A pair of hilarious articles by Scott Alexander of AstralCodexTen
Every Bay Area House Party
You walk in. The wall decorations vaguely suggest psychedelia. The music is pounding, head-splitting, amelodious. Everyone is struggling to speak over it. Everyone assumes everyone else likes it.
You flee to the room furthest from the music source. Three or four guys are sitting in a circle, talking. Two girls are standing by a weird lamp, drinks in hand. You see Bob.
“Hey, good to see you again!”
“Man, it’s been a crazy few months. You hear I quit my job at Google and founded a fintech startup?”
“No! What do you do?”
“Yeah. We pay out if there’s a war.”
“Isn’t that massively correlated risk?”
“Yeah. The idea is, we sell war insurance to companies who do badly if there’s a war – tourist attractions and the like. Then we sell the same amount of peace insurance to military contractors. As long as we get the probabilities and costs right, we make the same profit either way.”
“Neat idea, how’s it going?”
“Great! Ayatollah Khameini just bought a ten billion dollar policy.”
“Of the war version or the peace version?”
“Can’t say, confidentiality agreement.”