Yeah I’m not too confident about it, i did not spend time looking into it. But I think it is >30% likely you can compensate for past over or under estimations.
Ulrik Horn
Karma: 41
Apologies, I don’t often come to this forum and only now saw your response. Fair point on teaching the wrong lesson. But to BofAs defence they had a really good workshop for us interns on betting under uncertainty. We had to answer various questions like how long is the Nile. The answer has to be a range and we could set it ourselves. We could put 0 − 10^99 on every answer and get all answers correct. Nobody got more than half right (mostly top grade ivy League grads) or so which really made me humble to overconfidence. They really did try to hammer in proper risk adjustment. That said, how traders bonuses were tied to their profit and loss was not ideal i think—i am pretty sure there were no negative bonuses. The bonuses were like the portfolio competition!
One thought that struck me is that sometimes one can make unholy alliances with profit maximizing organizations aggressively pursuing AI. This happens when you find a company that thinks regulation is likely, thinks that they can increase that likelihood and think that they are better positioned than their competition to thrive in a highly regulated environment. My optimism about this comes comes from both climate change work and vehicle emission regulation. Some oil companies want a carbon price because their expensive oil is less carbon intensive than the cheaper oil of the cooperation. Similarly, some auto makers are better at making low emission vehicles.
I think your point on “What are the culture, expectations, norms and habits?” is possibly crucial. While there are others here in the comments with much more experience than me, I am just reading Sapiens by Yuval Noah Harari and I think it is important to keep in mind that a society (the “object” you want to look at governing in different ways) is a fictional creation and hence trust is essential. This means there is large value in doing things the way they have (to some degree) worked in the past (just look at some people’s fear of letting in immigrants out of a deep rooted fear of collapse). On a related note, and perhaps I overlooked this in your article, one can look at alternative societies around the world. One example that comes to mind is Auroville in India where I think governance is somewhat creative. Perhaps there are other experimental societies out there who have organized in even more radical ways like using computer science to set up distribution systems that circumvents the need for money and demand and supply (like some sort of Soviet style economy but made more efficient by the use of IT)?
Maybe someone else commented something similar here, but I encountered this issue for the first time in an internship in a bank in 2007 where we had a fake investment competition. An option trader told me that a competition is really a binary option, with 0 value if less than strike price and a big reward if above. This means you want to maximize the value of the option which in this case means maximizing volatility. I crushed the portfolio competition by betting on leveraged financial instruments correlated to oil price (the biggest volatility investment at the time).
Another issue I have not explored with GJopen is the possibility of adjusting for past over or under estimates. For example, if you for some period in the beginning forecasted 70% probability of A and 30% of B and then mid way through the question get new data indicating that B is actually 70% likely, you might not want to put 70% but some higher percentage to compensate for the period before having a too low probability. So you can artificially lower your Brier score due to the forecasts being made over time. I am sure there are ways to account for that, I just have not had time to think about it.
I think that to make your above arguments, you would have to engage with literature on whole-system electric grid modeling. That has been done many times and I trust experts when they say that we can create cost-efficient, complete and reliable electricity systems in many geographies using mostly renewables (some say all renewables). Then nuclear, or bio+co2 capture (negative emissions), or hydrogen could fill in for the last bit.
In short, you would have to go into details behind these models and show why they are wrong in order to say a mostly renewable grid is infeasible. If you are right, it is urgent! Because we are headed in the direction of a ton of renewables and then as we get close to saturation we need to put in place measures to take care of what renewables cannot supply. If that cannot be done we need to quickly make drastic changes!
Here is one example modelling Sweden’s future electricity system with and without nuclear showing that nuclear or no nuclear seems to be about the same cost in a cost optimized system, based on total system cost.