AGI & Volatility, and Thinking in Bets
Tyler Cowen believes that those who believe in the imminence of AGI ought to be long volatility. He writes:
As many of you know, when I confront mega-pessimists I like to ask them "But are you short the market?" Not once in my life have I heard a satisfactory rejoinder to this query....
I now have a new question for those who see a reasonably high likelihood of AGI. Of course AGI could wreck the world, make the world a whole lot better, or simply overturn multiple sectors of the economy, in both good and bad ways. If you believe in AGI, typically you believe it will matter a lot, though there is considerable disagreement on the cost-benefit ratio.
But that presupposes that people sufficiently interested in AI to believe in AGI imminence also pay attention to financial markets. I don't think that's a reasonable assumption to make, even if the rational response to a given belief is to make a financial bet on its outcome.
His argument is a specific form of the more general "put your money where your mouth is". And to some extent, that's a reasonable heuristic. If you won't bet money on your prediction, why should I believe it? But people are not necessarily rational in this manner.
So you can have some very smart people, who earnestly believe in the imminence of AGI for a set of cogent and well-articulated reasons, but who have chosen not to commit money to the belief. Does that decision invalidate the substance of their argument?
Here's one person's argument that AGI will arrive by 2030. The core of this person's argument are the following three points:
- We've already captured way too much of intelligence with way too little effort.
- Everything points towards us capturing way more of intelligence with very little additional effort.
- Trying to create a self-consistent worldview that handles all available evidence seems to force very weird conclusions.
Believing the truth of any of these three statements does not require a concurrent financial bet on volatility. Stated another way: I can believe that Elon Musk will eventually acquire Twitter, without taking a financial position in either Twitter or Elon Musk. Now, it may be rational to, say, buy Twitter stock, in the expectation of Musk eventually acquiring it for a premium. In fact, Carl Icahn did just that. But he's Carl Icahn, and you're not.
Indeed, one of Cowen's commenters notes:
1) If you engage in volatility speculation without experience, without learning heuristics from career volatility speculators/institutions, without knowing how to replicate variance swaps with no clue what you are buying, or for what price, it is likely to result in losses.
2) Those who "believe" in AGI don't believe there will be a functioning derivatives market left to pay them afterwards.
The broader moral of: are you doing the things someone who really believed in this would be doing? is a good one. But someone who really believes in AGI can also really believe they don't know what they are doing speculating in complex, liquid, derivatives markets.
Tyler Cowen is an economist, and economists want to price people's beliefs. And if you're not committing money to your belief, their argument continues, you value your belief at $0, so why should anyone else subscribe to it? While that has a certain appealing rationale to a person predisposed to thinking like an economist, it turns out that the set of people who think like an economist is only a subset of all people.