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Thanks, I hadn't seen that graph yet! I had only searched Manifold.

The odds of 1:7 imply a 12.5% chance of a crash. That's far outside of the consensus on that graph. Though I also notice that their criteria for a "bust or winter" are much stricter than where I'd set the threshold for a crash.

That makes me wonder whether I should have selected a lower odd ratio (for a higher return on the upside). Regardless, this month I'm prepared to take this bet.

but calling this "near free money" when you have to put up 25k to get it...

Fair enough – you'd have to set aside this amount in your savings. You could still earn some interest from the bank, but that's not much.

See in context

32 Who wants to bet me $25k at 1:7 odds that there won't be an AI market crash in the next year?

by Remmelt

8th Apr 2025

1 min read

32

If there turns out not to be an AI crash, you get a 1/(1+7) * $25,000 = $3,125
If there is an AI crash, you transfer $25k to me.

If you believe that AI is going to keep getting more capable, pushing rapid user growth and work automation across sectors, this is near free money. But to be honest, I think there will likely be an AI crash in the next 5 years, and on average expect to profit well from this one-year bet.

If I win, I want to give the $25k to organisers who can act fast to restrict the weakened AI corps in the wake of the crash. So bet me if you're highly confident that you'll win or just want to hedge the community against the possibility of a crash.

To make this bet, we need to set the threshold for a market crash. I find it hard to define comprehensively: is a 40% slump in VC investment in AI start-ups a crash? Or a 30% slump in LLM subscriptions? Or GPU data center providers unable to cover debts? Or just a majority vote here that a crash happened? How do we non-ambiguously define it?

Also, I'd need some proof of you having $25k in cash. If you say you have a well-earning job and saved up the money, that might be enough.

BettingSlowing Down AIAI

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[-]DAL2mo3027

These are very poor odds, to the point that they seem to indicate a bullish rather than a bearish position on AI.

There's definitely a better than 1 in 7 chance of a general market crash in the next year, given tariffs and recession risk (or, if you define crash loosely, we've already had one). Given that broader macro risk, merely 1 in 7 of an AI crash probably implies a forecast that AI will outperform the broader market.

If, for whatever reason, one is willing to disregard the macro risk, then there's a lot more upside in just buying QQQ than taking your bet.

[-]Rafael Harth2mo31

These are very poor odds, to the point that they seem to indicate a bullish rather than a bearish position on AI.

If you think the odds of something are , but lots of other people think they are $x$ with $x << y$ , then the rational action is not to offer bets at a point close to $x$ ; it's to find the closest number to $y$ possible. Why would you bet at 1:5 odds if you have reason to believe that some people would be happy to bet at 1:7 odds?

You could make an argument that this type of thinking is too mercenary/materialistic or whatever, but then critique should be about that. In any case the inference that offering a bet close to $x$ indicates beliefs close to $x$ is just not accurate.

[-]DAL2mo32

This only works if you're the only bookmaker in town. Even if your potential counterparties place their own subjective odds at 1:7, they won't book action with you at 1:7 if they can get 1:5 somewhere else.

Perhaps I misread OP's motivations, but presumably if you're looking to make money on these kinds of forecasts, you'd just trade stocks. Sure, you can't trade OpenAI per se, but there are lot of closely related assets and then you're not stuck in the position of trying to collect on a bet you made with a stranger over the internet.

So, the function of offering such a "bet" is more as a signaling device about your beliefs. In which case, the signal being sent here is not really a bearish one.

[-]Remmelt2mo10

This is a neat and specific explanation of how I approached it. I tried to be transparent about it though.

[-]Remmelt2mo10

Maybe I'm banking too much on some people in the AI Safety community keep thinking that AI "progress" will continue as a rapid upward curve :)

Elsewhere I posted a guess of 40% chance of an AI market crash for this year, though I did not have precise crash criteria in mind there, and would lower the percentage once it's judged by a few measures, rather than my sense of "that looks like a crash".

[-]DAL2mo5-4

If you think there's a 40% chance of a crash, then that's quite the vig you're allocating yourself on this bet at 1:7.

[-]Remmelt2mo10

For sure! Proceeds go to organisers who can act to legitimately restrict the weakened AI companies.

(Note that with a crash I don’t just mean some large reduction in the stock prices of tech companies that have been ‘leading’ on AI. I mean a broad-based reduction in the investments and/or customer spending going into the AI companies.)

[-]Knight Lee2mo26

Maybe you should try to define an AI market crash in such a way it's mostly limited to AI market crashes caused by the economics of AI (rather than a general market crash).

E.g. compare the spending/valuations/investments in AI with spending/valuations/investments elsewhere.

[-]Remmelt2mo20

That's a good distinction.

I want to take you up on measuring actual inflows of capital into the large-AI-model development companies. Rather than e.g. measuring the prices of stocks in companies leading on development – where declines may not much reflect an actual reduction in investment and spending on AI products.

Consumers and enterprises cutting back on their subscriptions and private investors cutting back on their investment offers and/or cancelling previous offers – those seem reliable indicators of an actual crash.

It's plausible that a general market crash feeds into, and is reflective of, worsening economics of the AI companies. So it seems hard to decouple causation there. And, I'd still call it an AI market crash even if investment/valuations/investments are going down to a similar extent in other industries. So I would not try to control for other market declines happening around the same time, but your suggested indicators make sense!

[-]Knight Lee2mo*20

I disagree that it's hard to decouple causation: if the AI market and general market crashes by the same amount next year, I'll feel confident that it's the general market causing the AI market to crash, and not the other way around.

Yearly AI spendings have been estimated to be at least 200 billion and maybe 600+ billion, but the world GDP is 100,000 billion (25,000 billion in the US). AI is still a very small player in the economy. (Even if you estimate it by expenditures rather than revenue)

That said, if the AI market crashes much more than the general market, it could be the economics of AI causing them to crash, or it could be the general market slowing a little bit triggering AI to crash by a lot. But either way, you deserve to win the bet.

If your bet is that something special about the economics of AI will cause it to crash, maybe your bet should be changed to this?

If AI crashes but the general market does not, you win money
If AI doesn't crash, you lose money
If both AI and the general market crashes, the bet resolves as N/A

PS: I don't exactly have $25k to bet, and I've said elsewhere I do believe there's a big chance that AI spending will decrease.

Edit: Another thought is that changes in the amount of investment may swing further than changes in the value...? I'm no economist but from my experience, when the value of housing goes down a little, housing sales drop by a ton. (This could be a bad analogy since homebuyers aren't all investors)^[1]

^{^}
Though Google Deep Research agrees that this also occurs for AI companies

[-]Remmelt2mo20

If your bet is that something special about the economics of AI will cause it to crash, maybe your bet should be changed to this?

What's relevant for me is that there is an AI market crash, such that AI corporations have weakened and we in turn have more leeway to restrict their reckless activities. Practically, I don't mind if that's actually the result of a wider failing economy – I mentioned a US recession as a causal factor here.

Having said that, it would be easier to restrict AI corp activities when there is not a general market crash at the same time (since the latter would make it harder to fund organisers as well as for working citizens to mobilise).

PS: I don't exactly have $25k to bet, and I've said elsewhere I do believe there's a big chance that AI spending will decrease.

Understood! And I appreciate you discussing thoughts with me here.

Another thought is that changes in the amount of investment may swing further than changes in the value...?

Interesting point! That feels right, but I lack experience/clarity about how investments work here.

[-]Knight Lee2mo20

Oh yeah I forgot about that, the bet is about the strategic implications of an AI market crash, not proving your opinion on AI economics.

Oops.

[-]mabramov1mo80

Remmelt and I have made a bet at $5k:$25k odds on if there will be an AI market crash by the end of 2026 with a crash being designated if 2/3 of the following criteria are met:

OpenAI 2025 or 2026 yearly revenue is below $1.6 billion.
Anthropic 2025 or 2026 yearly revenue is below $400 million.
Nvidia revenue for any quarter in the range of Q3 2025 to Q4 2026 under the ‘data center’ category (covering the same revenue items, even if renamed/moved to something else) is below $8.5 billion.

Source for the first two criteria will be public statements by the companies or by credible reporting. Nvidia data centre revenue will be as reported by Nvidia.

We will make a formal post on it shortly

[-]Remmelt1mo10

Here is the post about our bet.

[-]exmateriae2mo61

this is near free money

That's a 12.5% return on 9 months. That's pretty good but calling this "near free money" when you have to put up 25k to get it...

The payback might be lower if I put this on the stock market but if I'm wrong there, there's 99% chance that's only on when the lowest point was or how fast it will recover. I have to wait a bit longer to get 3k out of it but I still own something. Here, you lose, you lose everything.

Still, congrats on putting your money where your mouth is, I'd be curious to see if someone takes you up on it and how you operationalize the bet. Maybe this resolution criteria will help:

[-]Remmelt2mo20

That makes me wonder whether I should have selected a lower odd ratio (for a higher return on the upside). Regardless, this month I'm prepared to take this bet.

but calling this "near free money" when you have to put up 25k to get it...

Fair enough – you'd have to set aside this amount in your savings. You could still earn some interest from the bank, but that's not much.

[-]mabramov2mo10

Remmelt, if you wish, I'm happy to operationalize a bet. I think you're wrong.

[-]Guive2mo21

There are much better ways of betting on your beliefs about the valuations of AI firms over the next year than wagering with people you met on Less Wrong. See this post by Ege for more.

[-]River2mo13

Suggesting specific odds without being able to define a threshold seems a bit, um, confused. Being willing to take the word of a stranger on the internet when these quantities of money are at stake seems outright stupid. I'm staying out of this market. I suggest that you withdraw your offer.

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