Paul_Christiano comments on Announcing the 2017 donor lottery - Effective Altruism Forum

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Comment author: Jess_Riedel 17 December 2017 06:00:05PM 1 point [-]

I'm curious about why blocks were chosen rather than just a single-lottery scheme, i.e., having all donors contribute to the same lottery, with a $100k backstop but no upper limit. The justification on the webpage is

Multiple blocks ensure that there is no cap on the number of donors who may enter the lottery, while ensuring that the guarantor's liability is capped at the block size.

But of course we could satisfy this requirement with the single-lottery scheme. The single-lottery scheme also has the benefits that (1) the guarantor has significantly less risk since there's a much higher chance they need to pay nothing, especially once the popularity of donor lotteries is more stable and (2) the "leverage" can get arbitrarily high rather than being capped by $100k/<donation size>. The main feature (benefit?) of the multi-block scheme is, as Carl says elsewhere in this thread, "the odds of payouts for other participants are unaffected by anyone's particular participation in this lottery design". But it's not clear to me why this non-interaction principle is better than allowing large leverage. We just want to be really careful about unintended incentives?

Comment author: Paul_Christiano 17 December 2017 07:21:15PM 6 points [-]

A $200k lottery has about 4x as much cost-via-risk as a $100k lottery. Realistically I think that smaller sizes (with the option to lottery up further) are significantly better than bigger pots. As the pot gets bigger you need to do more and more thinking to verify that the risk isn't an issue.

If you were OK with variable pot sizes, I think the thing to do would be:

  • The lottery will be divided up into blocks.
  • Each block will have have the same size, which will be something between $75k and $150k.
  • We provide a backstop only if the total donation is < $75k. Otherwise, we just divide the total up into chunks between $75k and $150k, aiming to be about $100k.
Comment author: Jess_Riedel 18 December 2017 04:18:24AM 0 points [-]

Could you explain your first sentence? What risks are you talking about?

Also, how does one lottery up further if all the block sizes are $100k? Diving it up into multiple blocks doesn't really work.

Comment author: SamDeere 18 December 2017 09:42:53PM *  1 point [-]

An alternative model for variable pot sizes is to have a much larger guarantor (or a pool of guarantors), and then run rolling lotteries. Rather than playing against the pool, you're just playing against the guarantor, and you could set the pot size you wanted to draw up to (e.g. your $1000 donation could give you a 10% shot at a $10k pot, or a 1% shot at a $100k pot). The pot size should probably be capped (say, at $150k), both for the reasons Paul/Carl outlined re diminishing returns, and to avoid pathological cases (e.g. a donor taking a $100 bet on a billion dollars etc). Because you don't have to coordinate with other donors, the lottery is always open, and you could draw the lottery as soon as your payment cleared. Rather than getting the guarantor to allocate a losing donation, you could also 'reinvest' the donations into the overall lottery pool, so eventually the system is self-sustaining and doesn't require a third-party guarantor. [update: this model may not be legally possible, so possibly such a scheme would require an ongoing guarantor]

This is more administratively complex (if only because we can't batch the manual parts of the process to defined times), but there's a more automated version of this which could be cool to run. At this stage I want validate the process of running the simpler version, and then if it's something there's demand for (and we have enough guarantor funds to make it feasible) we can look into running the rolling version sometime next year.

Comment author: Owen_Cotton-Barratt 18 December 2017 02:11:49PM 0 points [-]

A simple variation on the current system would allow people to opt into lottery-ing up further (to the scale of the total donor lottery pot):

Ask people what scale they would like to lottery to. If $100k, allocate them a range of tickets in one block as in the current system. If (say) $300k, split their tickets between three blocks, giving them the same range in each block. If their preferred scale exceeds the total pot, just give them correlated tickets on all available blocks.

If there's a conflict of preference between people wanting small and large lotteries so they're not simultaneously satisfiable (I think this is somewhat unlikely in practice unless someone comes in with $90k hoping to lottery up to $100k), first satisfy those who want smaller totals, then divide the rest as fairly as possible.

Comment author: Owen_Cotton-Barratt 18 December 2017 02:15:22PM 1 point [-]

I don't quite have an algorithm in mind for this. I think in practice it would likely be easy to find solutions to dividing tickets, but perhaps one would want something more specified first.

With a well-specified algorithm and an understanding that it was well-behaved, one could imagine shrinking the block size right down to give people flexibility over their lottery size and reduce the liability of the guarantor. There is perhaps an advantage to having a canonical size for developing buy-in to the idea, though.

Comment author: Paul_Christiano 18 December 2017 06:41:14AM *  0 points [-]

You have diminishing returns to money, i.e. your utility vs. money curve is curved down. So a gamble with mean 0 has some cost to you, approximately (curvature) * (variance), that I was referring to as the cost-via-risk. This cost is approximately linear in the variance, and hence quadratic in the block size.

Comment author: Carl_Shulman 18 December 2017 05:40:50AM 0 points [-]

Could you explain your first sentence? What risks are you talking about?

Probably the risks of moving down the diminishing returns curve. E.g. if Good Ventures put its entire endowment into a donor lottery (e.g. run by BMGF) for a 1/5 chance of 5x endowment diminishing returns would mean that returns to charitable dollars would be substantially higher in the worlds where they lost than when they won. If they put 1% of their endowment into such a lottery this effect would be almost imperceptibly small but nonzero. Similar issues arise for the guarantor.

With pots that are small relative to the overall field or the guarantor's budget (or the field of donors the guarantor considers good substitutes) these costs are tiny but for very big pots they become less negligible.

Also, how does one lottery up further if all the block sizes are $100k?

Take your 100k and ask Paul (or CEA, to get in touch with another backstopping donor) for a personalized lottery. If very large it might involve some haircut for Paul. A donor with more resources could backstop a larger amount without haircut. If there is recurrent demand for this (probably after donor lotteries become more popular) then standardized arrangements for that would likely be set up (I would try to do so, at least).