How Much Does Youth Cost?

Economic analysis always bases its theories on assumptions like “everyone is intelligent” or “people do whatever they can to maximize their profit.” It goes without saying that these assumptions do not hold good a lot of the time. However, they are valuable models and help approximate reality.

I’m going to take the assumption of “people do whatever they can to maximize their profit” to the extreme and introduce a nice conundrum – “would you sell your age?” I can hear shouts of, “Whaaaat?? No way!” All right. Fair enough. Before we proceed further, I would like to illustrate why anyone would want to buy your age.

When you put money into the stock market, what you are essentially saying is, “I don’t need this money right now. You (some corporation) need this for such and such purpose. You can do what you want with my money, but I expect a compensation.” This compensation is the interest you get on your money. Obviously, this trade is going to take place only if that corporation can do more with the money than you can. Otherwise, they lose out.

So this corporation needs the money more than you do (since they can do more with it), and you get your compensation.

Youth

Now just imagine the same when it comes to age. There is a rich old businessman called Kelly. Kelly is 90 yrs old and wants to go on making money. But he doesn’t have much time left. So he looks at you and thinks, “Hey. He’s twenty six. His earning potential is far less than mine. If he gives me 10 years of his life, I can make $200 million with it. He certainly can’t make that much in ten years. Let me see if he is willing to sell.” He offers you a trade, and you have two problems. Should you make the trade, and if you do, how much should you charge?

At first glance, there’s no way you would agree to sell your age. After all, when you sell your age, you are giving up the joys of experiences which can never come back. You tell this to Kelly, and he smiles shrewdly and says, “That’s OK. I wouldn’t dream of taking away the best years of your life. I only want those pieces of time (adding up to 10 years), that you actually spend working and trying to make money. I won’t even count coffee breaks”.

Photo by Anna Cervova from http://www.publicdomainpictures.net.

You go home, and work this out. You figure that you currently work for 10 hrs a day, out of which you really spend only 8 hours working. This means that for 10 years of working time to elapse, you need 30 years of actual life. You go to Kelly and ask how this would work out. He says, “Look. I’ll make you a deal. Since you work only for 1/3rd of your life, you will age 1/3rd faster than you are aging currently for the next 30 years. That extra time will come to me. This way, you will get to live your full life, and you will actually be only 40 years older when 30 years have passed.”

You figure this is not too bad. You will be 66 years old instead of 56, after which you will age normally. Plus you can relax and not have to work hard. Also, there’s no tension of losing your job, recession, etc. You’re not married (we have to make it easy!). You have parents, but they’re old anyway. And 30 years later, they’ll be long gone. The deal suddenly looks very sweet!

So you decide to accept Kelly’s offer and go through with the deal. Now it’s a question of pricing. You can’t let Kelly know that you’re dying to make the deal. You have to hard sell and get as much as possible. So you first figure out how much you’re going to make in 30 years. You currently earn $20,000 per month. In 30 years you will earn $7.2 Million. Assuming that you get a 10% hike per year, we can sum the series using Geometric progression and evaluate your total earnings to be $32.9 Million.

So you agree to Kelly’s deal, and go through with the trade. You have traded 10 years of your life for $32.9 Million! You tuck it away into savings and start enjoying your remaining 30 years. Remember, however, that whatever you got is taxable!

Would other people do the same? I don’t know. Maybe, and maybe not.

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