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wedrifid comments on Tallinn-Evans $125,000 Singularity Challenge - Less Wrong
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Have a reliable source of income and an overdraft available.
I don't think those two alone are sufficient for it to be rational.
I work for a mid-sized (in the thousands of employees), very successful, privately held company with a long, stable history, and I feel very secure in my job. I would say I have a reliable source of income, but even so, I wouldn't estimate the probability of finding myself suddenly and unexpectedly out of work in the next year at less than 1%, and if somebody has school loans, a mortgage, etc., then in that situation, it seems more rational to have at least enough cash to stay afloat for a few months or so (or have stocks, etc., that could be sold if necessary) while finding a new job.
They are sufficient to make the "entire bank account" factor irrelevant and the important consideration the $2,700 as an absolute figure. "Zero" is no longer an absolute cutoff and instead a point at which costs potentially increase.
Okay, let's think this through with a particular case.
Assume only your two factors: John has a reliable source of income and overdraft protection on an account. Since you assert that those two factors are sufficient, we can suppose John doesn't have any line of credit, doesn't own anything valuable that could be converted to cash, doesn't know anybody that could give him a loan or a job, etc
John donates all his savings, and loses his job the next day. He has overdraft protection on his empty bank account, which will save him from some fees when he starts bouncing checks, but the overdraft protection will expire pretty quickly once checks start bouncing.
Things will spiral out of control quickly unless John is able to get another source of income sufficient to cover his recurring expenses or there is some other compensating factor than the two you mentioned (which shows they are not sufficient). Or do you think he's doing okay a month later when the overdraft protection is no longer in effect, he has tons of bills due, needs to pay his rent, still hasn't found a job, has run out of food, etc.? And if he hasn't found work within a few months more -- which is quite possible -- he'll be evicted from his home and his credit will be ruined from not having paid any of his bills for several months.
ETA: the point isn't that all of that will happen or is even likely to happen, but that a bank account represents some amount of time that the person can stay afloat while they're looking for work. It greatly increases the likelihood that they will find a new source of income before they hit the catastrophe point of being evicted and having their credit ruined.
It looks to me like you're ignoring the "reliable" bit in "reliable source of income".
There's no such thing as "reliable" at that level.
No, I'm not. I'm assuming that even if one has a reliable source of income, one still might lose that source of income. Maybe you're interpreting 'reliable' as 'certain' or something very close to that.
To give some numbers, I would consider a source for which there is a 1% to 3% chance of losing it within 1 year as a reliable source, and my point remains that in that situation, with no other compensating factors than overdraft protection on a bank account, it is not rational to donate all your savings to charity.
And so John bets his current lifestyle that he won't lose his job. That bet looks like:
97%: SIAI gets 2700 dollars. (27 utils)
3%: SIAI gets 2700 dollars, hardship for John. (neg 300 utils)
The bet you're recommending is:
97%: Savings continue to grow (1 util)
3%: Savings wiped out to prevent hardship for John. (0 util)
The first bet comes out at E(util): 17.19, the second at 0.97 utils.
You need to be very very risk-averse for the second option to be preferable. So risk-averse that I would not consider you rational (foregoing 16.22 utils to avoid a 3% chance of neg 300 utils?)
Er, you've implied the level of risk aversion by assigning utils, so of course it would be irrational to act more risk averse than John actually is, but it's a weird way to phrase it. If John were more risk averse, the utils for hardship might be considerably lower.
Assuming we can speak cardinally of utility, John has to value his hardship as 33 times as bad as SIAI getting money is good for the first bet not to come out positive at all. If John cares not one whit for the SIAI that makes sense. If John is a codeword for the case that started this discussion that doesn't make sense. Maybe I should have just made my point with the ratios.
I think most people would evaluate the hardship of having their credit ruined and being evicted as far greater than 33 times as bad as SIAI getting money (or SIAI getting money in 1 year when a 6-month cash reserve safety net has been built up). Also, it's actually greater than 33 times, because you also have to include the probability that they won't get another income source before they hit the catastrophe point, but even including that, I think most people would rate their life being ruined as orders of magnitude more negative utils than SIAI getting the donation is positive utils.
John is definitely not the case that started this discussion. My entire point is that Rain has a bunch of other compensating factors, which one could easily argue make it rational in that case. The issue under debate is whether somebody with none of those addtional compensating factors that Rain has would be rational to do the same, given just a reliable source of income and overdraft protection.
The question, of course comes down to what utils are reasonable to assign. I too could choose numbers that would make either option look better than the other.
There's also a wide range of available options between the two extremes you consider, and risk aversion should make one of them preferable..
Yeah; I would think that generic health problems alone would be in that area of probability.