A counter-intuitive headline
On 18 September 2026, one piece of news got buried in the feed: the Nobel Foundation announced it would raise this year’s prize money by 9%, to 12 million Swedish kronor per prize. The occasion — 2026 marks the 125th anniversary of the awards.
I paused for a second and asked myself a dumb question:
A “person” who lives off the income from a principal, paying out bonuses for 125 years — why has the money not run out, but instead grown bigger and bigger?
After digging into the numbers, I realized the Nobel Foundation’s books might be the most perfect “cash-flow system” sample on this planet. And the math it proves happens to be exactly what I do in my options account.
The books first
In 1900, the Nobel Foundation was established with roughly 31 million Swedish kronor — almost the entire fortune Alfred Nobel left in his will.
By the end of 2025, the Foundation’s invested capital had a market value of SEK 6.744 billion.
Mind you, it has paid out prizes every single year of those 125 years — in 2025 alone, prizes plus operating expenses totaled SEK 148.1 million, about 2.2% of assets. Yet the principal still grew from 31 million to 6.7 billion.
Even more interesting is the return sequence. From the Foundation’s 2025 annual report, the five-year scorecard:
| Year | Return on investment |
|---|---|
| 2021 | +18.3% |
| 2022 | −1.9% |
| 2023 | +10.6% |
| 2024 | +11.6% |
| 2025 | +0.9% |
Five-year average: +7.7% per year. And the goal written in its annual report is merely “a total inflation-adjusted return of at least 3%”.
It does not chase explosive returns (just 0.9% in 2025), and it does not guarantee a positive year (2022 was negative). Yet over a century-plus, the return rate has stayed reliably above the spending rate — that is the entire secret.
The math is one formula
Return rate − Spending rate = Net principal growth
The Nobel Foundation’s actual numbers: 7.7% (five-year average return) − 2.2% (annual spending) ≈ 5.5% net principal growth per year.
Unimpressive on its own. But put that 5.5% into the machine of time, and it is where the 6.7 billion came from.
Flip it around: if return is 5% and spending is 6%, the books slowly shrink until prizes can no longer be paid. The life-or-death line of a perpetual system is not how high the return is — it is the relative size of return versus spending.
But its first 80 years were anything but glamorous
This part comforted me most while reading the history — because it looks so much like an ordinary person’s account:
- For the first decades, the will restricted investments to “safe securities” (bonds, real estate, municipal loans). Taxes ate into it — the fund actually shrank;
- By 1925 it was so poor that it simply skipped a year of prizes as a protest — which won it a tax cut from 40% to 3%;
- Real estate was only allowed from 1939; equities up to 60% only from the 1970s; up to 70% in the 1990s;
- Real growth only began in the 1980s — after which assets quadrupled over 20 years;
- Only in 1991 did the fund get back to its 1901 size (in real terms);
- Then came the dot-com crash: assets fell from almost 5 billion to just over 3 billion kronor — down nearly 30%; the 2008 financial crisis hit hard again.
See that? The first 80 years of this “perpetual system” were mostly foundation-laying. It lived through two crash-level drawdowns and even skipped paying prizes once.
And it survived for exactly one reason: income covered spending, so it never had to sell assets in a panic. Crashes could be waited out, rules could be adjusted slowly — as long as cash flow never dries up and you are never forced to sell, time is on your side.
Versus myself: a miniature Nobel experiment
My options cash-flow system is essentially the same structure at a tiny scale:
- Nobel’s “principal” = my account’s net liquidation value;
- Nobel’s “prize money” = the premiums I collect selling options;
- Nobel’s “spending rate” = what I take out of the account (currently zero — everything compounds).
Here is my real ledger (as of end-September, all figures from broker trade-level settlement records):
- Options cash flow (settlement basis): +$2,048, across 143 trades, about +$228 per month;
- That translates to a monthly cash-flow rate of roughly 2.3% (realized option P&L ÷ current NAV ÷ 9 months);
- But over the same period, directional stock positions lost −$4,064. Net: −$2,016.
Honestly, my “foundation” is still in its 1900–1950 phase: the engine is built, the structure is not finished — legacy stock positions still weigh on the account, and principal integrity is only 90.0% (NAV ÷ cumulative deposits).
So I will not claim “I make 2.3% a month, 28% annualized — 3.6 times faster than the Nobel Foundation.” That would be self-deception. Nobel’s 7.7% is 7.7% built from 55% diversified equities, hedge funds and property. My 2.3% is 2.3% built from small-cap options with unresolved concentration and unverified tail risk. Speed and scale cannot be compared — only the structure can:
- Return must stay above spending — my “spending rate” is currently zero, but what really matters is “return minus drawdown”;
- Never be forced out — leverage ≤1.5x, assignment handled within two trading days, only verified seller structures; all of this buys one thing: the right to never sell at the bottom;
- Rules must evolve — it took the Nobel Foundation 80 years to get its asset allocation right. My Q4 validation period is my own “1980s”.
Three things to take away
If you also want a “perpetual system” — an options account, rental income, a business, a side hustle — the Nobel books offer three immediately actionable lessons:
- Calculate your spending rate first: how much do you withdraw from the system each year, as a percentage of assets?
- Make the return rate stand firmly above the spending rate before talking about how high returns can go. A stable 1% beats a volatile 10%.
- Treat time as a multiplier: a 40% loss needs a 67% gain to recover; but a system compounding 5.5% net per year is 5x in 30 years. The first principle of compounding is not the return rate — it is “never interrupt it”.
The Nobel Foundation’s former CEO Lars Heikensten once said their investment philosophy could be summed up in four words:
“We’re in this forever.”
Not “how much this year” — but “here forever”. That sentence deserves to be posted above every options position I hold.
Trading Insights #008 · to be continued
Addendum (2026-10-13): Figures re-verified against broker trade-level settlement records (through Sep 30): options corrected from +$2,101 / 121 trades / +$246 per month to +$2,048 / 143 trades / about +$228 per month; monthly cash-flow rate corrected from about 2.6% to about 2.3%; stock direction corrected from -$2,875 to -$4,064, net account balance from -$773 to about -$2,016; principal integrity from 94.3% to 90.0%. Structure and conclusions unchanged.