Baxnet Ideas · Founder note
Nobody Should Be Able to Short Your Life
TL;DR: Backing somebody's potential can create shared upside. A separate contract that pays when that named person earns less, becomes ill or fails should never exist.
Imagine you leave a steady warehouse job to qualify as an electrician. A fund provides £12,000 for training and enough breathing room to cut your hours while you learn.
Now imagine a stranger buys a separate contract that pays if, three years later, your income is lower than it is today. They have never met you. They are not protecting themselves against a loss they would suffer. They simply think the market has overestimated you.
This is a hypothetical contract. It should stay that way.
Investing in People — Part Ten. The previous article, If Salary Is the Score, We Will Fund the Wrong Futures, asks what outcome this new form of finance should optimise. This one asks which financial position should be prohibited altogether. If you are new to the series, begin with Everyone Is Investable. Nobody Should Be Ownable..
A short is more than a pessimistic opinion
An investor is allowed to think your plan will fail. They can decline to fund it, question the evidence or decide that the expected return is too low. A market that requires universal optimism would be useless.
A short position goes further. It turns the negative view into an asset.
In ordinary securities markets, that can serve legitimate purposes. The US Securities and Exchange Commission describes short selling as selling stock that the seller does not own, usually after borrowing it. The seller profits if the price falls, but short selling can also provide liquidity or hedge another position. Those functions belong to a market in tradable securities.
That logic changes when the underlying subject is a person. They have to live through the event that makes the contract pay.
The fund backing our electrician already has a positive position. If the move works and the agreed outcome is produced, it may receive a return. If the move does not work, the fund should be capable of recording a loss. That is enough exposure to the individual’s result.
Creating a second instrument whose upside is her downside would change the character of the market.
We have met the wager-on-a-life problem before
Older insurance law already contains a useful warning.
The preamble to Britain’s Life Assurance Act 1774 described insurance on lives where the policyholder had no interest as a “mischievous kind of gaming”. The Act prohibited life policies made as wagers, required the interested person’s name to appear and limited recovery to the value of that interest. The language is more than 250 years old and remarkably direct.
I am not suggesting that a career-linked derivative would legally be a life assurance policy. The design lesson is the useful part. The ability to calculate the probability of a bad event does not automatically create a legitimate right to profit from it.
Insurance protects somebody who would suffer a real loss. A family can insure the life of the person whose income supports the household. A worker can protect their own earnings against disability. The payout exists to soften damage, not to give an unrelated spectator a winning trade.
Finance for human potential needs the same basic limit.
Protection and hostile exposure are different things
A fund may need protection against a recession, a collapse in one industry or a large group of participants earning less than forecast. It can hedge those risks at portfolio level. An income index or economy-wide measure does not require somebody to take a negative view of one named person’s future.
The person may need protection too. An agreement could pause when earnings fall, end after serious illness or include insurance that covers a defined obligation. Those instruments pay when something goes wrong, but they are arranged around the loss suffered by the person or somebody genuinely dependent on them.
A hostile position has no protective purpose. Its owner benefits because a specific person earns less, fails to qualify, becomes unwell or abandons the attempt.
Nobody has to sabotage the electrician for that arrangement to be corrosive. The incentive is already wrong. Her disappointment has become somebody else’s favourable result.
A rejection leaves an investor without a position. A short gives them a position that benefits from the negative outcome. A fund can say no. An analyst can identify weaknesses. A personal intelligence system can tell someone that their evidence does not yet support the plan. Honest disagreement helps people avoid bad decisions.
What nobody needs is a transferable claim on the bad decision being made.
Personal intelligence could create an unusually informed short seller
The risk becomes sharper once a person has a rich private record of their own life.
A useful personal intelligence engine might help somebody notice that they finish practical projects but abandon formal courses, perform well when working with customers, or repeatedly postpone learning whenever caring responsibilities increase. That context can help the person choose a realistic next step and decide what evidence to share with a prospective supporter.
Placed on the other side of the market, the same record becomes research for a negative position. A trader would want the periods of low confidence, health interruptions, weak relationships, unfinished applications and every other signal suggesting that the public story is too optimistic.
This is exactly the kind of function creep that purpose boundaries are meant to prevent. The Information Commissioner’s Office says organisations must be clear from the start about why they collect personal information and must not reuse it for an incompatible purpose without satisfying the relevant rules. Its current purpose-limitation guidance is practical rather than abstract.
For personal intelligence, the product boundary should be stronger than a long privacy notice. Information assembled to help somebody understand or finance an opportunity should not be available to create, market or settle a negative position on that person. Any evidence shared with a fund should be purpose-bound, time-limited and visible to the person who supplied it.
Consent alone would not make every instrument acceptable. Someone short of money can agree to a lot of ugly terms. Some markets need prohibited products, not merely better disclosure.
The market does not need this trade
Short sellers can argue that negative positions help prices reflect sceptical information. That case makes sense when the subject is a tradable company and the objective is a more accurate market price.
There should be no market price for the whole person. The first article in this series set that boundary around ownership. The previous one argued that even salary cannot serve as a complete score of human progress. Letting strangers short an individual would break both rules at once: it would create a tradable claim on decline and then search the person’s life for evidence that the decline is coming.
Finance for human potential can work without it. Funds can decline applications, diversify positive investments, absorb losses and hedge broad economic risks. Individuals can receive honest advice about where their plans are weak. None of that requires a counterparty who wins when a named person loses.
Our electrician may complete the qualification and earn more. She may decide the work is wrong for her, or finish at the exact moment a recession removes the expected jobs. Her personal record should help explain what happened, and the fund should account for its result.
The bad year can appear in the record. It should not appear in somebody else’s portfolio as the winning trade.