I have several questions, all in the spirit of helping you sharpen up the idea:
Why a loan product? Is that to mimic cat bonds? Standard insurance (just pay the premiums) would be even easier for the client wouldn’t it?
It seems to me that existing players (banks, FTX) have a strong competitive advantage in formally creating new products. Perhaps this organization could have more value add as an advisory/intermediary. Helping clients implement and manage such strategies (part of which may include helping with design/specification of the products). Have you considered that?
On profit-seeking, if there was big enough demand out there, wouldn’t prediction markets be bigger already?
Happy to talk offline too. But I do like seeing open discussion of these ideas on the forum. Whatever input you get on this post will hopefully be useful for others considering similar ideas. For now mission-correlated investing and related ideas seem mostly academic (and perhaps private/secret). If you find otherwise it would be exciting to see that shared.
In the long-term, I roughly estimate that HedgEverything would need at least USD$5M to USD$10M in consistent principal value to be self-sufficient.
I’m curious how you came this estimate as it seems low to me. It sounds like you are basically proposing a boutique insurance company / market maker / hedge fund, which involves a lot of expenses: reinsurance, legal, regulatory, compensation for skilled financial analysts, etc.. What sort of spread are you envisaging charging?
Bob runs an emergency response organization, which needs cash to scale up when an emergency hits (to hire surge staff, ramp up response operations, etc etc). Bob want to use prediction markets as a hedge, but appropriate disaster markets don’t always exist plus it’s hard to place high-payoff bets without tying up all his assets in the interim.
What variables would you be interested in, if you were a client?
I’d be interested in some variables that offer high ROI but also relate to suffering reduction from the worst (highest IR contribution) to the least. So, the reduction in abuse and neglect among animals, especially crickets since they can currently eat each other and it is relatively simple to avoid it (they are farmed in high concentrations and the cannibalism happens due to missing nutrients, such as salt).
I could also smartly tie my interest to animal welfare research, especially wild, which could expose a lot of suffering that could compel others resolve it. So, I would get even higher IR.
Then, I would tie my IR to the reduction of natural conservation, which could be popular among major stakeholders, such as ore companies, but given the welfare research high IR and negative utilitarian valuation, the companies would be compelled to take steps consistent with animal welfare but also further profit and make even more money and impact. I would add this based on the changing landscape of the welfare and its research.
do you believe I should create this organization and leave my industry career?
First leave your industry career and keep chatting with people (mostly in EA) about this. You will gain about 40 hours per week for that, which is extremely valuable and can expedite the project pivoting even before anything happens. I don’t think that you should maybe try reducing your workload since in your role it can be difficult (could express you do not care so much about your team anymore) - it could be apparent that you are staying to keep connections/income etc, which can be a rep loss risk.
If I did, what are my best next steps for funding, etc.?
OPP offers the maybe 3-month planning grants where you can just plan your project. This can be ideal for you. The cycle is that maybe you do not get the OPP grant and need some credibility for it. You can also try the LTFF/EAIF. These should not mind if you apply again. Others, such as the Future Fund, can like excellent projects.
Try to avoid the OPP mistake where they started as trying to appeal to hedge funders through quantification but later realized that it can present publication bias (which can be difficult to undo in an established organization). I suggest that you speak with various people in EA to learn about bias mitigation. This can also connect you with more individuals familiar with funding opportunities.
Thanks for putting this idea out there, Michael!
I have several questions, all in the spirit of helping you sharpen up the idea:
Why a loan product? Is that to mimic cat bonds? Standard insurance (just pay the premiums) would be even easier for the client wouldn’t it?
It seems to me that existing players (banks, FTX) have a strong competitive advantage in formally creating new products. Perhaps this organization could have more value add as an advisory/intermediary. Helping clients implement and manage such strategies (part of which may include helping with design/specification of the products). Have you considered that?
On profit-seeking, if there was big enough demand out there, wouldn’t prediction markets be bigger already?
Happy to talk offline too. But I do like seeing open discussion of these ideas on the forum. Whatever input you get on this post will hopefully be useful for others considering similar ideas. For now mission-correlated investing and related ideas seem mostly academic (and perhaps private/secret). If you find otherwise it would be exciting to see that shared.
I’m curious how you came this estimate as it seems low to me. It sounds like you are basically proposing a boutique insurance company / market maker / hedge fund, which involves a lot of expenses: reinsurance, legal, regulatory, compensation for skilled financial analysts, etc.. What sort of spread are you envisaging charging?
Here’s a scenario:
Bob runs an emergency response organization, which needs cash to scale up when an emergency hits (to hire surge staff, ramp up response operations, etc etc). Bob want to use prediction markets as a hedge, but appropriate disaster markets don’t always exist plus it’s hard to place high-payoff bets without tying up all his assets in the interim.
Does HedgEverything make Bob happy?
I’d be interested in some variables that offer high ROI but also relate to suffering reduction from the worst (highest IR contribution) to the least. So, the reduction in abuse and neglect among animals, especially crickets since they can currently eat each other and it is relatively simple to avoid it (they are farmed in high concentrations and the cannibalism happens due to missing nutrients, such as salt).
I could also smartly tie my interest to animal welfare research, especially wild, which could expose a lot of suffering that could compel others resolve it. So, I would get even higher IR.
Then, I would tie my IR to the reduction of natural conservation, which could be popular among major stakeholders, such as ore companies, but given the welfare research high IR and negative utilitarian valuation, the companies would be compelled to take steps consistent with animal welfare but also further profit and make even more money and impact. I would add this based on the changing landscape of the welfare and its research.
First leave your industry career and keep chatting with people (mostly in EA) about this. You will gain about 40 hours per week for that, which is extremely valuable and can expedite the project pivoting even before anything happens. I don’t think that you should maybe try reducing your workload since in your role it can be difficult (could express you do not care so much about your team anymore) - it could be apparent that you are staying to keep connections/income etc, which can be a rep loss risk.
OPP offers the maybe 3-month planning grants where you can just plan your project. This can be ideal for you. The cycle is that maybe you do not get the OPP grant and need some credibility for it. You can also try the LTFF/EAIF. These should not mind if you apply again. Others, such as the Future Fund, can like excellent projects.
Try to avoid the OPP mistake where they started as trying to appeal to hedge funders through quantification but later realized that it can present publication bias (which can be difficult to undo in an established organization). I suggest that you speak with various people in EA to learn about bias mitigation. This can also connect you with more individuals familiar with funding opportunities.