The attributed impact idea is interesting. I think in its current form it has the following problems:
Speculators can’t perfectly predict the ex ante impact as it will be estimated by experts at some point in time in the future. If a speculator thinks there’s some chance that the estimated ex ante impact will end up being astronomically positive, we get another version of the “distribution mismatch” problem. (I.e. from the perspective of the speculator, the estimated ex ante impact ending up being astronomically negative is not a worse outcome than it ending up being zero).
Even if most speculators are 100% sure that the ex ante impact is astronomically negative, if some think it may be positive then the price of the certificates can still be high (similarly to the more general problem that MakoYass mentioned).
Suppose a project clearly has a positive ex ante impact, but it is failing mundanely, and will end up with zero ex post impact if nothing dramatic happens. The people leading the project, who own some of the project’s certificates, may then be incentivized to carry out some newly planned intervention that is risky and net-negative, but has a chance of ending up being astronomically beneficial, in order for the project to have a positive expected future ex post impact (due to the distribution mismatch problem).
Perhaps problems 1-2 can be alleviated by something like the human-judgement filter that MakoYass mentioned.
For alleviating problem 3, maybe instead of defining attributed impact based on the state of the world in only two points in time, it should depend on all the points in time in between. I.e. defining it as the minimum subjective expected change [...] as the experts would estimate it in time t, for any t between the two points in time in the original definition.
Though the problematic incentive above may remain to some extent because: if a newly planned, risky, net-negative intervention will be carried out and some speculators will overestimate its value (for every t), that interventions can cause the certificate price to go up. Maybe this problem can be alleviated by using some stronger version of the “human-judgement filter” mechanism, maybe one that can cancel already-minted certificates at any point in time.
Yeah, that feels like a continuous kind of failure. Like, you can reduce the risk from 50% to 1% and then to 0.1% but you can’t get it down to 0%. I want to throw all the other solutions at the problem as well, apart from Attributed Impact, and hope that the aggregate of all of them will reduce the risk sufficiently that impact markets will be robustly better than the status quo. This case depends a lot on the attitudes, sophistication, and transparency of the retro funders, so it’ll be useful for the retro funders to be smart and value-aligned and to have a clear public image.
In a way this is similar to the above. Instead of some number of speculators having some credence that the outcome might be extremely good, we get the same outcome if a small number of speculators have a sufficiently high credence that the outcome will be good.
This one is different. I think here the problem is that the issuers lied and had an incentive to lie. They could’ve also gone the Nikola route of promising something awesome, then quickly giving up on it but lying about it and keeping the money. What the issuers did is just something other than the actions that the impact certificate are about; the problem is just that the issuers are keeping that a secret. I don’t want to (or can) change Attributed Impact to prevent lying, though it is of course a big deal…
I feel like the first two don’t call for changes to Attributed Impact but for a particular simplicity and transparency on the part of the retro funders, right? Maybe they need to monitor the market, and if a project they consider bad attracts too much attention from speculators, they need to release a statement that they’re not excited about that type of project. Limiting particular retro funders to particular types of projects could also aid that transparency – e.g., a retro funder only for scientific papers or one only for vaccinating wild animals. They can then probably communicate what they are and aren’t interested in without having to write reams upon reams.
The third one is something where I see the responsibility with auditors. In the short term speculators should probably only give their money to issuers who they somehow trust, e.g., because of their reputation or because they’re friends. In the long run, there should be auditors who check databases of all audited impact certificates to confirm that the impact is not being double-issued and who have some standards for how clearly and convincingly an impact certificate is justified. Later in the process they should also confirm any claims of the issuer that the impact has happened.
I’ll make some changes to my document to reflect these learnings, but the auditor part still feels completely raw in my mind. There’s just the idea of a directory that they maintain and of their different types of certification, but I’d like to figure out how much they’ll likely need to charge and how to prevent them from colluding with bad issuers.
The “human judgment filter,” which I’ve been calling “curation” (unless there are differences?) is definitely going to be an important mechanism, but I think it’ll fall short in cases where unaligned people are good at marketing and can push their Safemoon-type charity even if no reputable impact certificate exchange will list it.
Yeah, that feels like a continuous kind of failure. Like, you can reduce the risk from 50% to 1% and then to 0.1% but you can’t get it down to 0%.
Suppose we want the certificates of a risky, net-negative project to have a price that is lower by 10x than the price they would have on a naive impact market. Very roughly, it needs to be the case that the speculators have a credence of less than 10% that at least one relevant retro funder will evaluate the ex-ante impact to be high (positive). Due to the epistemic limitations of the speculators, that condition may not fulfill for net-negative projects even when the initial retro funders are very careful and transparent and no one else is allowed to become a retro funder. If the set of future retro funders is large and unknown and anyone can become a retro funder, the condition may rarely fulfill for net-negative projects.
Thanks! I’ve noted and upvoted your comment. I’ll create a document for all the things we need to watch out for when it comes to attacks by issuers, investors, and funders, so we can monitor them in our experiments.
In this case I think a partial remedy is for retro funders to take the sort of active role in the steering of the market that I’ve been arguing for where they notice when projects get a lot of investments that they’re not excited about and clarify their position.
But that does not solve the retro funder alignment that is part of your argument.
I’ll create a document for all the things we need to watch out for when it comes to attacks by issuers, investors, and funders, so we can monitor them in our experiments.
(I don’t think that potential “attacks” by issuers/investors/funders are the problem here.)
But that does not solve the retro funder alignment that is part of your argument.
I don’t think it’s an alignment issue here. The price of a certificate tracks the maximum amount of money that any future retro funder will be willing to pay for it. So even if 100% of the current retro funders say “we think project X has negative ex-ante impact”, speculators may still think it’s plausible that at some point there will be 100x retro funders in the market, and then at least one relevant retro funder will judge the ex-ante impact to be positive.
If you run a time-bounded experiment in which the set of retro funders is small and fixed, not observing this problem does not mean that it also won’t show up in a decentralized impact market in which the set of retro funders in unbounded.
The price of a certificate tracks the maximum amount of money that any future retro funder will be willing to pay for it
I get that. I call that retro funder alignment (actually Dony came up with the term :-)) in analogy with AI alignment, where it’s also not enough to just align one AI or all current AIs or some other subset of all AIs that’ll ever come into existence.
Our next experiment is actually not time-bounded but we’re the only buyers (retro funders), so the risk is masked again.
I wonder, though, when I play this through in my mind, I can’t quite see almost any investor investing anything but tiny amounts into a project on the promise that there might be at some point a retro funder for it. It’s a bit like name squatting of domains or Bitclout user names. People buy ten thousands of them in the hopes of reselling a few of them at a profit, so they buy them only when they are still very very cheap (or particularly promising). One place sold most of them at $50–100, so they must’ve bought them even cheaper. One can’t do a lot of harm (at the margin) with that amount of money.
Conversely, if an investor wants to bet a lot of money on a potential future unaligned retro funder, they need to be optimistic that the retro funding they’ll receive will be so massive that it makes up for all the time they had to stay invested. Maybe they’ll have to stay invested 5 years or 20 years, and even then only have a tiny, tiny chance that the unaligned retro funder, even conditional on showing up, will want to buy the impact of that particular project. Counterfactually they could’ve made a riskless 10–30% APY all the while. So it seems like a a rare thing to happen.
But I could see Safemoon type of things happening in more than extremely unlikely cases. Investors invest not because of any longterm promises of unaligned retro funders decades later but because they expect that other investors will invest because the other investors also expect other investors to invest, and so on. They’ll all try to buy in before most others buy in and then sell quickly before all others sell, so they’ll just create a lot of volatility and redistribute assets rather randomly. That seems really pointless, and some of the investors may suffer significant losses, but it doesn’t seem catastrophic for the world. People will probably also learn from it for a year or so, so it can only happen about once a year.
Or can you think of places where this happens in established markets? Penny stocks, yield farming platforms? In both cases the investors either seem small, unsophisticated, and having little effect on the world, or sophisticated and very quickly in and out, also with little effect on the world.
I think the concern here is not about “unaligned retro funders” who consciously decide to do harmful things. It doesn’t take malicious intent to misjudge whether a certain effort is ex-ante beneficial or harmful in expectation.
I wonder, though, when I play this through in my mind, I can’t quite see almost any investor investing anything but tiny amounts into a project on the promise that there might be at some point a retro funder for it.
Suppose investors were able to buy impact certificates of organizations like OpenAI, Anthropic, Conjecture, EcoHealth Alliance etc. These are plausibly very high-impact organizations. Out of 100 aligned retro funders, some may judge some of these organizations to be ex-ante net-positive. And it’s plausible that some of these organizations will end up being extremely beneficial. So it’s plausible that some retro funders (and thus also investors) would pay a lot for the certificates of such orgs.
Okay, but if you’re not actually talking about “malicious” retro funders (a category in which I would include actions that are not typically considered malicious today, such as defecting against minority or nonhuman interests), the difference between a world with and without impact markets becomes very subtle and ambiguous in my mind.
Like, I would guess that Anthropic and Conjecture are probably good, though I know little about them. I would guess that early OpenAI was very bad and current OpenAI is probably bad. But I feel great uncertainty over all of that. And I’m not even taking all considerations into account that I’m aware of because we still don’t have a model of how they interact. I don’t see a way in which impact markets could systematically prevent (as opposed to somewhat reduce) investment mistakes that today not even funders as sophisticated as Open Phil can predict.
Currently, all these groups receive a lot of funding from the altruistic funders directly. In a world with impact markets, the money would first come from investors. Not much would change at all. In fact I see most benefits here in the incentive alignment with employees.
In my models, each investor makes fewer grants than funders currently do because they specialize more and are more picky. My math doesn’t work out, doesn’t show that they can plausibly make a profit, if they’re similarly or less picky than current funders.
So I could see a drop in sophistication as relatively unskilled investors enter the market. But then they’d have to improve or get filtered out within a few years as they lose their capital to more sophisticated investors.
Relatively speaking, I think I’m more concerned about the problem you pointed out where retro funders get scammed by issuers who use p-hacking-inspired tricks to make their certificates seem valuable when they are not. Sophisticated retro funders can probably address that about as well as top journals can, which is already not perfect, but more naive retro funders and investors may fall for it.
One new thing that we’re doing to address this is to encourage people to write exposés of malicious certificates and sell their impact. Eventually of course I also want people to be able to short issuer stock.
Okay, but if you’re not actually talking about “malicious” retro funders (a category in which I would include actions that are not typically considered malicious today, such as defecting against minority or nonhuman interests), the difference between a world with and without impact markets becomes very subtle and ambiguous in my mind.
I think it depends on the extent to which the (future) retro funders take into account the ex-ante impact, and evaluate it without an upward bias even if they already know that the project ended up being extremely beneficial.
This case depends a lot on the attitudes, sophistication, and transparency of the retro funders, so it’ll be useful for the retro funders to be smart and value-aligned and to have a clear public image.
Agreed. Is there a way to control the set of retro funders? (If anyone who wants to act as a retro funder can do so, the set of retro funders may end up including well-meaning-but-not-that-careful actors).
In a way this is similar to the above.
The cause is different though, in (1) the failure is caused by a version of the distribution mismatch problem, in (2) the failure is analogous to the unilateralist’s curse.
I think here the problem is that the issuers lied and had an incentive to lie.
In the failure mode I had in mind the issuer does not lie or keeps something a secret at any point. Only after realizing that the project is failing (and that the ex post impact will be zero if nothing dramatic happens), a new intervention is planned and carried out. That intervention is risky and net-negative, but has a chance to be extremely beneficial, and thus (due to the distribution mismatch problem) makes the certificate price go up.
What the issuers did is just something other than the actions that the impact certificate are about
In that case, are the retro funders supposed to not buy the certificates? (Even if both the ex ante and ex post impacts are very beneficial?) [EDIT: for example, let’s say that the certificates are for creating some AI safety org, and that org carries out a newly planned, risky AI safety intervention.]
The “human judgment filter,” which I’ve been calling “curation” (unless there are differences?) is definitely going to be an important mechanism, but I think it’ll fall short in cases where unaligned people are good at marketing and can push their Safemoon-type charity even if no reputable impact certificate exchange will list it.
(I’m not familiar with the details of potential implementations, but...) if profit-motivated speculators can make a profit by trading certificates that are not listed on a particular portal (and everyone can create a competing portal) then most profit-motivated speculators may end up using a competing portal that lists all the tradable certificates.
Agreed. Is there a way to control the set of retro funders? (If anyone who wants to act as a retro funder can do so, the set of retro funders may end up including well-meaning-but-not-that-careful actors).
That’s a big worry of mine and the reason that I came up with the pot. So long as there are enough good retro funders, things are still sort of okayish as most issuers and speculators will be more interested in catering to the good retro funders will all the capital. But if the bad retro funders become too many or have too much capital, it becomes tricky. The pot is set up such that the capital it has scales in proportion to the activity on the market, so that it’ll always have roughly the same relative influence on the market. Sadly, it’s not huge, but it’s the best I’ve come up with so far.
The other solution is targeted marketing – making it so that the nice and thoughtful retro funders become interested in the market and not the reckless ones.
In the failure mode I had in mind the issuer does not lie or keeps something a secret at any point. Only after realizing that the project is failing (and that the ex post impact will be zero if nothing dramatic happens), a new intervention is planned and carried out. That intervention is risky and net-negative, but has a chance to be extremely beneficial, and thus (due to the distribution mismatch problem) makes the certificate price go up.
Impact certificates are required to be very specific. (Something we want to socially enforce, e.g., by having auditors refuse vague ones and retro funders avoid them.) So say an issuer issues and impact certificate for “I will distribute 1000 copies of the attached Vegan Outreach leaflet at Barbican Station in London between April 1 and August 1, 2022. [Insert many more details.]” They go on to do exactly that and poll a few people about their behavior change. But in July, as they hand out the last few leaflets, they start to realize that leafletting is fairly ineffective. They are disappointed, and so blow up a slaughterhouse instead and are transparent about it. The retro funder will read about that and be like, sure, you blew up a slaughterhouse, but that’s not what this impact certificate is about. And if they issue a new impact certificate for the action, they have to consider all the risks of killing humans, killing nonhumans, going to prison, hurting the reputation of the movement, etc., which will make everyone hesitant to invest because of the low ex ante expected impact.
Just saw your edit: One impact certificate for a whole org is much too vague imo. Impact certificates should be really well defined, and the actions and strategy of an org can change, as in your example. Orgs should rather sell all their activities as individual impact certificates. I envision them like the products that a company sells. E.g., if Nokia produces toilet paper, then the rolls or batches of toilet paper are the impact certificates and Nokia is the org that sells them.
Orgs can then have their own classic securities whose price they can control through buy-backs from the profits of impact certificate sales. Or I also envision perpetual futures that track an index of the market cap of all impact certificates issued by the same org.
Impact certificates as small as rolls of toilet paper are probably a bit unwieldy, but AMF, for example, has individual net distributions that are planned thoroughly in advance, so that would be suitable. I’ll rather want to err on the side of requiring more verifiability and clarity than on the side of allowing everyone to create impact certificates for anything they do because with vague interventions it’ll over time become more and more difficult to disentangle whether impact has been (or should be considered to have been) double-sold.
(I’m not familiar with the details of potential implementations, but...) if profit-motivated speculators can make a profit by trading certificates that are not listed on a particular portal (and everyone can create a competing portal) then most profit-motivated speculators may end up using a competing portal that lists all the tradable certificates.
Yep, also a big worry of mine. I had hoped to establish the pot better by making it mandatory to put a little fee into it and participate in the bet. But that would’ve just increased the incentives for people who don’t like the pot jury to build their own more laissez-faire platform without pot.
My fallback plan if I decide that impact markets are too dangerous is to stay in touch with all the people working on similar projects to warn them of the dangers too.
The attributed impact idea is interesting. I think in its current form it has the following problems:
Speculators can’t perfectly predict the ex ante impact as it will be estimated by experts at some point in time in the future. If a speculator thinks there’s some chance that the estimated ex ante impact will end up being astronomically positive, we get another version of the “distribution mismatch” problem. (I.e. from the perspective of the speculator, the estimated ex ante impact ending up being astronomically negative is not a worse outcome than it ending up being zero).
Even if most speculators are 100% sure that the ex ante impact is astronomically negative, if some think it may be positive then the price of the certificates can still be high (similarly to the more general problem that MakoYass mentioned).
Suppose a project clearly has a positive ex ante impact, but it is failing mundanely, and will end up with zero ex post impact if nothing dramatic happens. The people leading the project, who own some of the project’s certificates, may then be incentivized to carry out some newly planned intervention that is risky and net-negative, but has a chance of ending up being astronomically beneficial, in order for the project to have a positive expected future ex post impact (due to the distribution mismatch problem).
Perhaps problems 1-2 can be alleviated by something like the human-judgement filter that MakoYass mentioned.
For alleviating problem 3, maybe instead of defining attributed impact based on the state of the world in only two points in time, it should depend on all the points in time in between. I.e. defining it as the minimum subjective expected change [...] as the experts would estimate it in time t, for any t between the two points in time in the original definition.
Though the problematic incentive above may remain to some extent because: if a newly planned, risky, net-negative intervention will be carried out and some speculators will overestimate its value (for every t), that interventions can cause the certificate price to go up. Maybe this problem can be alleviated by using some stronger version of the “human-judgement filter” mechanism, maybe one that can cancel already-minted certificates at any point in time.
Whee, thanks!
Yeah, that feels like a continuous kind of failure. Like, you can reduce the risk from 50% to 1% and then to 0.1% but you can’t get it down to 0%. I want to throw all the other solutions at the problem as well, apart from Attributed Impact, and hope that the aggregate of all of them will reduce the risk sufficiently that impact markets will be robustly better than the status quo. This case depends a lot on the attitudes, sophistication, and transparency of the retro funders, so it’ll be useful for the retro funders to be smart and value-aligned and to have a clear public image.
In a way this is similar to the above. Instead of some number of speculators having some credence that the outcome might be extremely good, we get the same outcome if a small number of speculators have a sufficiently high credence that the outcome will be good.
This one is different. I think here the problem is that the issuers lied and had an incentive to lie. They could’ve also gone the Nikola route of promising something awesome, then quickly giving up on it but lying about it and keeping the money. What the issuers did is just something other than the actions that the impact certificate are about; the problem is just that the issuers are keeping that a secret. I don’t want to (or can) change Attributed Impact to prevent lying, though it is of course a big deal…
I feel like the first two don’t call for changes to Attributed Impact but for a particular simplicity and transparency on the part of the retro funders, right? Maybe they need to monitor the market, and if a project they consider bad attracts too much attention from speculators, they need to release a statement that they’re not excited about that type of project. Limiting particular retro funders to particular types of projects could also aid that transparency – e.g., a retro funder only for scientific papers or one only for vaccinating wild animals. They can then probably communicate what they are and aren’t interested in without having to write reams upon reams.
The third one is something where I see the responsibility with auditors. In the short term speculators should probably only give their money to issuers who they somehow trust, e.g., because of their reputation or because they’re friends. In the long run, there should be auditors who check databases of all audited impact certificates to confirm that the impact is not being double-issued and who have some standards for how clearly and convincingly an impact certificate is justified. Later in the process they should also confirm any claims of the issuer that the impact has happened.
I’ll make some changes to my document to reflect these learnings, but the auditor part still feels completely raw in my mind. There’s just the idea of a directory that they maintain and of their different types of certification, but I’d like to figure out how much they’ll likely need to charge and how to prevent them from colluding with bad issuers.
The “human judgment filter,” which I’ve been calling “curation” (unless there are differences?) is definitely going to be an important mechanism, but I think it’ll fall short in cases where unaligned people are good at marketing and can push their Safemoon-type charity even if no reputable impact certificate exchange will list it.
Suppose we want the certificates of a risky, net-negative project to have a price that is lower by 10x than the price they would have on a naive impact market. Very roughly, it needs to be the case that the speculators have a credence of less than 10% that at least one relevant retro funder will evaluate the ex-ante impact to be high (positive). Due to the epistemic limitations of the speculators, that condition may not fulfill for net-negative projects even when the initial retro funders are very careful and transparent and no one else is allowed to become a retro funder. If the set of future retro funders is large and unknown and anyone can become a retro funder, the condition may rarely fulfill for net-negative projects.
Thanks! I’ve noted and upvoted your comment. I’ll create a document for all the things we need to watch out for when it comes to attacks by issuers, investors, and funders, so we can monitor them in our experiments.
In this case I think a partial remedy is for retro funders to take the sort of active role in the steering of the market that I’ve been arguing for where they notice when projects get a lot of investments that they’re not excited about and clarify their position.
But that does not solve the retro funder alignment that is part of your argument.
(I don’t think that potential “attacks” by issuers/investors/funders are the problem here.)
I don’t think it’s an alignment issue here. The price of a certificate tracks the maximum amount of money that any future retro funder will be willing to pay for it. So even if 100% of the current retro funders say “we think project X has negative ex-ante impact”, speculators may still think it’s plausible that at some point there will be 100x retro funders in the market, and then at least one relevant retro funder will judge the ex-ante impact to be positive.
If you run a time-bounded experiment in which the set of retro funders is small and fixed, not observing this problem does not mean that it also won’t show up in a decentralized impact market in which the set of retro funders in unbounded.
I get that. I call that retro funder alignment (actually Dony came up with the term :-)) in analogy with AI alignment, where it’s also not enough to just align one AI or all current AIs or some other subset of all AIs that’ll ever come into existence.
Our next experiment is actually not time-bounded but we’re the only buyers (retro funders), so the risk is masked again.
I wonder, though, when I play this through in my mind, I can’t quite see almost any investor investing anything but tiny amounts into a project on the promise that there might be at some point a retro funder for it. It’s a bit like name squatting of domains or Bitclout user names. People buy ten thousands of them in the hopes of reselling a few of them at a profit, so they buy them only when they are still very very cheap (or particularly promising). One place sold most of them at $50–100, so they must’ve bought them even cheaper. One can’t do a lot of harm (at the margin) with that amount of money.
Conversely, if an investor wants to bet a lot of money on a potential future unaligned retro funder, they need to be optimistic that the retro funding they’ll receive will be so massive that it makes up for all the time they had to stay invested. Maybe they’ll have to stay invested 5 years or 20 years, and even then only have a tiny, tiny chance that the unaligned retro funder, even conditional on showing up, will want to buy the impact of that particular project. Counterfactually they could’ve made a riskless 10–30% APY all the while. So it seems like a a rare thing to happen.
But I could see Safemoon type of things happening in more than extremely unlikely cases. Investors invest not because of any longterm promises of unaligned retro funders decades later but because they expect that other investors will invest because the other investors also expect other investors to invest, and so on. They’ll all try to buy in before most others buy in and then sell quickly before all others sell, so they’ll just create a lot of volatility and redistribute assets rather randomly. That seems really pointless, and some of the investors may suffer significant losses, but it doesn’t seem catastrophic for the world. People will probably also learn from it for a year or so, so it can only happen about once a year.
Or can you think of places where this happens in established markets? Penny stocks, yield farming platforms? In both cases the investors either seem small, unsophisticated, and having little effect on the world, or sophisticated and very quickly in and out, also with little effect on the world.
I think the concern here is not about “unaligned retro funders” who consciously decide to do harmful things. It doesn’t take malicious intent to misjudge whether a certain effort is ex-ante beneficial or harmful in expectation.
Suppose investors were able to buy impact certificates of organizations like OpenAI, Anthropic, Conjecture, EcoHealth Alliance etc. These are plausibly very high-impact organizations. Out of 100 aligned retro funders, some may judge some of these organizations to be ex-ante net-positive. And it’s plausible that some of these organizations will end up being extremely beneficial. So it’s plausible that some retro funders (and thus also investors) would pay a lot for the certificates of such orgs.
Okay, but if you’re not actually talking about “malicious” retro funders (a category in which I would include actions that are not typically considered malicious today, such as defecting against minority or nonhuman interests), the difference between a world with and without impact markets becomes very subtle and ambiguous in my mind.
Like, I would guess that Anthropic and Conjecture are probably good, though I know little about them. I would guess that early OpenAI was very bad and current OpenAI is probably bad. But I feel great uncertainty over all of that. And I’m not even taking all considerations into account that I’m aware of because we still don’t have a model of how they interact. I don’t see a way in which impact markets could systematically prevent (as opposed to somewhat reduce) investment mistakes that today not even funders as sophisticated as Open Phil can predict.
Currently, all these groups receive a lot of funding from the altruistic funders directly. In a world with impact markets, the money would first come from investors. Not much would change at all. In fact I see most benefits here in the incentive alignment with employees.
In my models, each investor makes fewer grants than funders currently do because they specialize more and are more picky. My math doesn’t work out, doesn’t show that they can plausibly make a profit, if they’re similarly or less picky than current funders.
So I could see a drop in sophistication as relatively unskilled investors enter the market. But then they’d have to improve or get filtered out within a few years as they lose their capital to more sophisticated investors.
Relatively speaking, I think I’m more concerned about the problem you pointed out where retro funders get scammed by issuers who use p-hacking-inspired tricks to make their certificates seem valuable when they are not. Sophisticated retro funders can probably address that about as well as top journals can, which is already not perfect, but more naive retro funders and investors may fall for it.
One new thing that we’re doing to address this is to encourage people to write exposés of malicious certificates and sell their impact. Eventually of course I also want people to be able to short issuer stock.
I think it depends on the extent to which the (future) retro funders take into account the ex-ante impact, and evaluate it without an upward bias even if they already know that the project ended up being extremely beneficial.
Yes, that’ll be important!
Agreed. Is there a way to control the set of retro funders? (If anyone who wants to act as a retro funder can do so, the set of retro funders may end up including well-meaning-but-not-that-careful actors).
The cause is different though, in (1) the failure is caused by a version of the distribution mismatch problem, in (2) the failure is analogous to the unilateralist’s curse.
In the failure mode I had in mind the issuer does not lie or keeps something a secret at any point. Only after realizing that the project is failing (and that the ex post impact will be zero if nothing dramatic happens), a new intervention is planned and carried out. That intervention is risky and net-negative, but has a chance to be extremely beneficial, and thus (due to the distribution mismatch problem) makes the certificate price go up.
In that case, are the retro funders supposed to not buy the certificates? (Even if both the ex ante and ex post impacts are very beneficial?) [EDIT: for example, let’s say that the certificates are for creating some AI safety org, and that org carries out a newly planned, risky AI safety intervention.]
(I’m not familiar with the details of potential implementations, but...) if profit-motivated speculators can make a profit by trading certificates that are not listed on a particular portal (and everyone can create a competing portal) then most profit-motivated speculators may end up using a competing portal that lists all the tradable certificates.
That’s a big worry of mine and the reason that I came up with the pot. So long as there are enough good retro funders, things are still sort of okayish as most issuers and speculators will be more interested in catering to the good retro funders will all the capital. But if the bad retro funders become too many or have too much capital, it becomes tricky. The pot is set up such that the capital it has scales in proportion to the activity on the market, so that it’ll always have roughly the same relative influence on the market. Sadly, it’s not huge, but it’s the best I’ve come up with so far.
The other solution is targeted marketing – making it so that the nice and thoughtful retro funders become interested in the market and not the reckless ones.
Impact certificates are required to be very specific. (Something we want to socially enforce, e.g., by having auditors refuse vague ones and retro funders avoid them.) So say an issuer issues and impact certificate for “I will distribute 1000 copies of the attached Vegan Outreach leaflet at Barbican Station in London between April 1 and August 1, 2022. [Insert many more details.]” They go on to do exactly that and poll a few people about their behavior change. But in July, as they hand out the last few leaflets, they start to realize that leafletting is fairly ineffective. They are disappointed, and so blow up a slaughterhouse instead and are transparent about it. The retro funder will read about that and be like, sure, you blew up a slaughterhouse, but that’s not what this impact certificate is about. And if they issue a new impact certificate for the action, they have to consider all the risks of killing humans, killing nonhumans, going to prison, hurting the reputation of the movement, etc., which will make everyone hesitant to invest because of the low ex ante expected impact.
Just saw your edit: One impact certificate for a whole org is much too vague imo. Impact certificates should be really well defined, and the actions and strategy of an org can change, as in your example. Orgs should rather sell all their activities as individual impact certificates. I envision them like the products that a company sells. E.g., if Nokia produces toilet paper, then the rolls or batches of toilet paper are the impact certificates and Nokia is the org that sells them.
Orgs can then have their own classic securities whose price they can control through buy-backs from the profits of impact certificate sales. Or I also envision perpetual futures that track an index of the market cap of all impact certificates issued by the same org.
Impact certificates as small as rolls of toilet paper are probably a bit unwieldy, but AMF, for example, has individual net distributions that are planned thoroughly in advance, so that would be suitable. I’ll rather want to err on the side of requiring more verifiability and clarity than on the side of allowing everyone to create impact certificates for anything they do because with vague interventions it’ll over time become more and more difficult to disentangle whether impact has been (or should be considered to have been) double-sold.
Yep, also a big worry of mine. I had hoped to establish the pot better by making it mandatory to put a little fee into it and participate in the bet. But that would’ve just increased the incentives for people who don’t like the pot jury to build their own more laissez-faire platform without pot.
My fallback plan if I decide that impact markets are too dangerous is to stay in touch with all the people working on similar projects to warn them of the dangers too.
I agree that requiring certificates to specify very specific interventions seems to alleviate (3).