

    of course it's possible that market excess & poor financial reporting / crappy auditing will produce poor outcomes -- but the current financial crisis is not an indictment of the entire subprime market and/or mortgage market / stock market. don't throw the baby out with the bath water just because some idiots packaged a bunch of crappy subprime mortgages and Moody's said they were AAA. you can't assume that financial markets suck just because of poor execution / conflicted ratings agencies. these are obviously issues to be addressed, but they are not structural failures of the concept, rather of the last ten years of execution.

    so if you want to put your savings in a mattress and hide your head in the sand, that's fine you're welcome to do so... on the other hand, if you'd like to help solve the problem economic innovation & financial pioneering is probably the best avenue to a solution.

    personally i don't think we're running out of suckers... that market is never short.
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