Like the last post, don't take this post too seriously. This is playtime with Taleb and one of his anti-fragility ideas now expanded a bit. As in the last post, it is more or less like this with some changes highlighted in blue:
IF
- robust systems are identifiable by the reduction of single points of failure and redundancy of resources at critical points, and
- we assume a $1M portfolio P1 for a 60-95yo, spending an age adjusted spend[1], and
- of that 40k (in t(0) only) in spend, 20k (real, all periods) is a life-or-death floor forever, and
- we use SS-like life table to assess the probability of spending anything at a future time but now conditional on advancing age, and
- the PV at t(0) of the probability-weighted cashflow of the floor is variable by age , and
- we simply and blindly double that part of the portfolio (.43) that defeases the floor at t(0), and then we also, as age advances:
- recalculate the spend as the "heuristic rule spend amt" divided into the "total" capital, where the total now includes the extra redundancy
THEN
- the initial portfolio P1 is now redundancy adjusted .43 x P1 = P2 at 60 and where now the redundancy will decline with age and life horizon,
- The spend rates will rise monotonically but always be less than a less-redundant portfolio, of course,
- The spend rates with redundant capital, keeping mind that the heuristic spend rule may have already considered the same risk that the redundancy is addressing (i.e., so that we might contemplate some possible double counting here...maybe...), would look a little like this:
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| Figure 1. Spend rates with addl redundancy of capital |
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