# Long Bets as Charitable Giving Opportunity

Evaluating Long Bets as a prediction market shows it is dysfunctional and poorly-structured; despite the irrationality of many users, it is not good even as a way to raise money for charity.
statistics, predictions, charity, R
24 Feb 201724 Feb 2018 in progress certainty: likely

Long Bets is a 15-year-old real-money prediction market run by the Long Now Foundation for incentivizing forecasts/bets about long-term events of social importance such as technology or the environment. I evaluate use of Long Bets as a charitable giving opportunity by winning bets and directing the earnings to a good charity by making forecasts for all available bet opportunities and ranking them by expected value after adjusting for opportunity cost (defined by expected return of stock market indexing) and temporally discounting. I find that while there are ~41 open bets which I expect have positive expected value if counter-bets were accepted, few or none of my counter-bets were accepted. In general, LB has had almost zero activity for the past decade, and has not incentivized much forecasting. This failure is likely caused by its extreme restriction to even-odds bets, no return on bet funds (resulting in enormous opportunity costs), and lack of maintenance or publicity. All of these issues are highly likely to continue barring extensive changes to Long Bets, and I suggest that Long Bets should be wound down.

’s 2016 annual letter includes a long section on his $1m long bet with Protege Partners’s Ted Seides that the S&P 500 index will outperform hedge funds (as does his 2017 letter); unsurprisingly, he was about to win, and in May 2017, Seides conceded the bet, blaming the S&P 500 for turning in its “unexpected” but historically average performance. This reminded me of in general (abbreviated LB; about; FAQ; rules/procedure), a /registry launched in April 2002 but which never really caught on (in part because their website was effectively unusable for several years), but is still running and still resolving bets and still has any number of in-progress bets and open challenges. It is one of several projects of the Long Now Foundation, but less high profile than others like the being built for 1 For a Long Bet, to create a ‘prediction’ one pays a$50 fee; then a challenger and you put up the same bet (minimum of $200) each—even odds is mandatory—and designate a preferred charity, for a bet with duration >=2 years, the bets are invested in a ultra-conservative investment fund (unspecified return, I’d guesstimate 3% optimistically), and the winnings+investment go to the winner’s charity. # Exploiting irrational bets You can’t make money off them directly because of the charity restriction necessary to keep LB legal in the USA (regulation is why we can’t have nice things like prediction markets), but you could try to replace your current charitable giving with canny long bets—as it is not a prediction market, after all, the bets can be quite irrational. Indeed, some of the existing predictions strike me as quite dumb and easy money (eg bet #312, “Turkey will join the European Union and become a model for a Democratic Islamic State and lead the way for advancing relations between the Islamic world and ‘Western World’”, 2007–2018, which was unlikely in 2007 and has ~0% probability now). You don’t have to pay the$50 fee or worry about no one taking up your challenge, and you double your money, so if you wanted to donate $1k to , you could instead try to find a bet like #312 and offer a bet of$500 and, almost certainly winning, send ~$1000 to AMF, thereby both providing accountability & increasing funding for effective charities. One could also try to argue that the betting will have additional benefits like establishing a track record as a good predictor or getting publicity for one’s views, a few bets might be interesting as a learning experience, and taking/making bets could be useful as a companion to any research/essays/books one might write as a form of accountability. # Challenges The downsides would be: • LB invests funds super-conservatively, so the opportunity cost is nontrivial—they definitely don’t get the standard 7% stock market returns, so one is forfeiting something like 4–7% annual returns. (Presumably if one thinks that spending one’s money in some other way such as donating to a charity right now so the charitable activities can be done right away is better than investing & donating later, one thinks the opportunity cost is >7% and so the LB opportunity cost is even greater than just 4%!) For example, Buffett reports for his bet that as of February 2017, if they had simply put their [$1]($2008)m into the S&P 500 index, with the cumulative return of 85.4% it would be worth$1.854m; in other words, Buffett will win for his favored charity little more than he would have earned if he had not used LB at all & simply held the money, and substantially less than if he had kept the money in Berkshire Hathaway which has seen a cumulative return of 221% (BRK.A has appreciated from $145,929 31 December 2007 to$244,121 27 February 2017). Or to put it another way, by not doing a handshake bet, Buffett/Seides gave LB a float of $1m over an long time period with a large opportunity cost2 and thus would have paid LB ~$800,000 for its service; it is not clear that this would have been money well spent, and indeed, it turns out that Buffett did not allow LB to hold the money but instead invested the original wager of $827,752 into a US Treasury bond (worth$1m by 2012) & then reinvested into Berkshire Hathaway.3

• the ‘long’ aspect exacerbates this, as the longer a bet goes on, the less likely it is that you wind up donating more to your charity than just saving & giving later

• 3% is optimistic, as the rules state that half of the ‘conservative’ return goes to the Long Now Foundation in addition to the $50 prediction fee: The entire amount goes into a long-term investment portfolio called the Farsight Fund—its assets are in “Endowments”, a mutual fund managed by Capital Research and Management Company. Half of the growth of that fund is drawn off to The Long Now Foundation, which maintains the LB service; the other half accrues so that the eventual payment to the winner’s preferred charity may be significantly larger than the original bet stakes. I asked LB for more information and they replied that they intend to publicly review Farsight Fund performance at the end of 2017. • there are not many predictions in general, and only a few are added each year, of which many are clearly unserious despite the registration fee & LB’s moderation, limiting possible investments • all bets are 1:1, sharply upper bounding how many are worthwhile (eg if someone thinks that a thing is only 60% likely and you think it’s 100% likely and they register a prediction for it, you can’t do anything about it) and how much you can money-pump people for (only 2x) • many of the predictions seem to be invalid or outdated; bet #312 hasn’t finished yet, but I think it would technically be invalid to make that bet with him now because a bet expiring in 2018 can’t be at least 2 years long • of the valid ones which would be profitable to take, I would expect most of them to back out or refuse to bet or quibble about technicalities or delay as long as possible; LB requires a$50 fee but they don’t require the $200 bet to be prepaid and you have to negotiate with each predictor before any bet goes into effect. So you can’t bet with most of them. (A major downside of personal betting as compared to prediction markets is the huge friction & transaction costs.) • LB could still collapse or embezzle it all or decide flagrantly wrong (that said, the Long Now Foundation has been operating since 1996, for 21 years, and the latest Form 990 for 20144 indicates their financial health looks good, and at least there have been no complaints about misjudgments for the handful of expired bets, ~9, thus far) • you might be the irrational one and see your bets go to worthless charities (eg Buffett designated Girls Inc as his winner; but that$1m is going to do far less good than if it was going to the Gates Foundation with the rest of Buffett’s money!)

• the publicity benefits are minimal: the Buffett bet has been widely reported on, but because of the amount and it being Warren Buffett, not because LB moderates it (if anything, LB has benefited far more, both financially and publicity-wise); other bets have not received much publicity

# Minimum required returns

The opportunity cost is the big one. Since the minimum is 2 years, and guesstimating 3% return for the fund and using the usual stock market index return of ~7%, you are forfeiting ~4% return for >=2 years, so the minimum opportunity cost is or ~8.4% of your bet. That is quite a lot.

The question becomes, even if you think you’ve found a bet you have >50% chance of winning (required to make it +EV given the mandatory 1:1 betting), how much of an edge do you need to just outpace the opportunity cost?

You need to solve for p in a value expression like . b drops out as a constant, so for t=2, you need… p=0.54. In general, . So even if you assume you are certain to win, p=1, you can’t bet any further out than ~18.19 years (so in 2017, any bet past 2035 is out of the question).

Or to put it another way, the lost return doubles in 18 years (), so since you can never earn more than twice your bet on LB, past 18 years it becomes impossible to earn a return (before, it is merely very difficult).

data.frame(Year=2:19, Minimum.Win.Prob=sapply(2:19, function(t) {
optimize(function(p) { abs(1.07^t - 2*p*1.03^t) }, seq(0,1,by=0.001))$minimum })) # Year Minimum.Win.Prob # 2 0.5395891434 # 3 0.5605221301 # 4 0.5822973072 # 5 0.6049417583 # 6 0.6284340139 # 7 0.6527947343 # 8 0.6781593805 # 9 0.7045338182 # 10 0.7318640396 # 11 0.7602945746 # 12 0.7898129251 # 13 0.8204982106 # 14 0.8523813174 # 15 0.8854592825 # 16 0.9198648951 # 17 0.9555596565 # 18 0.9926832986 # 19 0.9999338930 1.07^10.5 # [1] 2.034837186 data.frame(Year=2:11, Minimum.Win.Prob=sapply(2:11, function(t) { optimize(function(p) { abs(1.07^t - 2*p*1.00^t) }, seq(0,1,by=0.001))$minimum }))
# Year Minimum.Win.Prob
#    2     0.5724575464
#    3     0.6124911939
#    4     0.6553833666
#    5     0.7012821290
#    6     0.7503808673
#    7     0.8028891537
#    8     0.8591051279
#    9     0.9192578559
#   10     0.9836032026
#   11     0.9999338930

In the worst-case of 0% return from the LB investment fund after fees & Long Now taking its half, the upper bound is 11 years (2028).

# Opportunities

As of 25 February 2017, LB has 29 registered bets, of which 9 have finished & 20 are outstanding with a total balance (excluding any investment returns) of $1,041,800 (or$41,800 excluding the Buffett bet). The bets maturing soon:

Given the implied 50% probability, I disagree strongly on many of these, but unfortunately there is no additional betting; bets must be done on predictions only.

## Expired or Invalid Bets

There are ~207 outstanding predictions but a decent fraction are ill-defined, expired, or expiring too soon to register a bet on. Reviewing the ones with due dates before 2035:

Expired, right:

Expired, wrong:

Expired:

About to expire: Cannot be bet on and so should be removed, or the prediction needs to be edited, because it matures in <=2 years and the LB rules mandate bets must be >=2 years long:

Should be removed for being ill-defined/unjudgeable/unfalsifiable, vague, emotizing, moronic, spam or just plain awful:

I have emailed this list to LB so they can clean up their predictions page; they said they will keep it in mind should they ever update the site.

Amusingly, even though predictors presumably are at least 50% confident when they make binary predictions at 1:1 odds, by my count, over 3x as many expired predictions were false rather than true, even judging generously and skipping the hardest. So, the predictors as a whole are not just badly but systematically overconfident, and one could’ve made a considerable profit just betting against everyone blindly.

## Valid and Available Predictions

I have of all kinds over thousands of predictions (with 2,263 judged predictions on PredictionBook alone as of 16 May 2017) and am well-calibrated, so for each available prediction, I will make a quick prediction of their probability to help form my expected-value estimates.

This gives (excluding all the expired ones, but including the well-defined-but-moronic ones, which are winnable should the predictor be sufficiently foolish as to accept bets) as viable candidates, going by year (the main determinant of profitability) / prediction / initial probability estimate:

# Optimal selection of bets & amounts

Optimal choice of which bets to make and how much to offer is simplified by the upper bound of 18 years, the high probability that most bet offers will be declined, the inability to reinvest gains (since all winnings go immediately to charity), and risk neutrality since it’s for a charity. As far as I can tell, there’s no need for advanced apparatus like or the ; one simply takes one’s available total investment, estimates the probability of winning to get the expected value, divides by years to get annual return, and offers to bet everything on whatever has the highest implied annual return >0%; then with whatever is left over, one moves onto the next bet, and so on until one runs out of money or bets. (So one would start with the nearest ~0% predictions…)

lb <- read.csv(stdin(), header=TRUE, colClasses=c("integer", "character", "factor", "numeric"))
Year,Prediction,ID,P
2020,"By 2020 a completely propellant-less (no material particles) ...",92,0.00
2020,"By 2020, 75% of all incremental new generation will come fr...",141,0.50
2020,"By 2020, GE crops will be grown on 10 fold more acreage tha...",522,0.50
2020,"By 2020, across at least 25% of the continental US, the cos...",655,0.50
2020,"By 2020, historians will agree that the start of the 21st c...",295,0.00
2020,"By 2020, in real or artificial life, sustainable evolutiona...",44,0.00
2020,"By December 31, 2020, synthetic solar energy (fusion) will ...",605,0.50
2020,"By the year 2020 solar electricity will be as cheap or chea...",76,0.50
2020,"By the year 2020 the technology will exist that will allow ...",143,0.00
2020,"By the year 2020, the tickets to space travel - at the leas...",27,0.00
2020,"China's current regime will be overthrown or reformed (anot...",588,0.02
2020,"My prediction is that artificial life; i.e., life from non-...",195,0.50
2020,"Self-replicating manufacturing machines will be commonplace...",345,0.00
2020,"The first ice-free Arctic day (as defined by NSIDC) will oc...",653,0.40
2020,"By 2020, Urban and vertical farms will replace 10% of city ...",661,0.01
2020,"Turkish president Recep Tayyip Erdogan will be found guilty...",685,0.05
2020,"The CFR (Delivered) China price of Iron Ore (62% Fe) as pub...",718,0.15
2021,"A commercial airliner will be destroyed by terrorists hacki...",615,0.05
2021,"The rate of fatalities for seafarers will be ten times that...",724,0.50
2022,"By 02022, Aether Physics (or its equivalent) will take the ...",627,0.00
2022,"In ten years, people will be watching more live video than ...",623,0.05
2023,"Patents will be abolished by at least two leading economies...",343,0.00
2023,"Roe v. Wade will not celebrate a 50th anniversary.",347,0.33
2023,"advances in personal aviation will cause the cost of land i...",433,0.00
2024,"That by 2024 'artificial' life emerging somewhere out of th...",42,0.5
2024,"US accounting and banking regulations will not require that...",149,0.50
2024,"Apple will release an electric car within the next decade.",678,0.15
2025,"A third party candidate will be elected President of the Un...",583,0.05
2025,"By 2025 at least 50% of all U.S. citizens residing within t...",106,0.01
2025,"By 2025, Albert Einstein's theory of relativity will be con...",427,0.00
2025,"By 2025, Quantum field theory will no longer be part of The...",429,0.00
2025,"By 2025, Stellar nucleosynthesis will no longer be consider...",431,0.00
2025,"By 2025, The Aether Physics Model will not have replaced qu...",432,0.00
2025,"By 2025, The giant impact hypothesis will no longer be the ...",430,0.00
2025,"By 2025, at least 25 of the 30 stocks currently in the Dow ...",112,0.50
2025,"By 2025, more than 50% of desktop computers in the world wi...",270,0.05
2025,"By 2025, new astronomical observations and theories will re...",425,0.01
2025,"By 2025, the very first human being will be cloned and this...",284,0.10
2025,"By the end of 2024 there will be a Single Global Currency m...",226,0.00
2025,"Major online internet usage research firms will record tha...",88,0.00
2025,"Neither the Google car nor any other fully autonomous car w...",656,0.20
2025,"The concept of time as a linear dimension will be replaced ...",173,0.00
2025,"The nation with the highest (nominal) GDP in the world in 2...",491,0.50
2025,"By 2025, the underground economy in the USA will be worth m...",662,0.40
2025,"By 2025, oil and gas companies will find that their carbon ...",674,0.00
2025,"Due to a favorable political & social conditions, India's e...",684,0.03
2025,"The June, 2025 Labor Force Participation Rate and unemploym...",687,0.50
2029,"By December 31 02029 one of the world's top ten car manufac...",710,0.30
2030,"..effective computerized individual citizen profiling, with...",289,0.05
2030,"A nuclear explosive weapon will be used in war or terrorism...",521,0.25
2030,"By 2030 all surgical anesthesia will be administered and mo...",43,0.3
2030,"China will break apart by 2030",297,0.05
2030,"...China will lay an ownership claim to the entire moon.",624,0.01
2030,"By 2030, 30% of libraries existing today will not have wall...",657,0.10
2030,"By 2030, the apostrophe will have functionally disappeared ...",658,0.00
2030,"That the average level of innovation between 2025 and 2035 ...",321,0.35
2030,"Iranian women will become the dominant force in Iranian pol...",659,0.02
2031,"The average annual Palmer Drought Severity Index (PDSI) com...",652,0.60
2032,"By 02032, in response to studies correlating interactive me...",629,0.10
2032,"By 2032 you will be able to purchase a mass produced car th...",622,0.70
2035,"By the year 2035 non-invasive devices will allow us to inte...",285,0.30
2035,"One or more space agencies will send a manned mission to Ma...",351,0.40
2035,"There will be a Chernobyl National Park by 2035.",511,0.33
2035,"The United States will NOT adopt a single-payer health care...",682,0.75
2035,"The amount of geologically-derived crude oil consumed by th...",726,0.50
lb$Return <- with(lb, (2*(1-P)*1.03^(Year-2017) - 1.07^(Year-2017)) / (Year-2017)) lb[order(lb$Return, decreasing=TRUE),]
#    Year                                                     Prediction  ID    P          Return
# 1  2020 By 2020 a completely propellant-less (no material particles)... 92 0.00  0.320137000000
# 5  2020 By 2020, historians will agree that the start of the 21st c... 295 0.00  0.320137000000
# 6  2020 By 2020, in real or artificial life, sustainable evolutiona...  44 0.00  0.320137000000
# 9  2020 By the year 2020 the technology will exist that will allow ... 143 0.00  0.320137000000
# 10 2020 By the year 2020, the tickets to space travel - at the leas...  27 0.00  0.320137000000
# 13 2020 Self-replicating manufacturing machines will be commonplace... 345 0.00  0.320137000000
# 15 2020 By 2020, Urban and vertical farms will replace 10% of city ... 661 0.01  0.312852153333
# 11 2020 China's current regime will be overthrown or reformed...       588 0.02  0.305567306667
# 16 2020 Turkish president Recep Tayyip Erdogan will be found guilty... 685 0.05  0.283712766667
# 17 2020 The CFR (Delivered) China price of Iron Ore (62% Fe) as pub... 718 0.15  0.210864300000
# 18 2021 A commercial airliner will be destroyed by terrorists hacki... 615 0.05  0.206917682250
# 20 2022 By 02022, Aether Physics (or its equivalent) will take the ... 627 0.00  0.183199283580
# 21 2022 In ten years, people will be watching more live video than ... 623 0.05  0.160013802094
# 22 2023 Patents will be abolished by at least two leading economies... 343 0.00  0.147895706868
# 24 2023 advances in personal aviation will cause the cost of land i... 433 0.00  0.147895706868
# 30 2025 By 2025, Albert Einstein's theory of relativity will be con... 427 0.00  0.101919247868
# 31 2025 By 2025, Quantum field theory will no longer be part of The... 429 0.00  0.101919247868
# 32 2025 By 2025, Stellar nucleosynthesis will no longer be consider... 431 0.00  0.101919247868
# 33 2025 By 2025, The Aether Physics Model will not have replaced qu... 432 0.00  0.101919247868
# 34 2025 By 2025, The giant impact hypothesis will no longer be the ... 430 0.00  0.101919247868
# 39 2025 By the end of 2024 there will be a Single Global Currency m... 226 0.00  0.101919247868
# 40 2025 Major online internet usage research firms will record tha...   88 0.00  0.101919247868
# 42 2025 The concept of time as a linear dimension will be replaced ... 173 0.00  0.101919247868
# 45 2025 By 2025, oil and gas companies will find that their carbon ... 674 0.00  0.101919247868
# 29 2025 By 2025 at least 50% of all U.S. citizens residing within t... 106 0.01  0.098752322664
# 37 2025 By 2025, new astronomical observations and theories will re... 425 0.01  0.098752322664
# 46 2025 Due to a favorable political & social conditions, India's e... 684 0.03  0.092418472258
# 28 2025 A third party candidate will be elected President of the Un... 583 0.05  0.086084621851
# 36 2025 By 2025, more than 50% of desktop computers in the world wi... 270 0.05  0.086084621851
# 38 2025 By 2025, the very first human being will be cloned and this... 284 0.10  0.070249995833
# 27 2024     Apple will release an electric car within the next decade. 678 0.15  0.069286299249
# 55 2030 By 2030, the apostrophe will have functionally disappeared ... 658 0.00  0.040555571286
# 41 2025 Neither the Google car nor any other fully autonomous car w... 656 0.20  0.038580743799
# 53 2030       ...China will lay an ownership claim to the entire moon. 624 0.01  0.038296288650
# 57 2030 Iranian women will become the dominant force in Iranian pol... 659 0.02  0.036037006014
# 49 2030 ..effective computerized individual citizen profiling, with... 289 0.05  0.029259158105
# 52 2030                                 China will break apart by 2030 297 0.05  0.029259158105
# 14 2020 The first ice-free Arctic day (as defined by NSIDC) will oc... 653 0.40  0.028743133333
# 54 2030 By 2030, 30% of libraries existing today will not have wall... 657 0.10  0.017962744925
# 23 2023             Roe v. Wade will not celebrate a 50th anniversary. 347 0.33  0.016549954250
# 59 2032 By 02032, in response to studies correlating interactive me... 629 0.10  0.003020653944
# 50 2030 A nuclear explosive weapon will be used in war or terrorism... 521 0.25 -0.015926494616
# 48 2029 By December 31 02029 one of the world's top ten car manufac... 710 0.30 -0.021343862281
# 44 2025 By 2025, the underground economy in the USA will be worth m... 662 0.40 -0.024757760271
# 51 2030 By 2030 all surgical anesthesia will be administered and mo...  43 0.30 -0.027222907797
# 56 2030 That the average level of innovation between 2025 and 2035 ... 321 0.35 -0.038519320977
# 2  2020 By 2020, 75% of all incremental new generation will come fr... 141 0.50 -0.044105333333
# 3  2020 By 2020, GE crops will be grown on 10 fold more acreage tha... 522 0.50 -0.044105333333
# 4  2020 By 2020, across at least 25% of the continental US, the cos... 655 0.50 -0.044105333333
# 7  2020 By December 31, 2020, synthetic solar energy (fusion) will ... 605 0.50 -0.044105333333
# 8  2020 By the year 2020 solar electricity will be as cheap or chea...  76 0.50 -0.044105333333
# 12 2020 My prediction is that artificial life; i.e., life from non-... 195 0.50 -0.044105333333
# 19 2021 The rate of fatalities for seafarers will be ten times that... 724 0.50 -0.046321800000
# 25 2024 That by 2024 'artificial' life emerging somewhere out of th...  42 0.50 -0.053701087293
# 26 2024 US accounting and banking regulations will not require that... 149 0.50 -0.053701087293
# 61 2035 By the year 2035 non-invasive devices will allow us to inte... 285 0.30 -0.055362555000
# 35 2025 By 2025, at least 25 of the 30 stocks currently in the Dow ... 112 0.50 -0.056427012306
# 43 2025 The nation with the highest (nominal) GDP in the world in 2... 491 0.50 -0.056427012306
# 47 2025 The June, 2025 Labor Force Participation Rate and unemploym... 687 0.50 -0.056427012306
# 63 2035               There will be a Chernobyl National Park by 2035. 511 0.33 -0.061037331871
# 62 2035 One or more space agencies will send a manned mission to Ma... 351 0.40 -0.074278477902
# 65 2035 The amount of geologically-derived crude oil consumed by th... 726 0.50 -0.093194400805
# 58 2031 The average annual Palmer Drought Severity Index (PDSI) com... 652 0.60 -0.097747312166
# 60 2032 By 2032 you will be able to purchase a mass produced car th... 622 0.70 -0.121616739384
# 64 2035 The United States will NOT adopt a single-payer health care... 682 0.75 -0.140484208062

I began offering bets with a capital of $1200 with AMF as the beneficiary, roughly what I intended to donate in 2017. Offered bets: 1. 2017-05-02: #345, “Self-replicating manufacturing machines will be commonplace by 2020”, Adrian Bowyer 2. 2017-05-11: #661, “By 2020, Urban and vertical farms will replace 10% of city produce in Chicago.”, Ed Hubbard 3. Ibrahim expressed interest in accepting on 19 May 2017, and we began negotiating updated terms. # Long Bets future ## Status and accomplishment Examining the full set of predictions, the total activity on LB can be described as ranging from slim to none: the service is essentially static as it receives no new predictions, no new bets, and not even comments on existing bets. Indeed, with the expiration of the Buffett bet, LB will have a grand total of ~20 bets active (9 expired), and, inasmuch as the Buffett bet represents ~94% of all outstanding bet funds (albeit not under the control of LB, see previous about Buffett controlling & investing his bet’s stake), collapse to a total outstanding sum of ~$60k. One has to wonder if this is enough to even operate the “Farsight Fund” with, as even with ~3% returns, the annual return would be somewhere <$2k, of which half goes to LB. This implies that LB has seen, over its 15 year lifespan, 1.9 bets per year; and, since the majority date to 2002–2005 after its launch, few bets post-2005 (~10), or 0.8 bets per year. Nor have the bets, aside from the Buffett bet, prompted any substantial media interest or changed discussions. (Aside from the lack of comments or general activity on the site itself, we can also look at Wikipedia search queries—almost immeasurably small and several of which were probably me—and at Google Trends, worldwide search trends never exceed 100 searches a day and average ~25 all the way back to 2004; on Google News, I could not find any mentions of “Long Bets” which weren’t normal expressions; and even on Hacker News, where the original coder of the LB site apparently hangs out, there are few mentions of it which aren’t provoked by ongoing interest in the Buffett bet.) Compared to other prediction markets such as Intrade, Good Judgment Project, or PredictIt, LB has had orders of magnitude fewer participants, contracts, or wagered amounts. (Even individual Intrade contracts, such as Obama winning re-election in 2012, often had an order of magnitude more volume than LB’s lifetime total, and just the 2012 presidential election on Intrade alone represented $$291 million, or >100x more.) So over the past 15 years, despite a splashy launch with coverage in and well-connected participants, LB has sank like a stone, is almost totally inactive, and with the expiration of the Buffett bet, even less attention will be paid to it. ## Should Long Bets continue to exist? This raises a serious question: should LB continue to exist at all? Has LB changed any conversations or had any material impact on the world worth the considerable investment by Long Now Foundation & principals to create, launch, and maintain it? LB is of course in a better position to say this than I am, but as far as I can tell (speaking as someone closely interested in LB since its 2002 launch and who has made predictions on most of the LB topics on PredictionBook.com as part of ), I would have to say no. It is true that by the nature of their long-term goals, Long Now Foundation projects cannot and should not be evaluated on annual metrics or killed off-handedly, but LB is front-loaded in the sense that bets must be made before the long future happens in order to have any effects on discussion or foster accountability. From this perspective, from the lack of discussion now and the lack of betting activity, no one is being held accountable for anything in the near or mid-term future; so it is crystal-clear that as of April 2017, LB has failed. Even if LB were to experience a sudden burst of activity in 2017 (not that I can imagine why or who it would be by), it would still be many years before any new bets matured and accountability was possible This is a trend that has been clearly visible since at least 2005, and over a decade later, nothing has changed and with the end of the Buffett bet, public interest in LB will decline even further. No organization can afford to run failed services indefinitely at the expense of other, much more successful projects such as the Clock of the Long Now. Particularly not non-profits. LB is parasitic on the Long Now Foundation’s resources & activities; with the disappearance of the float from the Buffett bet, the fees likely will not even cover a part-time employee working 2 weeks a year on LB-related matters such as maintenance or judging. So the Long Now Foundation has 3 options: 1. maintain the LB status quo as a zombie site limping along, unmoderated, with near-zero activity, getting perhaps 1 or 2 bets in a good year, steadily draining Foundation labor and increasing overhead, for no particular benefit other than stubbornness. 2. shut down LB As LB has so few bets, this would be easy. LB can simply close bets which are clearly going to be won by one side, and can ‘push’ all bets where it’s unclear who will win by transferring the funds to the pre-designated charities. This is permitted by the legal agreement signed by all bettors, and they can hardly complain if their favored charities get the funds earlier than expected (and the charities themselves will be very pleased to have the money early, because of the opportunity cost, before too much time has been wasted or inflation eviscerated the donations). Then the site can be converted to a static HTML site for historical archive purposes.5 Long Now Foundation can then monitor ongoing attempts to fill the prediction market niche such as , or decentralized cryptocurrency-based projects like HiveMind/ & Gnosis, and use them, either by backing particular contracts and serving as an oracle/judge (in centralized models like PredictIt or Gnosis) or by endorsing & subsidizing contracts (HiveMind/Augur). 3. invest in LB further and attempt to revitalize or reboot it ## Fixes What could the Long Now Foundation do to improve? • remove the arbitrary and unnecessary even-odds restriction. There is no legal requirement for this that I am aware of, and it bizarrely limits what bets can be made and also eliminates any meaningful expression of confidence. Two people who think an event might happen with 40% and 60% can make bets, but two people who think 50% and 100% can’t! • a non-conservative investment fund, and specifically, a global Vanguard stock market index: the ‘low risk’ investment vehicle is counterproductive, unnecessary, and risky: 1. counterproductive: the low return makes it irresponsible and unethical to register predictions, particularly for long-dated predictions, discouraging anyone serious about charity & the future from using LB 2. unnecessary: • legally: as LB makes clear, it has no legal obligation to the ‘bettors’, who are actually donators to the Long Now Foundation, to pay anything to the designated charities, much less at a particular return • morally: donators should be risk-neutral and seek to maximize their eventual impact, so trading off enormous long-term growth for some reduction in volatility reduces the expected value of donating/betting • financially: for short-term bets, most bets are <=1k, and the possible loss trivially small either as a fraction of either the Long Now Foundation’s assets or annual revenue so it can simply self-insure (or ask one of its wealthy donors to guarantee it); for medium-term bets, fluctuations downward can be compensated for by borrowing from long-term bets; and for long-term bets (which may be centuries away from maturing), that very aspect implies that the final investment will far exceed the nominal bet and converge on the long-term averages of 7% annually (as indeed LB’s largest and most prominent bet demonstrates on a much shorter time-scale!) 3. and risky: conservative ‘safe’ investments making betting highly unattractive causing lack of use is itself a highly risky investment (where do they go if the Long Now Foundation shuts down LB or itself dissolves?); low growth rates in ‘safe’ investments commit the fallacy inherent in the “precautionary principle” by being intrinsically risky as they build up no reserves against random shocks and extraordinary expenses, entire classes of investments being zeroed out by disasters or hyperinflation. It is worth noting that many classes of bond holders throughout investing history have failed to outpace inflation & taxation, or been simply zeroed out (Credit Suisse 2013), and in the long run, “safe” assets returns have been extremely low and more volatile than so-called “risky assets” (Jordà et al 2017). As Warren Buffett remarks in his 2011 annual letter and again in his 2017 annual letter, investments in productive equities & business rather than bonds or commodities are not just lucrative in the long run but they “will be by far the safest.”67 This is not surprising, considering the long-term average real return rates calculated by Jordà et al 2017 of 1.94% vs 4.64% over 16 countries 1870–2014 (surely a long and eventful time period), implying that an ‘risky’ equity investment would yield a total return 44x than an equity one8, which clearly would be much safer in any meaningful sense of the term. • real moderation: many predictions should never have been approved, and even the decent ones often need to be tightened up and made more objective & falsifiable; it’s absurd to charge 50 to submit a prediction and then let through crackpottery and outright balderdash like “The concept of time as a linear dimension will be replaced by one of time as a polarity between content and context”. (How could anyone take such a site seriously?) • possibly require minimum bets to be paid up front, to avoid people deliberately weaseling out or being incentivized to kill negotiations with prospective bettors; since in theory, people making predictions are willing to bet money on the prediction they are making, they should have no grounds to object. If no bettors appear, the money can be kept until expiration and then donated to the predictor’s pre-specified charity. (This mechanism would be far more appealing with the investment fund fixed.) • more active promotion by Long Now Foundation members, directors, and prominent donors: looking over the bet dates, many date from a narrow time period in the early 2000s, after which LB appears to’ve fallen into obscurity and gone dormant; but many of the people on the Long Now board or who have been involved in Long Now are well-off, donate to charity regularly, and remain heavily involved in writing and activism on issues ranging from technological unemployment to nuclear power to the Russian Internet—thus, they could easily route their charitable giving through long bets on topics of current interest, as well as eliminating the worse predictions & enforcing a basic level of sanity and seriousness • communicative more clearly to the public what Long Now Foundation projects are actually active, and what concrete progress is being made; the Long Now website currently fails at this, as it apparently is devoted to telling people about talks they cannot attend (and which are never made available online) and improvements at a bar they cannot drink at, while people are more interested in things like progress on the Rosetta stones or the Clock 1. Although it’s not always clear how active any of the projects are, except their bar and talks—they are very proud of their bar & talks and the website is frequently updated about them.↩︎ 2. Buffett repeatedly emphasizes in his letters that one of the keys to Berkshire Hathaway’s business success is its insurers, who in turn are enabled by the ‘float’ of insurance premiums which are paid long before any claims are made, and this ‘free’ money can be invested as Buffett wishes; so the cost of giving LB 1m for such an extended time surely was not lost on him. Similarly, he notes in his 2013 annual letter that his estate will not be put into a long-term fund for investment but will be distributed for philanthropic investment as quickly as possible: “all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate”.↩︎ 3. At this point, one has to wonder what function LB plays in the bet at all, if it does not hold the funds, does not invest them in its Foresight Fund, and Buffett (not LB) is the one with access to the confidential audited results from the hedge fund side of the bet in order to judge results?↩︎ 4. The Long Now Foundation doesn’t provide its Form 990s online, so I have copied them from CitizenAudit.org: 2001 / 2002 / 2003 / 2004 / 2005 / 2006 / 2007 / 2008 / 2009 / 2010 / 2011 / 2012 / 2013 / 2014.↩︎ 5. Or simply taken down; I have already .↩︎ 6. pg18–19, Buffett 2011 (emphasis in original): Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as “safe.” In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge. Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as the holders continued to receive timely payments of interest and principal. This ugly result, moreover, will forever recur…Even in the U.S., where the wish for a stable currency is strong, the dollar has fallen a staggering 86% in value since 1965, when I took over management of Berkshire. It takes no less than$$9 today to buy what$$6 did at that time. Consequently, a tax-free institution would have needed 4.3% interest annually from bond investments over that period to simply maintain its purchasing power. Its managers would have been kidding themselves if they thought of any portion of that interest as “income.”… Current rates, however, do not come close to offsetting the purchasing-power risk that investors assume. Right now bonds should come with a warning label… Today, a wry comment that Wall Streeter Shelby Cullom Davis made long ago seems apt: “Bonds promoted as offering risk-free returns are now priced to deliver return-free risk.” …My own preference—and you knew this was coming—is our third category: investment in productive assets, whether businesses, farms, or real estate. Ideally, these assets should have the ability in inflationary times to deliver output that will retain its purchasing-power value while requiring a minimum of new capital investment. Farms, real estate, and many businesses such as Coca-Cola, IBM and our own See’s Candy meet that double-barreled test. Certain other companies—think of our regulated utilities, for example—fail it because inflation places heavy capital requirements on them. To earn more, their owners must invest more. Even so, these investments will remain superior to nonproductive or currency-based assets. Whether the currency a century from now is based on gold, seashells, shark teeth, or a piece of paper (as today), people will be willing to exchange a couple of minutes of their daily labor for a Coca-Cola or some See’s peanut brittle. In the future the U.S. population will move more goods, consume more food, and require more living space than it does now. People will forever exchange what they produce for what others produce. Our country’s businesses will continue to efficiently deliver goods and services wanted by our citizens. Metaphorically, these commercial “cows” will live for centuries and give ever greater quantities of “milk” to boot. Their value will be determined not by the medium of exchange but rather by their capacity to deliver milk. Proceeds from the sale of the milk will compound for the owners of the cows, just as they did during the 20th century when the Dow increased from 66 to 11,497 (and paid loads of dividends as well). Berkshire’s goal will be to increase its ownership of first-class businesses. Our first choice will be to own them in their entirety—but we will also be owners by way of holding sizable amounts of marketable stocks. I believe that over any extended period of time this category of investing will prove to be the runaway winner among the three we’ve examined. More important, it will be by far the safest. ↩︎ 7. pg 12–14, discussing the reason Buffett & his bettor agreed to sell the original US Treasury backing the bet for BRK shares (all emphasis in original): Originally, Protégé and I each funded our portion of the ultimate$1 million prize by purchasing $660,908 face amount of zero-coupon U.S. Treasury bonds (sometimes called “strips”). These bonds cost each of us$420,668—a bit less than 64¢ on the dollar—with the $500,000 payable in ten years. As the name implies, the bonds we acquired paid no interest, but (because of the discount at which they were purchased) delivered a 4.56% annual return if held to maturity. Protégé and I originally intended to do no more than tally the annual returns and distribute$1 million to the winning charity when the bonds matured late in 2017.

After our purchase, however, some very strange things took place in the bond market. By November 2012, our bonds—now with about five years to go before they matured—were selling for 95.7% of their face value. At that price, their annual yield to maturity was less than 1%. Or, to be precise, 0.88%.

Given that pathetic return, our bonds had become a dumb—a really dumb—investment compared to American equities. Over time, the S&P 500—which mirrors a huge cross-section of American business, appropriately weighted by market value—has earned far more than 10% annually on shareholders’ equity (net worth).

In November 2012, as we were considering all this, the cash return from dividends on the S&P 500 was 2.5% annually, about triple the yield on our U.S. Treasury bond. These dividend payments were almost certain to grow. Beyond that, huge sums were being retained by the companies comprising the 500. These businesses would use their retained earnings to expand their operations and, frequently, to repurchase their shares as well. Either course would, over time, substantially increase earnings-per-share. And—as has been the case since 1776—whatever its problems of the minute, the American economy was going to move forward.

Presented late in 2012 with the extraordinary valuation mismatch between bonds and equities, Protégé and I agreed to sell the bonds we had bought five years earlier and use the proceeds to buy 11,200 Berkshire “B” shares. The result: Girls Inc. of Omaha found itself receiving [$2,222,279]($2017) last month rather than the \$1 million it had originally hoped for.

Berkshire, it should be emphasized, has not performed brilliantly since the 2012 substitution. But brilliance wasn’t needed: After all, Berkshire’s gain only had to beat that annual 0.88% bond bogey—hardly a Herculean achievement…After that kindergarten-like analysis, Protégé and I made the switch and relaxed, confident that, over time, 8% was certain to beat 0.88%. By a lot.

…Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained.

By that standard, purportedly “risk-free” long-term bonds in 2012 were a far riskier investment than a long-term investment in common stocks. At that time, even a 1% annual rate of inflation between 2012 and 2017 would have decreased the purchasing-power of the government bond that Protégé and I sold.

I want to quickly acknowledge that in any upcoming day, week or even year, stocks will be riskier—far riskier—than short-term U.S. bonds. As an investor’s investment horizon lengthens, however, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates.

It is a terrible mistake for investors with long-term horizons—among them, pension funds, college endowments and savings-minded individuals—to measure their investment “risk” by their portfolio’s ratio of bonds to stocks. Often, high-grade bonds in an investment portfolio increase its risk.

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8. Over the 145 year period, the mean returns from Table 3, pg13 (geometric mean of real returns in full sample), imply a compounded return of for bonds, for equities, and .↩︎