LW readers have unusual views on many subjects. Efficient Market Hypothesis notwithstanding, many of these are probably alien to most people in finance. So it's plausible they might have implications that are not yet fully integrated into current asset prices. And if you rightfully believe something that most people do not believe, you should be able to make money off that.
Here's an example for a different group. Feminists believe that women are paid less than men for no good economic reason. If this is the case, feminists should invest in companies that hire many women, and short those which hire few women, to take advantage of the cheaper labour costs. And I can think of examples for groups like Socialists, Neoreactionaries, etc. - cases where their positive beliefs have strong implications for economic predictions. But I struggle to think of such ones for LessWrong, which is why I am asking you. Can you think of any unusual LW-type beliefs that have strong economic implications (say over the next 1-3 years)?
Wei Dai has previously commented on a similar phenomena, but I'm interested in a wider class of phenomena.
It is plausible that a few LessWrong readers have information which would let them create a portfolio which would, on average, perform better than the market. For the large majority of us, though, knowing about overconfidence bias and the law of large numbers should be enough to convince us that putting most of our savings in an index fund is a good idea.
Although everything in this comment seems correct, it also seems to be missing the point a bit. Not all investment is equity. Any of us might be in a position to notice an asset is considerably undervalued.
The old saw about two economists seeing a $50 on the ground and dismissing it as impossible since if it were, someone would have picked it up, is illustrative in this case. The underlying point is broadly correct, since you don't often see fifties lying in the street, but when you do actually see $50 in the street, you don't just leave it there. Sticking with this analogy, by my reading, the OP is suggesting that LW readers go down some unusual streets without a lot of foot traffic, where stray fifties might not have had the chance to be picked up.
These feel like stating the obvious, but maybe outside LW they wouldn't:
Personally, I expect this "market" to remain irrational for longer than I expect anyone who bets against it to remain solvent.
Genetic engineering for intelligence will be a game changer. I don't know when it will start, but as soon as we can reliably produce children with, say, 130 or above IQs markets will anticipate higher future economic growth.
My initial reaction was
But then I actually worked it out in excel and the NPV triples. So thank you for the good suggestion!
Given the current political climate, I think it's likely that those children will be first born in non-Western countries.
I don't see why that would be true. The GWAS and embryo selection approach is basically atheoretical and can affect intelligence at all points in life: you take millions of variants, run a giant regression, and select embryos based on the regression score. You have no idea what each variant does, why it does it, when it does it, or how; all you know is that it seems to increase scores a little bit. And you can do this approach in the complete absence of any understanding of what a brain is or a neuron is.
We will? So the biologists will be able to reverse-engineer the thousands of relevant variants, figure out exactly why they work, and then we'll be given nearly-magical nanobots which don't come close to existing right now which will be able to implement each variant?
Even if we had those nanobots, why would you expect that to work? Aren't there lots of possible changes to intelligence which only work in a narrow developmental window and ideally start at conception? For example, iodine: giving people iodine as adults seems to do zilch for increasing intelligence (once a cretin, always a cretin). How would medical nanotechnology fix that?
You may as well test an idea before trading on it, e.g. gather data about gender composition of a company + profitability, run a simulation, and see if someone trading based on this idea could expect to make money. One idea I've had is reading the Glassdoor.com reviews of what it's like to work at a company and trading based on those... I'm not sure to what extent the smart money is already taking that info in to account or whether it would have any predictive validity.
A related thing that came up in a discussion recently:
When I first found out about Bitcoin (~2010) I thought it was exceedingly clever and technically interesting, but then I put on my Monetary Theory goggles and concluded that as a currency it was subject to deflationary pressures, with a long-term trend towards appreciation. I then took off my Monetary Theory goggles and, I dunno, made a sandwich or something, when what I should have been doing was buying a quantity of Bitcoin below a certain regret-threshold face-value. I now consider this an object lesson in taking ideas seriously.
You're right. It does apply just as much today as it did four years ago, but the buy-in hurts a lot more.
The lesson is to not interpret my beliefs as some abstract, god's-eye-view observation with no real-world consequences. Instead of answering the question "should I buy some Bitcoin?", I answered the question "is Bitcoin the flawless transcendental currency that its proponents claim it to be?" and let that guide my decision on whether to buy Bitcoin.
I obviously have this irrational in-hindsight regret of not whimsically buying a massive pile of Bitcoin in 2010, then selling them in early 2014 and rolling around in a big pile of cash, but I didn't have any good reason to do that. A more pertinent regret about my past actions is that I had a good reason to buy dirt-cheap Bitcoin when they were dirt-cheap by my own material standards, rather than simply dirt-cheap by the standards of history. I didn't act on that good reason and I should have. Even if the currency crashes into oblivion tomorrow, I'll maintain I should have.
Usually the beliefs are impossible to put into practice because of legal constraints like rules against discrimination.
Off the top of my head:
That's true of some of the beliefs yes, but not of all. For example, many socialists believe (or at least used to believe) that large organizations (states) could efficiently allocate resources across a wide range of industries, without making much use of market prices. If you believed that, you might like to invest in conglomerates (which many investors dislike because they think conglomerates are bad at capital allocation across industries) and vertically integrated firms (which make less use of market prices of intermediate goods than non-vertically integrated firms).
Thanks for the direct suggestion! The former would have direct relevance for venture capitalists.
According to gwern,
He paid them more than they would otherwise have made (otherwise, they'd've accepted someone else's job offer). How sexist, offering them better-paying jobs because he wasn't blinded by misogyny.
That's how markets work: exchange only happens if one can gain from it, otherwise one doesn't do it. Every transaction follows that same structure: 'I am only going to pay you X which is the current price for something, even though X is lower than my gain from it'. You're demanding gifts be made, and how is that ethical?
Regarding the efficient market hypothesis:
It is mostly true for large, liquid markets, at times when you do not have any insider information.
The less liquid the particular market you are looking at, the less true it is. That is, if a $100 bill is lying on the ground in a place where people dont look very often, it very well could stay there for a while, and you might have found it first if you were looking.
And if you do have insider information, that is, you know about or understand something that most of the market participants do not understand, then you might very well discover opportunities to beat the market.
A concrete example of how markets are imperfect, and the efficient market hypothesis is not a 100% true rule:
On monday afternoon, Patrick Byrne, CEO of Overstock, gave a speech in Vegas in which he announced that Overstock was partnering with Counterparty (an altcoin), for their attempt to develop a blockchain stock market.
I saw this information very shortly after it happened, and I could have immediately gone and purchased some Counterparty. But I didnt.
One hour later, Counterparty was up 40%, and I thought: well, I shouldve bought! But I guess it is priced in now. Af... (read more)
McKinsey did find that companies with a higher percentage of female outperform their competitors. But it could simply be that more forward thinking companies hire more woman. It's difficult to estimate to what extend those factors are currently priced into stock values.
If the leadership of companies would learn CFAR style skills those companies would perform better.
Experts who get feedback on the prediction they make perform better so companies should put structures into place where their leadership makes data based decisions and get's feedback. You can pay out bonuses by giving employees chips for the internal prediction market of the company.
You need to distinguish between (1) the beliefs people hold for social/political reasons and (2) the beliefs people hold for actually making decisions when important personal interests are at stake.
I doubt anyone seriously believes this in the second sense.
That said, my personal belief -- in the first sense -- is that we are moving more and more towards a "winner take all" economy. As an extreme example, if Google were to invent GAI, it could easily end up bei... (read more)
Invest in Quixey when they go in for the next round of funding, perhaps.
I suspect that the effect, if real, is likely small enough to be masked by confounders, like CEO competence, market conditions, various other biases of the executives and the board,random chance etc. I wonder if any statistics exist on the matter.... (read more)
106 comments so far and the word "artificial" (as in "artificial general intelligence", AI, or AGI) hasn't come up!?
As near as I can tell, if someone gets AGI to really work properly (and get even a not-very-explodey sort of intelligence explosion, just exponential curves with double times of months or years), it is likely, in the span of years to decades, to become worth more than the entire present value of the economy of the planet. How can this not be an investment opportunity?
I am astonished that after 105 comments, cryonics had not yet been mentioned. Very long term investments with compound interest plus a cryonics policy that works seem like a pretty simple formula for acquiring enormous absolute (and potentially even relative) wealth.
Labor costs are already reported, and if it was known that a company was particularly efficient in the labor market, that'd already be factored into its price and performance expectations, regardless of the cause.
I don't believe that, and you lay out exactly why one should not believe this claim for an instant: you seriously think that in the the $2.4 trillion+ hedge fund industry - stuffed full of the smartest hungriest slimiest most ambitious money-hungry people, men and women who would sell their own grandfather if that would provide collateral for a juicy short, who would encourage their employees to break the law and throw them to the wolves if they get caught, who are worse friends than sharks because at least sharks' bellies can get full - that this entire industry would uniformly pass up almost doubling their return through a dead-simple legal strategy which would be discovered by their machine-learning algorithms even if they were blind to it - out of sexism? (How many Wall Street traders even know the gender of the CEOs whose associated hieroglyphics flash across thei... (read more)
Bitcoin has been the answer to this question for the past 5 years and it is still the answer. It is the biggest disruption to the monetary system since we moved from bartering to using currency, and it is still in its infancy.