Tuesday, December 21st, 2010

Math–So Evil!–Destroys Young, Stupid Business

Do you know why investment banks and hedge funds and insurance companies actually work? If you just said "LAWYERS" or "THE FED WINDOW," you are technically correct. But on a more fundamental level, it's because there are thousands of Ivy League children assiduously doing math all day. These firms are the nation's number one consumer of nerds, and that is why, in the end, great amounts of money are made. (Though it's never the nerds that get the big bonuses, which is a shame.) So when businesses try to rip off a model—for instance, the fine people who mixed viatical settlements with derivative instruments, that is to say, who buy life insurance policies and spread them among investors, hedging against death—they often fail because they don't have enough kids doing math. This is what happened to "Life Partners Holdings Inc., which, by the way, really gay name much? But yeah, they got hosed on the math because their "life partners" (LOL!) just keep not dying: "In policies old enough to provide a measure, the insured people usually haven't died within the life expectancy Life Partners gave its clients, and often were still living beyond double or triple their projected span." Bam! Math does it again.

23 Comments / Post A Comment

boyofdestiny (#1,243)

Brian Pardo, Life Partners' founder and chief executive, acknowledged that many of Life Partners' life-expectancy estimates "are probably wrong." It gets them from a doctor in Reno, Nev., who has testified for a court case that he never checks the accuracy of his prior predictions.

A ghoul and his money are soon parted, I suppose.

dntsqzthchrmn (#2,893)

Life, Actuarially.

brent_cox (#40)

So was this a failure of the maths or a failure of the doctors? Or do old people just stay alive to spite capitalism?

This is why we need death panels.

BadUncle (#153)

so, without the benefit of college graduates, the Mob has been successfully calculating the big for a hundred years, but Wall Street can't do it?

boyofdestiny (#1,243)

Leave the algorithm, take the cannoli.

deepomega (#1,720)

A derivative for a derivative.

So lemme get this straight: Companies that have a business interest in having old people die are seeing those old people not die, but instead continue to live? This is terrible! (For the companies!)

dntsqzthchrmn (#2,893)

Citizens United v. Double Indemnity

Jeff Wise (#9,126)

It's even grosser than that. I think they were expecting people to die of AIDS.

I vaguely remember back in the 90s that some guy was sued for not dying. He had sold his life insurance policy to pay for meds to people that had expected him to die shortly of AIDs. When he disappointed them by living beyond when they had hoped to collect on the insurance, they sued. Can't remember what the outcome was though.

zidaane (#373)

Huh? Someone just sent me a carton of cigarettes again. No return address.

Jeff Barea (#4,298)

Um, yeah if by fail you mean they made a shit ton of money selling the derivatives and then decided to take that money and build a new company before the old on collapsed.

How DID you get your job in the media again?

Cuz, I'm getting this vibe that you and your friends still think like the people in the 1880's who were more concerned that Jimmy Joe BOB Inc. est. 1765 means something to these people who don't care about longevity anymore. Yesterday my bank balance said $35. Today my bank balance says $2,000,000.00. Hmm. Guess I can start a new business now and just sell Newsweek for $2 because WHO THE FUCK CARES.

This is the problem with you new media types. You watch the NY Times trends that are 10 years after the trend actually began and forget your history.

Me? I see it all. But then when I make mention of something that even happened only 6 months ago without making it a TL&DR post I gotta deal with bullshit asshats who can't remember what happened last week.

I'm just going to start punching everyone I walk past and see if that makes them remember things.

dntsqzthchrmn (#2,893)

You see it all, and then you comment here. Huh.

petejayhawk (#1,249)
Jeff Barea (#4,298)

Or you spent too much time reading medical books.

Freud did this wonderful explanation of a tennis court. Do you know what I am talking about Pete?

I bet you don't until you have to look it up.

Guessing you hate yourself so much inside that it eats you up. See how easy that is? I could put in multi-syllabic words if that would ease your conscience. Very hard to accept well-adjusted people when your life is something you hate so much. I understand you Pete. I care about you Pete. It's ok to care about yourself too.

Jeff Barea (#4,298)

Why do I even bother with bald people? Somehow they've gotten it into their cold heads (no hair) that psychology and psychiatry are settled sciences that have demystified and catalogued…shit just look at the word he used. Pathophysiology. Physiology? The only thing we know about the brain functions are the physiological influences. How do these translate into thought processes? Only the stupidest of the stupid would hazard a guess on that.

So feel free to chime in Pete.

Jeff Barea (#4,298)

You would think I hadn't spent time in the early 90's helping slice cat brains in the top neurobiology lab in the country to figure out shit this bald Pete thinks he knows because his Professor told him it he was an awesome professor so why would he not believe him.

I really have to stop slumming in places where community college have grown up bald and are considered experts.

dntsqzthchrmn (#2,893)

Gaming. The. Thumb.

barnhouse (#1,326)

Oh some of those nerds get huge bonuses. "Quants" they are called, if you can believe.

dntsqzthchrmn (#2,893)

Quants get good bonuses. Huge is reserved for bringing in deal business, I think?

barnhouse (#1,326)

Well, it varies quite a lot I think. And of course there is "huge" in lay terms vs. "huge" in Wall Street terms. But some of the biggest hedge fund guys started out as quants, so.

Flashman (#418)

I was once picked up by a farm family from Idaho when I was hitchhiking out west and I swear they were the jolliest, rosy-cheekiest, healthiest looking people I've ever encountered.
No way would I bet on folks like that going to an early grave, unless it was from getting murdered by a hitchhiker.

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