In this episode, we tackle an intriguing question inspired by a recent working paper: If artificial general intelligence (AGI) is imminent, why are real interest rates so low?
The discussion centers on the provocative paper, "Transformative AI, Existential Risk, and Real Interest Rates", authored by Trevor Chow, Basil Halperin, and Jay Zachary Maslisch. This research argues that today's historically low real interest rates signal market skepticism about the near-term arrival of transformative AI—defined here as either technology generating massive economic growth (over 30% annually) or catastrophic outcomes like total extinction.
We found ourselves initially at odds over the paper's core claim:
* Seth was initially quite convinced (90% prior!) that low interest rates indeed suggest markets doubt imminent AGI. After all, wouldn't the expectation of revolutionary technology dramatically increase investment opportunities—and thus drive interest rates up?
* To clarify: I’m agreeing with the claim about “transformative AI”. The specific “transformative AI” definition entails a 30% growth rate. I do think there is a greater than 10% chance that we get “a country of geniuses on the cloud” but with low interest rates, but only modest increases in growth. In an initial correspondence with Basil about the paper, through Tyler, I initially emphasized this latter point. We’d need ~lots~ of automation to get growth up to 30%.
* Andrey, on the other hand, started with a skeptical 10% prior. While acknowledging the logic of the paper, he argued that markets might simply not be sophisticated enough—or might be too fragmented—to fully price in the highly uncertain prospects of AGI.
Listen to find out how we updated our priors.
Work mentioned:
Transformative AI, Existential Risk, and Real Interest Rates
Digital Abundance Meets Scarce Architects: Implications for Wages, Interest Rates, and Growth
Please subscribe, comment, and like! We would love to hear your thoughts.
💻Follow us on X:
@AndreyFradkin https://x.com/andreyfradkin?lang=en
@SBenzell https://x.com/sbenzell?lang=en
This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit
empiricrafting.substack.com
