I think my original point was just that the effect (survivorship bias at the country level) exists and most people happily ignore it. Looks like we agree about that.
My follow-up point was that this effect -- survivorship bias at the country level -- belongs to the class of things which makes your estimates of future returns suspect. However we've moved on to another issue -- how to account for the possibility of a major disaster (war, revolution, hyperinflation, etc.) while planning your life and what does this possibility and its consequences look like.
I think I'd like to stress the the consequences will be complicated and widespread, not reducible to lopping a percentage point off your expected returns. I also think that estimates have to be country-specific. The probabilities of the US going down are noticeably less than the probabilities of, say, Russia, going down. However a Russian implosion will be more contained (in the sense of affecting other countries) while if the US implodes it might well take the entire North America and Western Europe down with it.
One additional point is that you're not only interested in the expected return on your portfolio. You are also interested in the expected variance. The probability of disaster does not only reduce your expected return, but it also pushes up, considerably, your expected variance as well as makes your expected probability distribution asymmetric (more asymmetric, really).
By the way, I do not agree that "the historical performance of an index like the S&P or Nikkei has the cross-country effects of disasters elsewhere already factored in." The reason is that the interdependency of countries is not a constant. It grew a LOT during the XX century, especially its last few decades. For example, S&P is much more correlated with Nikkei now than it was in the 60s. Chinese economic numbers whipsaw Brazil (which exports huge amounts of iron ore to China) and significantly affect the US stock market. Or, remember what happened to the US stock markets when it turned out that Greece is bankrupt?
The world is much more interrelated now than it used to be. Historical performance does not reflect the current reality.
This was originally a comment to VipulNaik's recent indagations about the academic lifestyle versus the job lifestyle. Instead of calling it lifestyle he called them career options, but I'm taking a different emphasis here on purpose.
Due to information hazards risks, I recommend that Effective Altruists who are still wavering back and forth do not read this. Spoiler EA alert.
I'd just like to provide a cultural difference information that I have consistently noted between Americans and Brazilians which seems relevant here.
To have a job and work in the US is taken as a *de facto* biological need. It is as abnormal for an American, in my experience, to consider not working, as it is to consider not breathing, or not eating. It just doesn't cross people's minds.
If anyone has insight above and beyond "Protestant ethics and the spirit of capitalism" let me know about it, I've been waiting for the "why?" for years.
So yeah, let me remind people that you can spend years and years not working. that not getting a job isn't going to kill you or make you less healthy, that ultravagabonding is possible and feasible and many do it for over six months a year, that I have a friend who lives as the boyfriend of his sponsor's wife in a triad and somehow never worked a day in his life (the husband of the triad pays it all, both men are straight). That I've hosted an Argentinian who left graduate economics for two years to randomly travel the world, ended up in Rome and passed by here in his way back, through couchsurfing. That Puneet Sahani has been well over two years travelling the world with no money and an Indian passport now. I've also hosted a lovely estonian gentleman who works on computers 4 months a year in London to earn pounds, and spends eight months a year getting to know countries while learning their culture etc... Brazil was his third country.
Oh, and never forget the Uruguay couple I just met at a dance festival who have been travelling as hippies around and around South America for 5 years now, and showed no sign of owning more than 500 dollars worth of stuff.
Also in case you'd like to live in a paradise valley taking Santo Daime (a religious ritual with DMT) about twice a week, you can do it with a salary of aproximatelly 500 dollars per month in Vale do Gamarra, where I just spent carnival, that is what the guy who drove us back did. Given Brazilian or Turkish returns on investment, that would cost you 50 000 bucks in case you refused to work within the land itself for the 500.
Oh, I forgot to mention that though it certainly makes you unable to do expensive stuff, thus removing the paradox of choice and part of your existential angst from you (uhuu less choices!), there is nearly no detraction in status from not having a job. In fact, during these years in which I was either being an EA and directing an NGO, or studying on my own, or doing a Masters (which, let's agree is not very time consuming) my status has increased steadily, and many opportunities would have been lost if I had a job that wouldn't let me move freely. Things like being invited as Visiting Scholar to Singularity Institute, like giving a TED talk, like directing IERFH, and like spending a month working at FHI with Bostrom, Sandberg, and the classic Lesswrong poster Stuart Armstrong.
So when thinking about what to do with you future my dear fellow Americans, please, at least consider not getting a job. At least admit what everyone knows from the bottom of their hearts, that jobs are abundant for high IQ people (specially you my programmer lurker readers.... I know you are there...and you native English speakers, I can see you there, unnecessarily worrying about your earning potential).
A job is truly an instrumental goal, and your terminal goals certainly do have chains of causation leading to them that do not contain a job for 330 days a year. Unless you are a workaholic who experiences flow in virtue of pursuing instrumental goals. Then please, work all day long, donate as much as you can, and may your life be awesome!