My biggest issue is that I don’t think returns to increased donations are flat, with the highest returns coming from entering into neglected areas where EA funds are already, or would be after investment, large relative to the existing funds, and I see returns declining closer to logarithmically than flat with increased EA resources;
This is not correctly modeled in your guesstimate, despite it doing a Monte Carlo draw over different rates of diminishing returns, because it ignores the correlations between diminishing returns and impact of existing spending: if EA makes truly outsized altruistic returns, it will be by doing things that are much better than typical, and so the accounts on which more neglected activities are the best thing to do now have higher current philanthropic returns as well as faster diminishing returns
Likewise, high investment returns are associated with moving along the diminishing returns curve in the future, as diminishing marginal returns are not exogenous when EA is a large share of activity in an area; by drawing investment returns and diminishing returns from separate variables, your results wind up dominated by cases where explosive growth in EA funds is accompanied by flat marginal returns that are extremely implausible because of the missing correlations
These reflect a general problem with Guesstimate models, it’s easy to create independent draws of variables that are not independent of each other and get answers exponentially off as one considers longer time frames or more variables
Regarding prognostications of future equity returns, I think it’s worthwhile to follow other fundamental projections in breaking down equity returns into components such as P/E, economic growth, growth in corporate profits as a share of the economy etc; in particular, this reveals that some past sources of equity returns can’t be extrapolated indefinitely, e.g. 100%+ corporate profit shares are not possible and huge profit shares would likely be accompanied by higher corporate or investment taxes, while early stock returns involved low rates of stock ownership and high transaction costs
When there are diminishing returns to spending in a given year, being forced to spend assets too quickly in response to a surprise does lower efficiency of spending, so regulatory changes requiring increased disbursement rates can be harmful
Mission hedging and tying funding to epistemic claims can be very important for altruistic investing; e.g. if scenarios where AI risk is higher are correlated with excess returns for AI firms, then an allocation to address that risk might overweight AI securities
My biggest issue is that I don’t think returns to increased donations are flat, with the highest returns coming from entering into neglected areas where EA funds are already, or would be after investment, large relative to the existing funds, and I see returns declining closer to logarithmically than flat with increased EA resources;
This is not correctly modeled in your guesstimate, despite it doing a Monte Carlo draw over different rates of diminishing returns, because it ignores the correlations between diminishing returns and impact of existing spending: if EA makes truly outsized altruistic returns, it will be by doing things that are much better than typical, and so the accounts on which more neglected activities are the best thing to do now have higher current philanthropic returns as well as faster diminishing returns
Likewise, high investment returns are associated with moving along the diminishing returns curve in the future, as diminishing marginal returns are not exogenous when EA is a large share of activity in an area; by drawing investment returns and diminishing returns from separate variables, your results wind up dominated by cases where explosive growth in EA funds is accompanied by flat marginal returns that are extremely implausible because of the missing correlations
These reflect a general problem with Guesstimate models, it’s easy to create independent draws of variables that are not independent of each other and get answers exponentially off as one considers longer time frames or more variables
Regarding prognostications of future equity returns, I think it’s worthwhile to follow other fundamental projections in breaking down equity returns into components such as P/E, economic growth, growth in corporate profits as a share of the economy etc; in particular, this reveals that some past sources of equity returns can’t be extrapolated indefinitely, e.g. 100%+ corporate profit shares are not possible and huge profit shares would likely be accompanied by higher corporate or investment taxes, while early stock returns involved low rates of stock ownership and high transaction costs
When there are diminishing returns to spending in a given year, being forced to spend assets too quickly in response to a surprise does lower efficiency of spending, so regulatory changes requiring increased disbursement rates can be harmful
Mission hedging and tying funding to epistemic claims can be very important for altruistic investing; e.g. if scenarios where AI risk is higher are correlated with excess returns for AI firms, then an allocation to address that risk might overweight AI securities