Mistakes in financial economics
I feel like this is almost deliberately missing the point. My median expectation is that AI boosts the economy enormously, so shorting things would be a terrible idea. But non-trivial tail risk is that it kills everyone. So shorting things would be pointless. That is from Tom Chivers. It is easy enough to say buy […] The post Mistakes in financial economics appeared first on Marginal REVOLUTION .
Tom Chivers expresses concern that many people are missing the point when it comes to financial economics. He believes that AI will have a significant positive impact on the economy, so shorting stocks would be a misguided approach. However, Chivers acknowledges that there is a non-trivial risk that AI could lead to the destruction of humanity.
He argues that shorting stocks is pointless in this scenario, as there are intermediate points of catastrophe where one could cash in on puts before everyone dies. Chivers suggests that spending a few thousand dollars a year on put options could be a form of insurance. He points out that many people try to rebut the idea that, given their views, they should be shorting the market.
Chivers believes that this is a mistake, as it reveals a lack of confidence in their own views. He quotes Victor Niederhoffer, who thought that no investor should ever go net short on an asset. Chivers does not use the word "never," but he shares a similar view. He questions why it is so difficult for people to buy puts and do so.
Chivers concludes by saying that it is a matter of intuition that AI will not be as bad as some fear.
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