Eliezer: I'm glad you're finally willing to at least consider the possibility that the world can end up someplace that is neither paperclips nor singulariparadise. A few years back a friend of mine asked you on the #sl4 IRC channel "what do you need to continue your work in the event of collapse" and your response bordered on dismissive. What got you to take long-term economic slump seriously as an existential threat?
Jonathan El-Bizri: on what grounds do you assume we will have GM biofuels online in less than ten years? How much per gallon in 2009 dollars do you expect such a fuel to cost? Why?
Jes: Mad Max scenarios happen all the time. Daily life in much of sub-Saharan Africa is one big Mad Max scenario. Afghanistan is a Mad Max scenario (and was before the US invaded, and still was before the Soviets invaded). What the hunker-in-a-bunker crowd gets wrong is the transition phase: they neglect to think about what needs to happen BETWEEN now and the final descent into chaos and barbarism. What are the upper and lower bounds on how long this transition phase takes? What might be some indicators that the transition is occurring and how far along it is? Guns and canned food only become valuable asset in the late stages. Nobody seems to even ask what's a good investment in the early and middle stages of descent. If only they did, they might end up with more spending power to use on said guns and canned food in the later stages. Thoughts?
As for me, I've been paying attention to some bearish index-tracking ETFs, whose value is inversely related to the performance of the target index (e.g. SRS, SKF). Certain alternative energy companies might also be good investments, as might be railroads and their suppliers. Coal and "green" coal processing. But of course investing in individual companies or even sector tracking ETFs requires a lot more research, caveat emptor.
Here's an odd bias I notice among the AI and singularity crowd: a lot of us seem to only plan for science-fictional emergencies, and not for mundane ones like economic collapse. Why is that? Anybody else notice this?
I have no crystal ball with which to predict the Future, a confession that comes as a surprise to some journalists who interview me. Still less do I think I have the ability to out-predict markets. On every occasion when I've considered betting against a prediction market - most recently, betting against Barack Obama as President - I've been glad that I didn't. I admit that I was concerned in advance about the recent complexity crash, but then I've been concerned about it since 1994, which isn't very good market timing.
I say all this so that no one panics when I ask:
Suppose that the whole global economy goes the way of Japan (which, by the Nikkei 225, has now lost two decades).
Suppose the global economy is still in the Long Slump in 2039.
Most market participants seem to think this scenario is extremely implausible. Is there a simple way to bet on it at a very low price?
If most traders act as if this scenario has a probability of 1%, is there a simple bet, executable using an ordinary brokerage account, that pays off 100 to 1?
Why do I ask? Well... in general, it seems to me that other people are not pessimistic enough; they prefer not to stare overlong or overhard into the dark; and they attach too little probability to things operating in a mode outside their past experience.
But in this particular case, the question is motivated by my thinking, "Conditioning on the proposition that the Earth as we know it is still here in 2040, what might have happened during the preceding thirty years?"
There are many possible answers to this question, but one answer might take the form of significantly diminished investment in research and development, which in turn might result from a Long Slump.
So - given the way in which the question arises - I know nothing about this hypothetical Long Slump, except that it diminished investment in R&D in general, and computing hardware and computer science in particular.
The Long Slump might happen for roughly Japanese reasons. It might happen because the global financial sector stays screwed up forever. It might happen due to a gentle version of Peak Oil (a total crash would require a rather different "investment strategy"). It might happen due to deglobalization. Given the way in which the question arises, the only thing I want to assume is global stagnation for thirty years, saying nothing burdensome about the particular causes.
What would be the most efficient way to bet on that, requiring the least initial investment for the highest and earliest payoff under the broadest Slump conditions?