# X-Risk, Anthropics, & Peter Thiel's Investment Thesis

24 min read26th Oct 20211 comment

# 49

This story is cross-posted from my blog, jacksonw.xyz.

Summary: I analyze an essay by Peter Thiel, in which he explains:

• How markets are incentivized to ignore the risk of civilizational collapse.
• How this introduces distortions in both market prices and our thinking.
• How to attempt to correct for these distortions using "The Optimistic Thought Experiment"
• A big-picture view of financial history as a single "Great Boom" built on the uncertain hope that capitalist civilization will ultimately be proven viable and achieve existential security.

I then add my own musings about how these ideas might usefully connect with the goals of longtermist Effective Altruism.

# EA Portfolio Design: An Unsolved Problem Way Over My Head

Effective altruists have discussed whether EA values and beliefs should affect how we invest the wealth that we eventually plan to donate:

I consider myself reasonably savvy about financial topics, but I would be in way over my head if I tried to synthesize all these competing claims and produce the One True EA Portfolio Theory.

However, I think it's an important unsolved problem in EA where further progress could likely be made, and thus should be taken very seriously. To some extent, the entire concept of longtermist EA is driven by a financial/values "edge" of buying the far future cheap because other people don't care as much about the far future. In this and other ways, EAs (including non-longtermists who care more about suffering of distant beings than most folks, and to a lesser extent rationalists more broadly who have unique beliefs about AI, etc) have different beliefs and different priorities than the typical investor, which should present many opportunities to bet on those beliefs and arbitrage the difference in values.

(PSA: For anyone reading who is totally new to finance & investing topics, stop reading this post and instead read up on the basics — here is a helpful, charismatic, rationalist introduction to the logic of index investing, and here is a handy reddit-consensus guide to personal finance. The couple hours I spent first reading about index investing and making the effort to get my finances in order have been some of the highest-value hours of my life, since they led directly to getting higher returns and paying lower fees on my entire life's savings.)

# Reading the Thiel-Leaves of "The Optimistic Thought Experiment"

Instead of synthesizing any of the above claims, I am here merely to throw another wild idea into the mix!! In this post, I present my interpretation Peter Thiel's overall financial strategy, an investment thesis grounded in ideas like X-risk and the anthropic principle, based on what he calls "the optimistic thought experiment" in his 2008 essay of the same name.

Thiel's writing style is entertaining, but also cryptic and postmodern. He sometimes meanders around his real point, interleaving the chain of rational argument with jokes, straussian literary/religious allusions, and memorable bits of trivia from the history of finance. I'll try to extract the most relevant bits and clarify when necessary.

## We face significant X-risk.

After kicking things off with some characteristic Christian allegory, Thiel introduces his concern about anthropogenic existential risk to civilization:

Beginning with the Great War in 1914, and accelerating after 1945, there has re-emerged an apocalyptic dimension to the modern world... Will it be an environmental catastrophe like runaway global warming, or will it be murderous robots, Ebola viruses genetically recombined with smallpox, nanotech devices that dissolve the living world into a gray goo, or the spread of miniature nuclear bombs in terrorist briefcases? Even if it is not yet possible for humans to destroy the whole world, on current trends it might just be a matter of time. The relentless proliferation of nuclear weapons remains the most obvious case in point... We know that there exists some point [as more and more countries acquire weapons] beyond which there is no stable equilibrium and where there will be a nuclear Armageddon.

Thiel contrasts these looming dangers with the "eerily complacent" nature of the stock market, which aside from occasional minor corrections seems to march inexorably upwards unperturbed by these existential threats. "The news and business sections [of the newspaper] seem to inhabit different worlds." If Thiel (and effective altruists) are correct to think that existential risk is sizeable — perhaps a 1-in-6 chance over the next century! — then why do markets seem so exuberant?

## Anthropic logic means markets ignore the risk.

First, the more pedestrian fact that pessimistic voices are ignored as they are drained of capital during long bull runs in the markets: perma-bear doomsayers have simply been "wrong for too long", and consequently "they have lost most of their money and have no significant capital left to invest in anything".

Second, and this is the main point that both Thiel and I am focusing on: Thiel reasons that markets are bound by their incentives to ignore existential risk, since there is no way to win a bet that the world will end and also successfully redeem your winnings afterwards.

Apocalyptic thinking appears to have no place in the world of money. For if the doomsday predictions are fulfilled and the world does come to an end, then all the money in the world — even if it be in the form of gold coins or pieces of silver, stored in a locked chest in the most remote corner of the planet — would prove of no value, because there would be nothing left to buy or sell. Apocalyptic investors will miss great opportunities if there is no apocalypse, but ultimately they will end up with nothing when the apocalypse arrives. Heads or tails, they lose. ...A mutual fund manager might not benefit from reflecting about the danger of thermonuclear war, since in that future world there would be no mutual funds and no mutual fund managers left. Because it is not profitable to think about one ’s death, it is more useful to act as though one will live forever.

Since it is not profitable to contemplate the end of civilization, this distorts market prices. Instead of telling us about the objective probabilities of how things will play out, prices are based on probabilities adjusted by the anthropic logic of ignoring doomed scenarios:

# 49

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Thought provoking post, thanks Jackson.

You humbly note that creating an 'EA investment synthesis' is above your pay grade. I would add that synthesizing EA investment ideas into a coherent framework is a collective effort that is above any single person's pay grade. Also, that I would love to see more people from higher pay grades, both in EA and outside the community, making serious contributions to this set of issues. For example, top finance or economics researchers or related professionals. Finally, I'd also say that any EA with an altruistic strategy that relates to money (i.e. isn't purely about direct work) has a stake in these issues and could benefit from further research on some of the topics you highlighted. So there's a lot of things to discuss and a lot of reasons to keep the discussion going.