To maximize payouts from life annuities, 18th-century Swiss bankers nominated young girls from wealthy families who had survived smallpox as beneficiaries, creating a securitized investment based on their longevity. This historical example of actuarial arbitrage shows how financial engineering can push ethical boundaries by turning human lives into financial instruments.
Related Insights
The South Sea Bubble wasn't just a market mania; it was enabled by government corruption. Directors secretly gave shares to government officials who, in turn, had a direct financial incentive to keep the share price rising, regardless of the cost to the nation. This highlights how state actors can be complicit in creating systemic risk.
A key critique of life settlement firms is underestimating longevity. Abacus de-risks its model by acting as an originator, quickly selling policies to private credit funds. This transfers longevity risk to larger entities and allows Abacus to focus on volume and market penetration, countering a major short-seller thesis.
A more significant danger than insider trading is that individuals in power could actively manipulate real-world outcomes to ensure their bets on a prediction market pay out. This moves beyond leveraging information to actively corrupting decision-making for financial gain, akin to throwing a game in sports.
The creation of the Bank of England and John Law's monetary schemes were not academic exercises. They were desperate measures to solve the massive national debts accumulated by England and France from decades of war, showing how fiscal crisis is a powerful catalyst for financial innovation.
Abacus is penetrating the $13 trillion life insurance market, where 90% of policies lapse worthless. By purchasing policies from seniors (life settlements), it provides them with immediate cash for retirement or healthcare and creates a new, uncorrelated asset class for institutional investors.
The economic value of extending healthy life is astronomical. One research team estimated a single year of added healthspan is worth $38 trillion to the US economy, a figure experts believe is still an underestimate. This reframes geroscience investment as a massive economic opportunity, not a cost.
The business model of prediction markets and online gambling disproportionately exploits the neurobiology of young men. These platforms are designed to tap into a less-developed prefrontal cortex, which governs risk assessment and impulse control. This is the core monetization strategy, turning a developmental vulnerability into a massive market opportunity.
Just as 1700s British aristocrats had lower life expectancies from accessing ineffective but expensive "quack" medicine, today's wealthy investors can access complex financial instruments that often act as financial poison. These products peddle hope but can dramatically increase the odds of ruin, a danger unavailable to ordinary investors.
AI and big data give insurers increasingly precise information on individual risk. As they approach perfect prediction, the concept of insurance as risk-pooling breaks down. If an insurer knows your house will burn down and charges an equivalent premium, you're no longer insured; you're just pre-paying for a disaster.
Apollo entered the insurance market by identifying a post-GFC niche in guaranteed products (annuities), realizing it was essentially a spread-lending business they could master. This opportunistic move, not a preconceived plan, evolved into a half-trillion-dollar cornerstone of their firm.
