A Scientist Wants To Issue A Bond That Pays Big Once We Find Alien Life

A Scientist Wants To Issue A Bond That Pays Big Once We Find Alien Life

SARANYA KAPUR NOV. 16, 2013, 7:10 AM 462

In modern finance, you can hedge against anything. But the market for hedging against alien invasions is pretty thin. Marginal Revolution’s Tyler Cowen pointed us to an interesting proposal addressing the matter. In an article for the Journal of the British Interplanetary Society, Jacob Haqq-Misra of the Blue Marble Space Institute of Science proposes a novel way to insure against the coming close encounter, while also helping fund the search for extraterrestrial intelligence. He proposes a bond which pays out when extraterrestrial life is proved to exist by researchers on earth. It would be a “lottery bond,” which is a security usually issued to fund projects when the issuer foresees low demand for the bonds. In order to drum up demand, some randomly selected bonds within the issue are redeemed at a higher value than the face value of the bond once the project is completed; this enhances the value of the bond.

All of the bonds get a regular, but low coupon payment, and once the project is completed, the holders of the “lucky” bonds get a high payout, while everyone else gets less or nothing.

According to Haqq-Misra’s paper:

“I propose the establishment of a SETI Lottery Bond to provide a continued source of funding for  the search for extraterrestrial intelligence (SETI). The SETI Lottery Bond is a fixed rate perpetual bond with a lottery at maturity, where maturity occurs only upon discovery and confirmation of extraterrestrial intelligent life. Investors in the SETI Lottery Bond purchase shares that yield a  fixed rate of interest that continues indefinitely until SETI succeeds—at which point a random  subset of shares will be awarded a prize from a lottery pool. SETI Lottery Bond shares also are  transferable, so that investors can benefact their shares to kin or trade them in secondary markets. The total capital raised this way will provide a fund to be managed by a financial institution, with  annual payments from this fund to support SETI  research, pay investor interest, and contribute to  the lottery fund. Such a plan could generate  several to tens of millions of dollars for SETI research  each year, which would help to revitalize and expand facilities such as the Allen Telescope Array.”

What makes these bonds unusual is that they assert with certainty that we will find alien life in the future. The probability of this occuring is determined by the Drake equation, an equation that tries to determine the probability of finding alien life in a galaxy, depending on several factors including the number of planets it has and the average rate of star formation. According to this, the Milky Way probably has about 12,000 alien civilizations.

Given our current zero knowledge about alien life, these lottery bonds would probably be a hard sell, but they’re a fun way to help underfunded space research. And if we do end up finding a hostile alien civillization- you’ or your descendants will be able to cash out big time.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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