This is a linkpost for https://s-risks.org/thoughts-on-patient-philanthropy/
Summary
- Risk-free interest rates are currently very low. Therefore, patient philanthropy can only work with risky assets, such as stocks.
- For risky assets, the attractiveness of such investments depends on one’s degree of risk aversion. Risk-averse investors should consider the certainty equivalent (i.e., the guaranteed return that’s equally desirable as the risky return) of investing rather than expected return.
- There are some reasons why patient philanthropy is differentially good for those who primarily wish to reduce suffering, compared to those with other longtermist goals.
- Overall, I believe we should pursue both financial and non-financial investments (such as movement-building and cause prioritisation research). This is in part because there are not that many highly urgent interventions to directly reduce s-risks right now, and there might be more in the future.
Thank you for the certainty equivalent calculations, that was interesting.
This isn't necessarily true. If you expect risk-free rates to increase in the future, then the long-term average interest rate could still be high enough to justify investing.
If impatient actors dominate the market, then the risk-free rate will always be high enough such that patient actors prefer to invest. This is true regardless of what the risk-free rate is currently. Although I don't know how to reconcile a positive pure time preference with the fact that real risk-free rates are currently negative or extremely low.
Yeah, but even 30 year interest rates are low (1-2% at the moment). There is an Austrian 100 year bond paying 0.88%. I think that is significant evidence that something about the "patient vs impatient actors" story does not add up.
Patient philanthropists might want to wait for hundreds or even thousands of years before deploying their capital. 30 years is nothing compared to the possible future of civilization.
I was just talking about 30 years because those are the farthest-out US bonds. I agree that the horizon of patient philanthropists can be much longer.