One concern on the alignment of executive compensation is that it's especially hard to get executives to care about what happens after they die, unless their perpetual bonds go to their heirs, unlike a regular pension. Even then, they or their heirs can sell those bonds, no? At least in the US, we have laws setting time limits on constraints about how heirs can use or dispose of property left to them.
And if an eternal company's growth is slow by necessity, then the smart move would be investing the proceeds from perpetual bonds in a diverse portfolio of market-traded faster-growth companies. I understand this is something university endowments sometimes do to get around restrictions on how some funds can be used.
When I look at the world's actually existing very old companies, I think the end state for an eternal company might look something like Sumitomo Group: diversified enough to survive systemic and idiosyncratic shifts to any subset of its interests, interdependent enough for mutual support to survive downturns and finance needed changes internally, and willing to divest parts of itself when needed. (Kinda like the world's oldest trees (and largest funghi), that have many above-ground bodies that die all the time, but interconnected wide-spanning root systems and shared DNA.) A lot of long-lived companies are (or at least were) family businesses motivated to preserve intergenerational wealth, like Merck.
Do we, or should we expect to, see any signs that these kinds of companies ae unusually motivated to reduce existential risks?
One concern on the alignment of executive compensation is that it's especially hard to get executives to care about what happens after they die, unless their perpetual bonds go to their heirs, unlike a regular pension. Even then, they or their heirs can sell those bonds, no? At least in the US, we have laws setting time limits on constraints about how heirs can use or dispose of property left to them.
This is a good point, but I think empirically people don't really divest/diversify their inheritance? This is something that could be tested. In theory the perpetual bonds of a large eternal company should be some of the safest assets to hold, similar to U.S. bonds. So I don't think most people will want to sell these for other assets.
When I look at the world's actually existing very old companies, [...] Do we, or should we expect to, see any signs that these kinds of companies ae unusually motivated to reduce existential risks?
Possibly. I'm not sure we should look at what long-lasting companies do now, since we can't be sure that they will continue to last long (maybe by now the management has gone bad). It would probably be better to look at how long-lasting companies behaved in the past.
Interesting idea, and I'm glad to explore it a bit. I think in addition to your other reasons it's not workable, it's pretty questionable whether "corporation" is the unit of institution to focus on. I'm also pretty skeptical that slack is compatible with financial metrics as the primary optimization lever, whether amortized or instantaneous.
Also, it's unclear (when discussed over the long term, assuming rational investors (which is broken for your proposal as well)) that theoretical stock value deviates much from perpetual bond value. Both are quite sensitive to perceived stability of company.
it's pretty questionable whether "corporation" is the unit of institution to focus on.
I agree. AI Safety is a public good and so suffers from the https://en.wikipedia.org/wiki/Free-rider_problem and so even if you had eternal companies, they would have to co-ordinate some how. But I think it would be easier for eternal companies to coordinate on AI Safety compared to normal companies.
I'm also pretty skeptical that slack is compatible with financial metrics as the primary optimization lever, whether amortized or instantaneous.
I'm not sure what you mean by this. I think a lot of companies already give their employees a lot of slack? e.g. Apparently Google used to allow every employee to spend 20% of their time on pet projects (although I've heard this practice no longer exists).
Also, it's unclear [...] that theoretical stock value deviates much from perpetual bond value. Both are quite sensitive to perceived stability of company.
Surely their must be a difference. A bond is not exposed to the "upside" of the companies profits only the "downside" of them defaulting. I think maybe a good analogy is how parents behave with their children. Parents are much less exposed to the upside of their children's accomplishments (if you start a business and become a multi-millionaire you're parents see very little of that money), but are much more exposed to the downsides of their children's failures (if your business fails, then they might have to live with you, increasing rent and food costs). Understandably parents tend to push their children to go for safe jobs (accountant, doctor, lawyer, programmer) rather than doing risky jobs with high upside (actor, artist, musician).
I think in the same way an eternal company (if the incentives work) will behave in a less risky way.
I think we have different models of how upside and downside is experienced by parents and investors (which includes creditors for many purposes). Parents ABSOLUTELY benefit from childrens' successes, perhaps more than they suffer from failures. Both shareholders and bondholders benefit from company profits - that's the primary indicator of longevity available to outside observers.
"Grow or die" is far oversimplified as a management directive, but it's not completely wrong. A pile of past retained earnings is not a long-term defense against business irrelevance. If the corporation isn't investing in growth opportunities to replace the existing operations (which will eventually erode, as all things do), it's not going to be around for long.
If someone believes in high existential risk, then they already have strong incentive to prevent it, because if they don't, they will die. I'm confused as to how this would provide additional incentive.
Walmart has incentive to be the institution that provides groceries for a reasonable price, not just for there to be reasonably priced groceries at all. Everyone already has incentive for food to be affordable, often so that they can afford food, but also because of the adverse effects of starving a populace.
Yes, individuals have the incentive to mitigate existential risk, but only in their lifetime, and possibly the lifetime of their grandchildren.
Institutions can last many generations and also allow people to coordinate and work together. In theory it's difficult to form a company with the sole purpose of mitigating existential risk, since investors will be pushing you to grow big or make huge profits (in practice it seems like Conjecture managed to do this?). With an eternal company the bondholders want your company to not take risks for big-profits.
This seems potentially useful, but less useful than I thought you were claiming when I read the post. If I understand correctly, an eternal company has no greater incentive to prevent near-term existential risk than a non-profit (or Conjecture), but has slightly greater incentive to prevent long-term existential risk.
TL;DR A company that maximizes its bond price instead of its stock price cares about the long-term future and is incentivized to reduce existential risk.
There is a world in which we solve the alignment problem. We are not in that world.
The world in which we solve the alignment problem has institutions with incentives to solve alignment-like problems. The same way Walmart has incentives to sell you groceries for a reasonable price. In countries with functioning market economies, nobody thinks about "the grocery problem".
One such institution is one that has incentives to care about the long-term future. I believe that there is an easy way to create such an institution in our current world.
The first insight is that to bet on the end of the world is to take a loan that you expect not to pay back. Hence to bet against the end of the world is to buy a bond that pays installments far into the future. An example of such is a perpetual bond.
When a company sells a perpetual bond they promise to pay regular installments on the bond until the company fails. (If this concept seems alien to you there is a great video by Tom Scott on the concept)
Normal companies try to maximize their risk-adjusted returns (i.e. their share price), but what if we had a company that maximized the price of its perpetual bonds? We can call this type of company an eternal company.
The price of perpetual bonds are determined by interest rates (which the company's executive has no control over) and the company's risk of default (which the company's executive does have control over).
To maximize its bond price an eternal company will try to minimize its risk of default, by
The probability a company will default () can be decomposed into three factors.
A small eternal company will have a very large idiosyncratic risk and will not have much control over systemic and existential risk. A large eternal company may be able to diversify away its idiosyncratic risk and be able chip away at systemic risk (e.g. through regulatory capture). A gigantic eternal company could hold such sway that it may be able to reduce existential risk.
In theory, a loan is a bet that society will collapse in the future, but in practice, markets don't seem to take existential risk seriously. For example the Metaculus community prediction on the chance that humans will go extinct by 2100 is only 2%.
I'm not an expert in corporate bonds. But I think there are some empirical questions that can be asked to test the above theory.
All companies face the principal-agent problem. The investor (principal) wants the company to maximize its profits (or in the case of an eternal company, minimize its risk of default), however the executives (agent) want to maximize their own compensation.
How do we ensure the executives of an eternal company actually try to maximize the company's bond price and not just award themselves a cushy salary?
I've heard people complain that companies are too short-sighted, just trying to maximize their quarterly earnings instead of their expected earnings. Apparently part of the problem is that the executives bonuses are tied to the results of these quarterly earnings.
To align the incentives of the executive and the bondholders, executives of an eternal company will not get annual bonuses, instead they will get generous pensions. Of course, the pensions will be in the form of the eternal company's perpetual bonds! If company fails the executives lose their pension! Clearly the executives will have the incentive to minimize the risk of default.
An alternative is to make decisions via prediction markets i.e. Futarchy, but that's orthogonal this proposal.
A company trying hard not to default would want to be in a low-risk industry with regular cash flows. Some examples I can think of are
Eternal companies will likely have these policies:
While this idea seems to work in theory, it essentially assumes that existential risk is priced into interest rates, but I don't know if this is the case. Additionally, eternal companies are likely to grow very slowly. It will probably take, say, 100 years for the company to get big enough to care about existential risk more than its idiosyncratic or systemic risk. If you think AI Doom will happen in the next few decades then it's probably too late for this idea to work.
But, in 500 million years, when our paperclip maximizer encounters an alien civilization that did solve the alignment problem, instead of it saying "The civilization that gave birth to me had no chance." It would be more dignified if it could say, "The civilization that gave birth to me had fledgling eternal company that would have tried to solve the alignment problem, but they were a few decades too late."
This is not my best idea and I don't have any experience in the financial sector (the most likely sector for an eternal company) so I'm not going to start my own eternal company. I just thought I should put this idea out there.