The impact certificate is resold when someone wants to become the owner of it and pays more than the current owner paid for it
Oh, selling is compulsory.
A certificate can’t be sold at a ‘loss’ by the terms of the smart contract. It just ratchets.
OK. That’s what I meant when I said “If you’re having only profits accrue to the creator, but not the losses, then all of these concerns except for the last would still hold, and the price discovery mechanism would be even more messed up.” I’ll call my understanding of Paul’s proposal the “capitalist” model and your model the “ratchet” model BTW.
The main thing is to avoid the pathologies of NFTs as collectibles and speculative bubbles
OK.
Re the downsides of the “ratchet” model, here are my responses:
(Coordination). If Anne writes a blog post, Bob and Chris may both want Anne to be funded, but not want to have to personally lose the cash. In the capitalist model, Bob can just buy Anne’s IC, knowing that he’s not any worse off, because he has gained an asset that he can easily sell later. Whereas in the ratchet model, Bob and Chris don’t gain any profitable asset.
(Capital requirement). Sorry, I was unclear about the fact that I was referencing Paul’s quote “The ability to resell certificates makes a purchase less of a commitment of philanthropic capital, and less of a strategic decision; instead it represents a direct vote of confidence in the work being funded.” In the capitalist model, talent scouts who buy up undervalued projects can retain and grow their capital, and scout more talent. Not so in the “ratchet” version.
(Equilibrium). Price discovery will have problems due to the price not being able to go down. Suppose I do an activity that further investigation will be revealed to have had value $0 or $2, with equal probability. Until we figure that out, the price will be $1. If someone discovers that the value was really $0, there is no way for that information to be revealed via the price (which can only increase). Edit: or alternatively, the price never goes up to $1 in the first place. So then the price only reaches a level $n when people are sure it really couldn’t be worth less than that, and the price will only serve as a lower bound on the EV of the impact.
(Incentive for resellers to research).
(Selling at a loss). OK, I agree this is not an issue if you ratchet.
Your example doesn’t make sense to me. If Bob is not providing any money and cannot ‘personally lose the cash’ and is never ‘any worse off’ because he just resells it, what is he doing, exactly? Extending Anne some sort of disguised interest-free loan? (Guaranteed and risk-free how?) Why can’t he be replaced by a smart contract if there are zero losses?
It seems like in any sensible Paul-like capitalist system, he must be providing money somewhere in the process—if only by eating the loss when no one shows up to buy it at the same or higher price! If Bob gets involved and does anything useful at all, he’s personally losing cash, somehow, in expectation.
So, I don’t see how this is any different from the ratchet system where the ‘loss’ is upfront and Bob buys half the tokens for the blog post and Chris buys the other half, or Bob+Chris pool in a DAO to jointly buy the post’s NFT, or something. Maybe someone will show up to buy out those tokens, and they get their money back. Or they don’t. Just like the capitalist system. But the ‘loss’ goes to Anne either way.
Yes, I regard this as a feature and not a bug, and a problem with capitalist CoI schemes. There is no difference between ‘talent scouting’ and ‘speculative bubble unmoored from fundamentals’, as this is implemented. It becomes a Keynesian beauty contest: buying CoIs because you think many someones will think it’s a CoI to buy...
There is no ground truth which verifies the ‘talent’ which has been shouted up. The only ‘verification’ is that there is a greater fool who does buy the CoI from you, so that means ‘talent scout’ here actually means ‘snake oil salesman and marketer’ as the scheme collapses under Goodhart, and Paul (or whoever outcompetes him in marketing rather than impacting) starts spending all his time shilling his NFTs on Instagram and talking about how EA CoIs are going to be auctioned at Christies soon, and his followers DM you saying that their inside source says that a new Paul blog is going to drop at midnight on Thursday and if you join their Discord the dropbot can get you in on the token buy early to flip them for guaranteed profits! don’t be a sucker or left holding the bag!...
CoIs should be about paying for past performance, and not playing at being covert prediction markets, and doing so poorly. Mixing pay for making more accurate predictions and pay for performance is an uneasy combination at the best of times. If PMs and CoIs are going to be con-fused into the same financial instrument, it needs to be thought through much more carefully. There is probably a role for PMs with subsidies on EA-relevant questions, which can then be used to help price CoIs of any type, but not by directly determining their prices as the answer to their prices, circularly.
Price discovery is implemented by new NFTs. As they reach equilibrium and stop trading, new NFTs have to come out (as one would hope, as the world needs new impacts every day). If an activity is discovered to be worthless, people will just stop buying the new NFTs involving that activity.
Note that new NFTs need to be issued under capitalist CoI too, because time marches on and the world changes: maybe an activity did have the impact back then, but that’s not the same question as “today, I, a potential impacter, should do something; what should that something be?” A CoI for fighting iodine deficiency 20 years ago may have a high price, and may always trade at around that high price, and the value of further fighting iodine today be ~$0. The price of the old CoI does not answer the current question; what does is… issuing a new CoI, which people can refuse to buy—“don’t you know, iodization is solved, dude? Just check the last national nutrition survey! I’m not buying it, not at that price.”
Buyers can buy the CoI of researchers of CoIs. :) Think of how much a CoI must be worth to an altruistic philanthropist when that research affects the purchase of hundreds of later CoIs by other altruists! So much impact.
If Bob is not providing any money and cannot ‘personally lose the cash’ and is never ‘any worse off’ because he just resells it, what is he doing, exactly? Extending Anne some sort of disguised interest-free loan? (Guaranteed and risk-free how?) Why can’t he be replaced by a smart contract if there are zero losses?
1. (Coordination). Bob does lose cash of his balance sheet, but his net asset position stays the same, because he’s gained an IC that he can resell.
3. (Price discovery). I agree that in cases of repeated events, the issues with price discovery can be somewhat routed around.
2&4. (Philanthropic capital requirement & Incentive for resellers to research). The capitalist IC system gives non-altruistic people an incentive to do altruistic work, scout talent, and research activities’ impact, and it rewards altruists for these. Moreover, it reallocates capital to individuals—altruistic or otherwise—who perform these tasks better, which allows them to do more. Nice features, and very standard ones for a capitalist system. I do agree that the ratchet system will allow altruists to fund some talent scouting and impact research, but in a way that is more in-line with current philanthropic behaviour. We might ask the question: do we really want to create a truly capitalist strand of philanthropy? So long as prices are somewhat tethered to reality, then this kind of strand might be really valuable, especially since it need not totally displace other modes of funding.
Oh, selling is compulsory.
OK. That’s what I meant when I said “If you’re having only profits accrue to the creator, but not the losses, then all of these concerns except for the last would still hold, and the price discovery mechanism would be even more messed up.” I’ll call my understanding of Paul’s proposal the “capitalist” model and your model the “ratchet” model BTW.
OK.
Re the downsides of the “ratchet” model, here are my responses:
(Coordination). If Anne writes a blog post, Bob and Chris may both want Anne to be funded, but not want to have to personally lose the cash. In the capitalist model, Bob can just buy Anne’s IC, knowing that he’s not any worse off, because he has gained an asset that he can easily sell later. Whereas in the ratchet model, Bob and Chris don’t gain any profitable asset.
(Capital requirement). Sorry, I was unclear about the fact that I was referencing Paul’s quote “The ability to resell certificates makes a purchase less of a commitment of philanthropic capital, and less of a strategic decision; instead it represents a direct vote of confidence in the work being funded.” In the capitalist model, talent scouts who buy up undervalued projects can retain and grow their capital, and scout more talent. Not so in the “ratchet” version.
(Equilibrium). Price discovery will have problems due to the price not being able to go down. Suppose I do an activity that further investigation will be revealed to have had value $0 or $2, with equal probability. Until we figure that out, the price will be $1. If someone discovers that the value was really $0, there is no way for that information to be revealed via the price (which can only increase). Edit: or alternatively, the price never goes up to $1 in the first place. So then the price only reaches a level $n when people are sure it really couldn’t be worth less than that, and the price will only serve as a lower bound on the EV of the impact.
(Incentive for resellers to research).
(Selling at a loss). OK, I agree this is not an issue if you ratchet.
Your example doesn’t make sense to me. If Bob is not providing any money and cannot ‘personally lose the cash’ and is never ‘any worse off’ because he just resells it, what is he doing, exactly? Extending Anne some sort of disguised interest-free loan? (Guaranteed and risk-free how?) Why can’t he be replaced by a smart contract if there are zero losses?
It seems like in any sensible Paul-like capitalist system, he must be providing money somewhere in the process—if only by eating the loss when no one shows up to buy it at the same or higher price! If Bob gets involved and does anything useful at all, he’s personally losing cash, somehow, in expectation.
So, I don’t see how this is any different from the ratchet system where the ‘loss’ is upfront and Bob buys half the tokens for the blog post and Chris buys the other half, or Bob+Chris pool in a DAO to jointly buy the post’s NFT, or something. Maybe someone will show up to buy out those tokens, and they get their money back. Or they don’t. Just like the capitalist system. But the ‘loss’ goes to Anne either way.
Yes, I regard this as a feature and not a bug, and a problem with capitalist CoI schemes. There is no difference between ‘talent scouting’ and ‘speculative bubble unmoored from fundamentals’, as this is implemented. It becomes a Keynesian beauty contest: buying CoIs because you think many someones will think it’s a CoI to buy...
There is no ground truth which verifies the ‘talent’ which has been shouted up. The only ‘verification’ is that there is a greater fool who does buy the CoI from you, so that means ‘talent scout’ here actually means ‘snake oil salesman and marketer’ as the scheme collapses under Goodhart, and Paul (or whoever outcompetes him in marketing rather than impacting) starts spending all his time shilling his NFTs on Instagram and talking about how EA CoIs are going to be auctioned at Christies soon, and his followers DM you saying that their inside source says that a new Paul blog is going to drop at midnight on Thursday and if you join their Discord the dropbot can get you in on the token buy early to flip them for guaranteed profits! don’t be a sucker or left holding the bag!...
CoIs should be about paying for past performance, and not playing at being covert prediction markets, and doing so poorly. Mixing pay for making more accurate predictions and pay for performance is an uneasy combination at the best of times. If PMs and CoIs are going to be con-fused into the same financial instrument, it needs to be thought through much more carefully. There is probably a role for PMs with subsidies on EA-relevant questions, which can then be used to help price CoIs of any type, but not by directly determining their prices as the answer to their prices, circularly.
Price discovery is implemented by new NFTs. As they reach equilibrium and stop trading, new NFTs have to come out (as one would hope, as the world needs new impacts every day). If an activity is discovered to be worthless, people will just stop buying the new NFTs involving that activity.
Note that new NFTs need to be issued under capitalist CoI too, because time marches on and the world changes: maybe an activity did have the impact back then, but that’s not the same question as “today, I, a potential impacter, should do something; what should that something be?” A CoI for fighting iodine deficiency 20 years ago may have a high price, and may always trade at around that high price, and the value of further fighting iodine today be ~$0. The price of the old CoI does not answer the current question; what does is… issuing a new CoI, which people can refuse to buy—“don’t you know, iodization is solved, dude? Just check the last national nutrition survey! I’m not buying it, not at that price.”
Buyers can buy the CoI of researchers of CoIs. :) Think of how much a CoI must be worth to an altruistic philanthropist when that research affects the purchase of hundreds of later CoIs by other altruists! So much impact.
1. (Coordination). Bob does lose cash of his balance sheet, but his net asset position stays the same, because he’s gained an IC that he can resell.
3. (Price discovery). I agree that in cases of repeated events, the issues with price discovery can be somewhat routed around.
2&4. (Philanthropic capital requirement & Incentive for resellers to research). The capitalist IC system gives non-altruistic people an incentive to do altruistic work, scout talent, and research activities’ impact, and it rewards altruists for these. Moreover, it reallocates capital to individuals—altruistic or otherwise—who perform these tasks better, which allows them to do more. Nice features, and very standard ones for a capitalist system. I do agree that the ratchet system will allow altruists to fund some talent scouting and impact research, but in a way that is more in-line with current philanthropic behaviour. We might ask the question: do we really want to create a truly capitalist strand of philanthropy? So long as prices are somewhat tethered to reality, then this kind of strand might be really valuable, especially since it need not totally displace other modes of funding.
What if no one buys it?
If the market value of the IC is 0, then ICs aren’t gonna work. But it’s OK if very few ICs are sold, so long as the market clears at a decent price.