I thought this was one of the more interesting blog posts I've read in some time:
What do you think are the odds that you will die during the next
year? Try to put a number to it – 1 in 100? 1 in 10,000? Whatever it
is, it will be twice as large 8 years from now.
This startling fact was first noticed by the British actuary
Benjamin Gompertz in 1825 and is now called the “Gompertz Law of human
mortality.” Your probability of dying during a given year doubles
every 8 years. For me, a 25-year-old American, the probability of
dying during the next year is a fairly miniscule 0.03% – about 1 in
3,000. When I’m 33 it will be about 1 in 1,500, when I’m 42 it will be
about 1 in 750, and so on. By the time I reach age 100 (and I do
plan on it) the probability of living to 101 will only be about 50%.
This is seriously fast growth – my mortality rate is increasing
exponentially with age.
And if my mortality rate (the probability of dying during the next
year, or during the next second, however you want to phrase it) is
rising exponentially, that means that the probability of me surviving to a particular age is falling super-exponentially.
Three thought questions: a) what does the law imply about systematic risk and asset pricing? b) what does the law imply for regulatory structures and Arnold Kling's chess game analogy? c) what does the law imply for the Fermi paradox?