If TAI arrives soon, either I’ll be dead (so I should borrow and spend all my money now—this part makes sense to me) or I’ll be fantastically rich in a post-TAI utopia, so you say I should borrow and spend all my money now, to smooth out my consumption. Apparently this is the consensus of all mainstream economics and also the results of common-sense.
But you also say: if TAI arrives soon, that means real interest rates should be higher, so I should engage in a risky investment strategy of shorting the bond market. This strategy will make me poorer in the short-term, but will pay off by making me richer later, once markets realize the consequences of TAI.
That second idea seems like the opposite of consumption smoothing?? Maybe it’s worthwhile because I would become rich enough that the extra volatility is worth it to me? But what’s the point of being rich for just a short time before I die, or of being rich for just a short time before TAI-induced utopia makes everyone fantastically rich anyways?
I also do not find it plausible that a vision of impending TAI-induced utopia, an acceleration of technological progress and human flourishing even more significant than the industrial revolution, would… send stock prices plummeting? I am not an economist, but if someone told me that humanity’s future was totally assured, I feel like my discount rate would go down rather than up, and I would care about the future much more rather than less, and I would consequently want to invest as much as possible now, so that I could have more influence over the long and wondrous future ahead of me. You could make an analogy here between stable utopia and assured personal longevity (perhaps to hundreds of years of age), similar to the one you make between human extinction and personal death. The promise of a stable utopian future (or personal longevity) seems like it should lead to the opposite of the short-term behavior seen in the near-term-extinction (or personal death) scenario. But your post says that these two futures end up in the same place as far as the discount rate is concerned?
To quote a Peter Thiel joke that didn’t make it into my post about investing under anthropic shadow, “Certainly if we could just live to all be 100, that would be quite a transformation. There is good news and bad news. The bad news is: If you don’t believe in the good news, you’re not saving enough for retirement.”
If TAI arrives soon, either I’ll be dead (so I should borrow and spend all my money now—this part makes sense to me) or I’ll be fantastically rich in a post-TAI utopia
Personally, I’d expect some actors to be really greedy. In the upside scenarios, they’d want to be 100x fantastically rich, not just 2x.
There haven’t been many historic examples where the wealthy / governments didn’t try to take advantage of big opportunities just because things were so good. Instead, when new resources opened up, some would rush to take as big a share as possible.
That second idea seems like the opposite of consumption smoothing?? Maybe it’s worthwhile because I would become rich enough that the extra volatility is worth it to me? But what’s the point of being rich for just a short time before I die, or of being rich for just a short time before TAI-induced utopia makes everyone fantastically rich anyways?
The way to resolve the apparent contradiction is to return to the logic of consumption smoothing.
Let’s say you believe that TAI is coming. You expect that you and everyone you know will be dead or fabulously rich in the medium-term. You think that this has implications for markets. You like consumption streams to be smooth.
You (hopefully) start today with savings.
The logic of consumption smoothing says that you want to save less/dissave more relative to what would have been the case if you did not believe TAI is coming. In the first instance this means spending down your assets. But no borrowing! There’s no point in (expensive) borrowing if you can still spend down your assets. It also means that you still have assets! Where should you put those assets? Well, your beliefs imply that real interest rates will be higher than the market expects, so you don’t want to hold inflation-protected treasuries.
The point about risk is neither here nor there. If this is a concern you can decrease the degree of underweighting (or the size of your short position). The point is that at the margin you disprefer inflation-protected treasuries to what would have been the case if you did not have your TAI beliefs.
At some future point, you have spent down your savings.
But, no worries, TAI is coming! You commit to take out loans. You don’t have any more savings, so there is no point in investing, so there is no point bothering to underweight inflation-protected treasuries. (Unless leverage, but logic would be similar.)
I am confused by some of the logic in this post.
If TAI arrives soon, either I’ll be dead (so I should borrow and spend all my money now—this part makes sense to me) or I’ll be fantastically rich in a post-TAI utopia, so you say I should borrow and spend all my money now, to smooth out my consumption. Apparently this is the consensus of all mainstream economics and also the results of common-sense.
But you also say: if TAI arrives soon, that means real interest rates should be higher, so I should engage in a risky investment strategy of shorting the bond market. This strategy will make me poorer in the short-term, but will pay off by making me richer later, once markets realize the consequences of TAI.
That second idea seems like the opposite of consumption smoothing?? Maybe it’s worthwhile because I would become rich enough that the extra volatility is worth it to me? But what’s the point of being rich for just a short time before I die, or of being rich for just a short time before TAI-induced utopia makes everyone fantastically rich anyways?
I also do not find it plausible that a vision of impending TAI-induced utopia, an acceleration of technological progress and human flourishing even more significant than the industrial revolution, would… send stock prices plummeting? I am not an economist, but if someone told me that humanity’s future was totally assured, I feel like my discount rate would go down rather than up, and I would care about the future much more rather than less, and I would consequently want to invest as much as possible now, so that I could have more influence over the long and wondrous future ahead of me. You could make an analogy here between stable utopia and assured personal longevity (perhaps to hundreds of years of age), similar to the one you make between human extinction and personal death. The promise of a stable utopian future (or personal longevity) seems like it should lead to the opposite of the short-term behavior seen in the near-term-extinction (or personal death) scenario. But your post says that these two futures end up in the same place as far as the discount rate is concerned?
To quote a Peter Thiel joke that didn’t make it into my post about investing under anthropic shadow, “Certainly if we could just live to all be 100, that would be quite a transformation. There is good news and bad news. The bad news is: If you don’t believe in the good news, you’re not saving enough for retirement.”
Personally, I’d expect some actors to be really greedy. In the upside scenarios, they’d want to be 100x fantastically rich, not just 2x.
There haven’t been many historic examples where the wealthy / governments didn’t try to take advantage of big opportunities just because things were so good. Instead, when new resources opened up, some would rush to take as big a share as possible.
The way to resolve the apparent contradiction is to return to the logic of consumption smoothing.
Let’s say you believe that TAI is coming. You expect that you and everyone you know will be dead or fabulously rich in the medium-term. You think that this has implications for markets. You like consumption streams to be smooth.
You (hopefully) start today with savings.
The logic of consumption smoothing says that you want to save less/dissave more relative to what would have been the case if you did not believe TAI is coming. In the first instance this means spending down your assets. But no borrowing! There’s no point in (expensive) borrowing if you can still spend down your assets. It also means that you still have assets! Where should you put those assets? Well, your beliefs imply that real interest rates will be higher than the market expects, so you don’t want to hold inflation-protected treasuries.
The point about risk is neither here nor there. If this is a concern you can decrease the degree of underweighting (or the size of your short position). The point is that at the margin you disprefer inflation-protected treasuries to what would have been the case if you did not have your TAI beliefs.
At some future point, you have spent down your savings.
But, no worries, TAI is coming! You commit to take out loans. You don’t have any more savings, so there is no point in investing, so there is no point bothering to underweight inflation-protected treasuries. (Unless leverage, but logic would be similar.)