MichaelDickens

• MichaelDickens 28 Jan 2020 0:16 UTC

  2 points

  in reply to: Jan_Kulveit's comment on: EA Fo­rum 2.0 Ini­tial Announcement

  Can you elab­o­rate on how you turned off karma dis­play? I would love to use your code if you’re will­ing to share it. I strongly dis­like post­ing on the EA Fo­rum be­cause of how the karma sys­tem works, and and my ex­pe­rience would be vastly im­proved if I couldn’t see post/​com­ment karma.

• MichaelDickens 20 Jan 2020 18:42 UTC

  3 points

  in reply to: Andy_Schultz's comment on: How Much Lev­er­age Should Altru­ists Use?

  Both are cor­rect. The claim made by Life­cy­cle In­vest­ing is not that in­creas­ing stock ex­po­sure de­creases risk in gen­eral. The claim is that by in­creas­ing stock ex­po­sure early in life and de­creas­ing late in life, while keep­ing net life­time ex­po­sure the same, you de­crease risk.

  The ar­gu­ment for this claim is that you have more dol­lars when you’re older, there­fore mar­ket swings in later years have a big­ger effect on your port­fo­lio than in ear­lier years. But you can negate this effect by us­ing lev­er­age when you’re young, thus effec­tively in­creas­ing how much money you’re in­vest­ing with, and hold­ing more bonds/​cash when you’re older.

  Sim­plified ex­am­ple: sup­pose you have $100 to­day and will get an­other $100 next year. If you in­vest all your money in stocks dur­ing both years, then you are ex­pos­ing $100 to equity risk this year, but $200 next year. If in­stead you in­vest with 1.5:1 lev­er­age this year, and then next year you only in­vest 75% of your money, that means you’re ex­pos­ing $150 to equity risk dur­ing both years. Either way, you’re in­vest­ing $150 per year on av­er­age. But in the former sce­nario, you are tak­ing twice as much risk in year 2, whereas in the lat­ter sce­nario, you take the same amount of risk both years, which is bet­ter.

  I’m not sure I’m ex­plain­ing it well, so let me know if that doesn’t make sense.

• MichaelDickens 11 Jan 2020 4:43 UTC

  2 points

  in reply to: PeterMcCluskey's comment on: How Much Lev­er­age Should Altru­ists Use?

  I was re­view­ing my notes and I found this pa­per on man­aged fu­tures: https://​​www.aqr.com/​​In­sights/​​Re­search/​​White-Papers/​​Trend-Fol­low­ing-in-Focus

  The pa­per has a sec­tion on why they don’t think man­aged fu­tures (a.k.a. trend­fol­low­ing) will stop work­ing in the near fu­ture. Here’s the sum­mary I wrote in my notes (of the rele­vant sec­tion):

  • As­sets in­vested in trend­fol­low­ing peaked in mid-2008 at $210B, and have de­clined to $120B

  • All sys­tem­atic hedge fund strate­gies have $500B AUM, or 17% of all hedge fund assets

  • Fu­tures mar­ket has grown since 2008, so trend­fol­low­ing as a % of fu­tures mar­kets has de­creased by more than half

  I don’t find this su­per con­vinc­ing, it’s definitely still con­ceiv­able that trend­fol­low­ing strate­gies could ba­si­cally stop work­ing, but it’s ev­i­dence that trend­fol­low­ing is not over-sub­scribed.

• MichaelDickens 11 Jan 2020 4:24 UTC

  10 points

  in reply to: Jon_Behar's comment on: Long-term in­vest­ment fund at Founders Pledge

  1. The risk-free in­ter­est is un­usu­ally low across the de­vel­oped world and the US equity mar­ket looks ex­pen­sive, but equity val­u­a­tions in the non-US de­vel­oped mar­ket are close to his­tor­i­cal av­er­ages, and equity val­u­a­tions in emerg­ing mar­kets are be­low av­er­age. So IMO it is rea­son­able to ex­pect near-his­tor­i­cal equity re­turns by in­vest­ing out­side the US. See https://​​meb­faber.com/​​2019/​​01/​​25/​​the-biggest-val­u­a­tion-spread-in-40-years/​​

  2. The case for giv­ing sort-of-later de­pends on the cur­rent in­ter­est rate, but the case for giv­ing much later only de­pends on the differ­ence be­tween the long-run in­ter­est rate and the long-run dis­count rate. As Phil Tram­mell ar­gues in the post linked by OP, the long-run in­ter­est rate most likely ex­ceeds the philan­thropic dis­count rate, which means we should give later.

• MichaelDickens 9 Jan 2020 3:42 UTC

  3 points

  in reply to: Brian_Tomasik's comment on: How Much Lev­er­age Should Altru­ists Use?

  I like this idea—a cen­trally-man­aged fund would be a lot eas­ier than a bunch of peo­ple sep­a­rately do­ing their own thing. But it cre­ates a prob­lem where the in­vestors/​donors in the fund might have un­re­al­is­tic ex­pec­ta­tions about perfor­mance and could be­come re­ally un­happy if the fund un­der­performs the S&P for sev­eral con­sec­u­tive years—which is bound to hap­pen some­times if the fund is aiming for low cor­re­la­tion. This would be par­tic­u­larly bad from an op­tics per­spec­tive. So there are pros and cons to this idea.

• MichaelDickens 9 Jan 2020 3:30 UTC

  3 points

  in reply to: PeterMcCluskey's comment on: How Much Lev­er­age Should Altru­ists Use?

  Thanks for the com­ments, Peter!

  I’m skep­ti­cal that man­aged fu­tures will con­tinue to do as well as back­test­ing sug­gests.

  Me too, I did ad­just the re­turn es­ti­mate way down from the back­test I quoted, but I can see an ar­gu­ment that man­aged fu­tures will provide zero ex­cess re­turn in the fu­ture.

  Re­gard­ing mo­men­tum, see AQR’s Fact, Fic­tion and Mo­men­tum In­vest­ing—speci­fi­cally, “Myth No. 4: Mo­men­tum Does Not Sur­vive, Or Is Se­ri­ously Limited By, Trad­ing Costs.”

• MichaelDickens 9 Jan 2020 3:19 UTC

  4 points

  in reply to: Carl_Shulman's comment on: How Much Lev­er­age Should Altru­ists Use?

  Can you clar­ify what ex­actly your con­cern is? Which of these best de­scribes your po­si­tion?

  1. Fac­tor pre­mia ba­si­cally don’t ex­ist.

  2. Fac­tor pre­mia are much smaller than this es­say claims.

  3. Fac­tor pre­mia are sub­stan­tial, but this es­say does not do enough to jus­tify that claim, so it’s not a good refer­ence.

  Ini­tially I thought you were say­ing #1, but from your re­ply be­low, it sounds like you at least be­lieve that fac­tor pre­mia ex­ist, so now I’m not sure.

  Edit: Or I guess a fourth op­tion: fac­tor pre­mia ex­ist, but gen­er­ally should not be pro­moted (pos­si­bly be­cause most read­ers will run into the same be­hav­ioral bi­ases that cause the pre­mia to ex­ist).

  Or some­thing else en­tirely.

• MichaelDickens 9 Jan 2020 3:13 UTC

  3 points

  in reply to: Carl_Shulman's comment on: How Much Lev­er­age Should Altru­ists Use?

  I just up­dated the es­say to in­clude some more jus­tifi­ca­tion for (1) the claim that it’s pos­si­ble to beat the mar­ket and (2) the spe­cific re­turn es­ti­mates given. I added the new ma­te­rial to the sec­tions “Im­prov­ing on con­ven­tional wis­dom” and “Re­turn ex­pec­ta­tions”, and have re­pro­duced the lat­ter be­low.

  -------

  As some­thing of a cor­rob­o­ra­tion, RAFI pro­vides es­ti­mates of for­ward-look­ing five-year re­turn for var­i­ous long/​short fac­tors. At the time of this writ­ing, it makes the fol­low­ing pre­dic­tions for its long/​short value and mo­men­tum fac­tors (net of trans­ac­tion costs):

  • 5.7% for US large-cap value

  • 1.1% for US large-cap momentum

  • 8.0% for US small-cap value

  • 6.4% for US small-cap momentum

  (RAFI’s pro­jec­tions for for­eign de­vel­oped mar­ket fac­tors are similar but gen­er­ally a bit higher.)

  A con­cen­trated long-only port­fo­lio on a par­tic­u­lar fac­tor would have ap­prox­i­mately the same ex­pected re­turn as the long/​short fac­tor plus the broad mar­ket (al­though that’s not quite how the math works).

  The un­der­ly­ing in­dexes used by VMOT make some im­prove­ments on RAFI’s sim­ple fac­tor model (see Quan­ti­ta­tive Value and Quan­ti­ta­tive Mo­men­tum for de­tails[^26]), so it might be rea­son­able to as­sume a higher ex­pected re­turn for VMOT. If we then sub­tract fees, we get some­thing close to the origi­nal es­ti­mate I gave for VMOT (prob­a­bly a bit higher[^27]).

  RAFI be­lieves the value and mo­men­tum pre­mia will work as well in the fu­ture as they have in the past, and AQR makes the same claim in some of the pa­pers I linked above. They offer good sup­port for this claim, but in the in­ter­est of con­ser­vatism, we could jus­tifi­ably sub­tract a cou­ple of per­centage points from ex­pected re­turn to ac­count for pre­mium degra­da­tion.

  Note that RAFI’s es­ti­mates use fac­tor timing—at­tempt­ing to guess how well fac­tors will perform based on the cur­rent mar­ket en­vi­ron­ment, rather than just look­ing at his­tor­i­cal be­hav­ior. This prac­tice is not widely ac­cepted; for ex­am­ple, see AQR’s Fac­tor Timing is De­cep­tively Difficult.

  Also note that these num­bers only give ex­pected mean re­turn. Even if these es­ti­mates are ac­cu­rate, we could still see much higher or lower re­turns due to mar­ket volatility.

• MichaelDickens 7 Jan 2020 16:45 UTC

  6 points

  in reply to: Carl_Shulman's comment on: How Much Lev­er­age Should Altru­ists Use?

  I’m not sur­prised that this is a stick­ing point. I think peo­ple should be highly skep­ti­cal of claims about EMH vi­o­la­tions, and I didn’t pre­sent a lot of ev­i­dence, be­cause that would have dra­mat­i­cally in­creased the length of this es­say. I would re­fer to the sources I linked in the rele­vant sec­tion.

  If you as­sume EMH is broadly true, al­most all of the rest of the es­say still ap­plies. When I pre­sented some rough es­ti­mates for tar­get lev­er­age un­der full Kelly and half Kelly, I gave es­ti­mates for the global mar­ket port­fo­lio, as well as for value/​mo­men­tum/​man­aged fu­tures. The main ex­cep­tion is if EMH is fully true, you might not want to in­vest in zero-cor­re­la­tion as­sets be­cause there aren’t re­ally any with pos­i­tive ex­pected real re­turn (AFAIK), but you’d still want to seek out low cor­re­la­tion to the ex­tent that it’s pos­si­ble.

  Re­gard­ing the claims I made about po­ten­tial fu­ture perfor­mance:

  1. The claims on value and mo­men­tum are con­sis­tent with aca­demic fac­tor liter­a­ture and es­ti­mates from ev­i­dence-fo­cused in­vest­ing firms like Re­search Affili­ates.

  2. I didn’t make any strong claims about man­aged fu­tures perfor­mance, but the made-up num­bers I gave are far lower than the the­o­ret­i­cal back­test perfor­mance from the AQR pa­per I cited, as well as ac­tual perfor­mance from prac­ti­tion­ers such as Richard Den­nis.

  In­vest­ment writ­ings taken as ad­vice dam­ag­ing es­pe­cially valuable as­sets that would oth­er­wise be used for al­tru­ism (just the flip side of the value of im­prove­ments)

  I don’t un­der­stand what this means, could you ex­plain?

  EDIT: I did a lit­tle more look­ing and found these two pa­pers that might be per­sua­sive to value and mo­men­tum skep­tics:

  https://​​www.aqr.com/​​In­sights/​​Re­search/​​Jour­nal-Ar­ti­cle/​​Fact-Fic­tion-and-Mo­men­tum-In­vest­ing https://​​www.aqr.com/​​In­sights/​​Re­search/​​Jour­nal-Ar­ti­cle/​​Fact-Fic­tion-and-Value-Investing

  The pa­pers them­selves are fairly short, but they sum­ma­rize a lot of ev­i­dence from other sources.

How Much Lev­er­age Should Altru­ists Use?

How Can Donors In­cen­tivize Good Pre­dic­tions on Im­por­tant but Un­pop­u­lar Topics?

Should Global Poverty Donors Give Now or Later? An In-Depth Analysis

Why Do Small Donors Give Now, But Large Donors Give Later?

• MichaelDickens 6 Oct 2018 22:18 UTC

  7 points

  on: RPTP Is a Strong Rea­son to Con­sider Giv­ing Later

  I’m not clear on how RPTP fits into a gen­eral un­der­stand­ing of fi­nan­cial re­turns on in­vest­ment. Clearly your RPTP mat­ters, and if you have a lower RPTP than most peo­ple, that makes in­vest­ing look rel­a­tively bet­ter for you. But why don’t, say, fi­nan­cial ad­vi­sors ever talk about this? Ad­vi­sors largely make in­vest­ment recom­men­da­tions based on clients’ risk tol­er­ance, which is un­re­lated to RPTP.

• MichaelDickens 6 Oct 2018 17:17 UTC

  3 points

  on: RPTP Is a Strong Rea­son to Con­sider Giv­ing Later

  I don’t have a di­rect source on the ar­gu­ment that you said Elie Hassen­feld made, but I do have a quote from Scott Alexan­der (http://​​slat­estar­codex.com/​​2013/​​04/​​05/​​in­vest­ment-and-in­effi­cient-char­ity/​​) who went to a live event in which Elie made this ar­gu­ment:

  [I]n the 1960s, the most cost-effec­tive char­ity was child­hood vac­ci­na­tions, but now so many peo­ple have donated to this cause that 80% of chil­dren are vac­ci­nated and the re­main­der are un­reach­able for re­ally good rea­sons (like they’re in vi­o­lent tribal ar­eas of Afghanistan or some­thing) and not just be­cause no one wants to pay for them. In the 1960s, iodiz­ing salt might have been the high­est-util­ity in­ter­ven­tion, but now most of the low-io­dine ar­eas have been iden­ti­fied and cor­rected. While there is still much to be done, we have run out of in­ter­ven­tions quite as easy and cost-effec­tive as those. And one day, God will­ing, we will end malaria and maybe we will never see a char­ity as effec­tive as the Against Malaria [Foun­da­tion] again.

• MichaelDickens 11 Sep 2018 2:52 UTC

  5 points

  in reply to: Flodorner's comment on: Ad­di­tional plans for the new EA Forum

  Another fea­ture that could help peo­ple find old posts is to dis­play a few ran­dom old posts on a side­bar. For ex­am­ple, on any of Jeff Kauf­man’s blog posts, five old posts dis­play on the side­bar. I’ve found lots of in­ter­est­ing old posts on Jeff’s blog via this fea­ture.

• MichaelDickens 24 Jul 2018 1:24 UTC

  0 points

  in reply to: SiebeRozendal's comment on: EA Fo­rum 2.0 Ini­tial Announcement

  I think there’s an­other down­side there: we should be wary of im­ple­ment­ing a sys­tem that doesn’t have a track record. There are lots of fo­rums that don’t have vot­ing, and red­dit-style vot­ing has a long track record as well (plus Hacker News-style, which is similar but not quite the same as red­dit-style). As you start in­tro­duc­ing ex­tra com­plex­ity, you don’t know what’s go­ing to hap­pen. Most pos­si­ble de­signs are bad, and most de­signs we come up with a pri­ori will prob­a­bly be bad, so my in­cli­na­tion would be to stick close to a sys­tem that has a proven track record.

  That said, hav­ing mul­ti­ple types of up­votes could look some­thing like Face­book which now has mul­ti­ple types of likes, and we have at least some idea of what that would look like. So it might be a good idea.

• MichaelDickens 23 Jul 2018 4:57 UTC

  7 points

  on: EA Fo­rum 2.0 Ini­tial Announcement

  I’m con­cerned with the plans to make vot­ing/​karma more sig­nifi­cant; I would pre­fer to make them less sig­nifi­cant than the sta­tus quo rather than more. Vot­ing al­lows ev­ery­one’s bi­ases to in­fluence dis­cus­sion in bad ways. For ex­am­ple, peo­ple’s votes tend to fa­vor:

  1. things they agree with over things they dis­agree with, which makes it harder to voice dis­sent­ing opinions

  2. en­ter­tain­ing con­tent over im­por­tant but less-en­ter­tain­ing content

  3. agree­able con­tent with­out much sub­stance over niche or dis­agree­able con­tent with lots of substance

  4. posts that raise easy ques­tions and give strong an­swers over posts that raise hard ques­tions and give weak answers

  Sort­ing the front page by votes, and giv­ing high-karma users more vot­ing power, only does more to in­cen­tivize bad habits. I think the cur­rent vot­ing sys­tem is more suited to some­thing like red­dit which is meant for en­ter­tain­ment, so it’s rea­son­able for the most pop­u­lar posts to ap­pear first. If the idea is to have “all of EA’s top re­searchers post­ing and com­ment­ing reg­u­larly”, I don’t think votes should be such a strong driver of the UX.

  About a year ago I es­sen­tially stopped mak­ing top-level posts on the EA Fo­rum be­cause the vot­ing sys­tem both­ers me too much, and the pro­posed change sounds even worse. Maybe I’m an out­lier, but I’d pre­fer a sys­tem that more closely re­sem­bled a tra­di­tional fo­rum with­out vot­ing where all posts have equal sta­tus. That’s prob­a­bly not op­ti­mal and it has its own prob­lems (the most ob­vi­ous be­ing that low-qual­ity con­tent doesn’t get filtered out), but I’d pre­fer it to the cur­rent or pro­posed sys­tem.

• MichaelDickens 19 Apr 2018 2:18 UTC

  0 points

  in reply to: John_Maxwell's comment on: How to im­prove EA Funds

  Al­most all typ­i­cal as­sets—bonds, stocks, com­modi­ties—are highly liquid, in the sense that if you de­cide to sell them, you can con­vert them into cash in a few min­utes max. So even a well di­ver­sified port­fo­lio can still be liquid. The main ex­cep­tions are real es­tate and pri­vate equity, but I see no rea­son why EA Funds need to hold those.

• MichaelDickens 15 Feb 2018 3:14 UTC

  1 point

  in reply to: RyanCarey's comment on: Where Some Peo­ple Donated in 2017

  I don’t know, the link to Zvi’s writeup works for me. But here is the URL: https://​​thezvi.word­press.com/​​2017/​​12/​​17/​​i-vouch-for-miri/​​