Regarding the first point about the extent to which we should update timelines based on the fact the bond market is not pricing in short timelines for TAI; my prior is that in general the fixed income (bonds) markets are fairly efficient and are more sophisticated/efficient than equity markets. This leads me to initially believe we likely should update based on this/consider it more strongly than bullish equity sentiment towards some AI themes.
However on the flipside I think the size of this market does mean it can retain inefficiencies around subtle themes for longer. I think of this as a form of Expecting Short Inferential Distances—there are a lot of inferential reasoning steps around TAI, scaling, take-off etc.. which make it slower for conviction to spread when compared to something like demographic shifts which have a much more straightforward causality. This is relevant because to move government bond markets requires people to take this bet with a huge amount of assets as this is a very capital-intensive trade with a lot of exposure to other uncorrelated risks/conflating variable (climate, demographics, geopolitics, populism etc..). The reason I think it may be unlikely that many people are making this bet is related to this:
An analysis of the most capital-efficient way to bet on short AI timelines and the possible expected returns (“the greatest trade of all time”).
I suspect there are far more highly levered bets that market participants with a high-conviction belief in short TAI timelines could take, potentially diluting the impact on lower beta instruments (like bonds). For example I expect even being long fairly broad equity markets might outperform this bet and much more targeted bets (especially if they could be hedged against other risks, bringing them closer to a ‘pure’ TAI bet) could be expected to return many multiples of the short-US30Y trade.
If the amount of money being managed by those with high conviction TAI views is ‘small’ (<<$100bn) then I expect there are many more favourable inefficiencies/price dislocations for them to exploit and not a sufficient mass of ‘smart TAI’ money to spill over into long-dated bonds.
Regarding the first point about the extent to which we should update timelines based on the fact the bond market is not pricing in short timelines for TAI; my prior is that in general the fixed income (bonds) markets are fairly efficient and are more sophisticated/efficient than equity markets. This leads me to initially believe we likely should update based on this/consider it more strongly than bullish equity sentiment towards some AI themes.
However on the flipside I think the size of this market does mean it can retain inefficiencies around subtle themes for longer. I think of this as a form of Expecting Short Inferential Distances—there are a lot of inferential reasoning steps around TAI, scaling, take-off etc.. which make it slower for conviction to spread when compared to something like demographic shifts which have a much more straightforward causality. This is relevant because to move government bond markets requires people to take this bet with a huge amount of assets as this is a very capital-intensive trade with a lot of exposure to other uncorrelated risks/conflating variable (climate, demographics, geopolitics, populism etc..). The reason I think it may be unlikely that many people are making this bet is related to this:
I suspect there are far more highly levered bets that market participants with a high-conviction belief in short TAI timelines could take, potentially diluting the impact on lower beta instruments (like bonds). For example I expect even being long fairly broad equity markets might outperform this bet and much more targeted bets (especially if they could be hedged against other risks, bringing them closer to a ‘pure’ TAI bet) could be expected to return many multiples of the short-US30Y trade.
If the amount of money being managed by those with high conviction TAI views is ‘small’ (<<$100bn) then I expect there are many more favourable inefficiencies/price dislocations for them to exploit and not a sufficient mass of ‘smart TAI’ money to spill over into long-dated bonds.