There is/âwas a debate on LessWrong about how valid the efficient market hypothesis is. I think this is super interesting stuff, but I want to claim (with only some brief sketches of arguments here) that, regarding EA projects, the efficient market hypothesis is not at all valid (that is, I think itâs a poor way to model the situation that will lead you to make systematically wrong judgments). I think the main reasons for this are:
EA and the availability of lots of funding for it are relatively new â thereâs just not that much time for âmarket inefficienciesâ to have been filled.
The number of people in EA who are able to get funding for, and excited to start, new projects, is really small relative to the number of people doing this in the wider world.
EMH says that we shouldnât expect great opportunities to make money to just be âlying aroundâ ready for anyone to take. EMH says that, if you have an amazing startup idea, you have to answer âwhy didnât anyone do this before?â (ofc. this is a simplification, EMH isnât really one coherent view)
One might also think that there arenât great EA projects just âlying aroundâ ready for anyone to do. This would be an âEMH for EA.â But I think itâs not true.
I had to use Wikipedia to get a concise definition of EMH, rather than rely on my memory:
The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to âbeat the marketâ consistently on a risk-adjusted basis since market prices should only react to new information. [1]
This appears to me to apply exclusively to financial (securities) markets and I think we would be taking (too) far out of its original context in trying to use it to answer questions about whether great EA projects exist. In that sense, I completely agree with you that:
itâs a poor way to model the situation that will lead you to make systematically wrong judgments
In the real (non-financial) world, there are plenty of opportunities to make money, which is one reason entrepreneurs exist and are valuable. Are you aware of people using EMH to suggest we should not expect to find good philanthropic opportunities?
What Iâm talking about tends to be more of an informal thing which Iâm using âEMHâ as a handle for. Iâm talking about a mindset where, when you think of something that could be an impactful project, your next thought is âbut why hasnât EA done this already?â I think this is pretty common and itâs reasonably well-adapted to the larger world, but not very well-adapted to EA.
still seems like a fair question. I think the underlying problem youâre pointing to might be that people will then give up on their projects or ideas without having come up with a good answer. An âEMH-styleâ mindset seems to point to an analytical shortcut: if it hasnât already been done, it probably isnât worth doing. Which, I agree is wrong.
I still think EMH has no relevance in this context and that should be the main argument against applying it to EA projects.
There is/âwas a debate on LessWrong about how valid the efficient market hypothesis is. I think this is super interesting stuff, but I want to claim (with only some brief sketches of arguments here) that, regarding EA projects, the efficient market hypothesis is not at all valid (that is, I think itâs a poor way to model the situation that will lead you to make systematically wrong judgments). I think the main reasons for this are:
EA and the availability of lots of funding for it are relatively new â thereâs just not that much time for âmarket inefficienciesâ to have been filled.
The number of people in EA who are able to get funding for, and excited to start, new projects, is really small relative to the number of people doing this in the wider world.
I donât see the connection between EMH and EA projects. Can you elaborate on how those two intersect?
EMH says that we shouldnât expect great opportunities to make money to just be âlying aroundâ ready for anyone to take. EMH says that, if you have an amazing startup idea, you have to answer âwhy didnât anyone do this before?â (ofc. this is a simplification, EMH isnât really one coherent view)
One might also think that there arenât great EA projects just âlying aroundâ ready for anyone to do. This would be an âEMH for EA.â But I think itâs not true.
I had to use Wikipedia to get a concise definition of EMH, rather than rely on my memory:
This appears to me to apply exclusively to financial (securities) markets and I think we would be taking (too) far out of its original context in trying to use it to answer questions about whether great EA projects exist. In that sense, I completely agree with you that:
In the real (non-financial) world, there are plenty of opportunities to make money, which is one reason entrepreneurs exist and are valuable. Are you aware of people using EMH to suggest we should not expect to find good philanthropic opportunities?
https://ââen.wikipedia.org/ââwiki/ââEfficient-market_hypothesis
What Iâm talking about tends to be more of an informal thing which Iâm using âEMHâ as a handle for. Iâm talking about a mindset where, when you think of something that could be an impactful project, your next thought is âbut why hasnât EA done this already?â I think this is pretty common and itâs reasonably well-adapted to the larger world, but not very well-adapted to EA.
still seems like a fair question. I think the underlying problem youâre pointing to might be that people will then give up on their projects or ideas without having come up with a good answer. An âEMH-styleâ mindset seems to point to an analytical shortcut: if it hasnât already been done, it probably isnât worth doing. Which, I agree is wrong.
I still think EMH has no relevance in this context and that should be the main argument against applying it to EA projects.