Remaining Useful Lives

My company owns a lot of long-lived assets, such as ships and power plants. The remaining useful life of each piece of equipment affects many of our spending decisions. When an airplane engine needs an overhaul, which can run into many millions of dollars, we will scrap or dump the airplane at a loss if it is long in the tooth, just as you, dear reader, wouldn’t order a $1,000 repair on a jalopy worth $2,000 (unless the old car is a member of the family, in which case rational economic analysis goes out the window).

The remaining useful life represents our best guess about how many more years of service we can get out of the equipment. Despite the higher costs---repair, maintenance, fuel, environmental, labor (e.g., three pilots versus two in planes built after the late 1980’s), most older assets can be kept running long beyond the original design specifications, and their remaining useful lives are constantly being revised upward.

And so it is with human beings. With 70 being the “new 60”, many of us baby boomers will be productive members of society well past the expiration dates of the pre-WWII generation. Our physical stamina and mental acuity may not quite be what it once was, but technology has advanced much faster than our powers have deteriorated. Net-net, as they say, we are better doctors, lawyers, accountants, engineers, and teachers than we were 20 years ago.

Rule of 65
In the financial services industry there’s an old joke about how deals are approved according to the “rule of 65”, that is, whether the deal will reach maturity, or at least not go bad, before the CEO retires at the age of 65. Maybe we’ll have to re-christen it the “rule of 70” or even 75. (At 74, this CEO doesn’t show any signs of stepping down, although it does appear he has enough saved for his retirement.)

Puzzling Behavior
Why is that the younger people drive so fast and risk life and limb to beat the red light? Oldsters are the ones who should be trying to make the most of each moment, while youngsters should act more relaxed with vast expanses of time in front of them. Another sign that our feelings and hormones overwhelm our rationality. Mr. Spock was right.

The vast expanse of Earth at night (hat tip: Jonah Goldberg, NRO)