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How Warren Buffett Won His Multi-Million Dollar Long Bet

Posted on Saturday, February 17th, 02018 by Ahmed Kabil
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This year, Warren Buffett won his multi-million dollar, decade-long Long Bet.

From the preacher warning that the day of reckoning is nigh, to the sports analyst prognosticating about the outcome of next week’s big game, to the fortune teller calling for hard times in Mercury retrograde, predictions are pervasive, but accountability is rare. That the vast majority of predictions fail to come true is hardly a deterrent; we tend to remember the few that do.

This is a story about a prediction that was made ten years ago, on the eve of the worst financial crisis since the Great Depression, by Warren Buffett, one of the three richest people in the world. Unlike most predictions, Buffett’s came to pass. And unlike most predictors, Buffett was willing to put his money where his mouth was.


I. The Oracle of Omaha

InMay 02006, some 20,000 investors convened, as they did every year, at the Berkshire Hathaway annual meeting to hear the Oracle of Omaha hold forth. After issuing prophecies on matters such as whether to invest in newspapers (don’t), and a looming housing bubble (there would be), Berkshire Hathaway CEO and legendary investor Warren Buffett took aim at hedge fund managers and the exorbitant fees they charged investors for their supposed expertise in beating the market.

The scene at the Berkshire Hathaway annual meeting. Sarah Hoffman/The World-Herald

If your wife is going to have a baby,” Buffett said, “you’d be better to call an obstetrician than do it yourself. If your pipes leak, you should call a plumber.Most professions add value beyond what the average person can do for themselves. But in aggregate, the investment profession does not do this — despite $140 billion in total annual compensation.

Every hedge fund manager believes they’ll be the exception that outperforms the market, Buffett said, even after taking into account the high fees they charge. Some certainly do. But over time, and in aggregate, the “math doesn’t work.”

Warren Buffett at the Berkshire Hathaway annual shareholders meeting in Omaha in 2015. Bloomberg via Getty images

Buffett said he was willing to bet anyone $500,000 that over ten years, an S&P index fund would outperform a collection of hedge funds. An index fund, at low-risk and low-cost, neither underperforming nor overperforming the market, has been called the “most boring fund there is.” It simply follows the market’s undulations, for better or for worse. And, since it’s not actively managed, the fees are a fraction of something like a hedge fund. In Buffet’s eyes, that’s almost always a better investment than trusting the experts.

As he wrote in his 02017 Berkshire Hathaway annual report:

Over the years, I’ve often been asked for investment advice, and in the process of answering I’ve learned a good deal about human behavior. My regular recommendation has been a low-cost S&P 500 index fund. To their credit, my friends who possess only modest means have usually followed my suggestion.

I believe, however, that none of the mega-rich individuals, institutions or pension funds has followed that same advice when I’ve given it to them. Instead, these investors politely thank me for my thoughts and depart to listen to the siren song of a high-fee manager or, in the case of many institutions, to seek out another breed of hyper-helper called a consultant.

Buffett didn’t have any takers that weekend, nor in the months that followed. But in July 02007, Ted Seides, a principal at investment firm Protégé Partners, wrote Buffett to say he was in. “For hedge funds, success can mean outperforming the market in lean times, while underperforming in the best of times,” Seides later wrote in his official argument against Buffett’s bet. “Through a cycle, nevertheless, top hedge fund managers have surpassed market returns net of all fees, while assuming less risk as well. We believe such results will continue.”

Seides reasoned that Protégé would have an eighty-five percent chance of winning. And anyway, the bet would doubtless garner Protégé a lot of publicity.

Ted Seides and Warren Buffett. Fortune

The question then became how to place the bet legally and publicly. Betting where bettors keep the money winnings is defined as gambling and is illegal throughout the United States. Though some may do it under the table, Buffett and Protégé wanted the bet to play out in the public, with their reputations on the line. For that, there was really only one game in town: Long BetsThe Long Now Foundation’s public arena for competitive predictions of interest to society. Each side picks a charity, and the winnings go to the winner’s charity choice. That was just fine with Buffett and Protégé. $1 million might make a substantial difference in most people’s lives, but it’s a different story when a man with a net worth in the tens of billions of dollars takes on a hedge fund. After all, this bet wasn’t about the money. It was about being right.


II. Wanna Bet?

The story of Long Bets begins, appropriately, with a bet. In 01995, Kevin Kelly, then-Executive Editor of Wired, was interviewing self-described neo-luddite Kirkpatrick Sale, who believed the end of the world was imminent. In the interview, Sale said that by 02020, humanity would suffer “multinational global currency collapse, social friction and warfare both between the rich and the poor and within nations, and […] continent-wide environmental disasters causing death and great migrations of people” — a perspective that, suffice it to say, Kelly did not share.

“Would you be willing to bet on your view?” Kelly asked.

Sale said he was. Kelly pulled out a check for $1,000. The exchange was left in the interview for Wired’s readers to see.

Kevin Kelly, one of the founders of Long Bets. Christopher Michel

“The bet forced both of us to refine strongly held beliefs, and because our predictions were now public, our reputations were on the line,” Kelly later wrote. “This is what public wagers can do: sharpen logic, filter out the halfhearted. Sometimes they can even alter collective views and shape society.”

As Kelly notes, there’s a long history of these kinds of public wagers, particularly in science. In 01600, astronomer Johannes Kepler bet his rival Christian Longomontanus that he could derive the formula for the solar orbit of Mars in eight days. It took him five years. Kepler lost the bet, but his calculations ultimately helped bring about modern astronomy. In 01870, flat earther John Hampden made a 500 pound bet with naturalist Alfred Russel Wallace (who, it should be noted, conceived of the theory of evolution independent of Darwin) that he could prove the Earth was flat using the Bedford Level Experiment. Hampden lost the bet, insisted that Wallace cheated, and ultimately was imprisoned for threatening to kill Wallace. The myth of the flat earth was laid to rest, albeit temporarily.

The results from the Bedford Level Experiment confounded scientists for 30 years before it was realized that it is merely an optical refraction effect. Lateral Science

More recently, there’s the bet that biologist and environmentalist Paul Ehrlich made with economist Julian Simon in 01980. Ehrlich bet Simon $10,000 that the prices of five metals (copper, chromium, nickel, tin, and tungsten) would increase over a decade. The prices declined sharply, and Simon won the bet.

The Simon-Ehrlich wager.

The wager received a lot of publicity over the decade, and the result ultimately shaped societal thinking around limited resources. “Simon was a prolific skeptic of environmentalism,” Kelly wrote, “yet nothing that he ever wrote had as much impact on the course of culture as his wager with Ehrlich. That single, relatively small bet transformed the environmental movement by casting doubt on the notion of resource scarcity.” (Although, if the bet were repeated in subsequent decades, Ehrlich would have won, given the rise in commodity prices. On a long enough timescale, however, it’s one more blip in a multiple-centuries-long trend towards decreasing prices).

Kevin Kelly, Stewart Brand, and Long Now Executive Director Alexander Rose. Gary Wilson

Both Kelly and Long Now Foundation co-founder Stewart Brand were intrigued by the Simon-Ehrlich bet and the public accountability and long-term thinking it made possible. (Ehrlich was Brand’s teacher and mentor at Stanford, and his concerns around resource scarcity and overpopulation were ones Brand used to share). Brand formulated the idea that would become Long Bets in an email to the Long Now board in May 02001:

People bet people about things that will happen farther in the future than the horserace next weekend. Peter Schwartz almost bet Hunter Lovins today about when electric-drive autos will be the norm — -in 10–20 years or in 15–25 years.

If Long Now offered a Longbets holding service, they could have bet, say $1,000, with the outcome to be decided in 02016. The money, the bet, and a fee could be placed with Long Now. The money draws interest in behalf of the eventual winner, minus a maintenance fee to Long Now. Long Now robots keep track of Peter and Hunter. As 2016 approaches the file wakes up and contacts them to begin negotiation toward resolution of the bet. If they don’t resolve, the amount is split 50–50. If they resolve, winner takes all. If only one of the two can be found, that person gets the winnings by default. If neither can be found, the money is held a while longer and then is absorbed into Long Now.

I bet it will work.

It did. Brand founded Long Bets in 02002 with Kevin Kelly and a little seeding assistance from Amazon’s Jeff Bezos. The forum asks all predictors to put their name, a solid argument, and a financial pledge down in support of their statement about the future. Long Now, in turn, provides a long-term record where any prediction can be revisited, reviewed, and discussed at any time.

A Long Bet always starts with a prediction. All predictions should come with an argument in support, a financial pledge, and an end-date. The minimum term for a prediction is two years; there is no maximum term.

A prediction becomes a bet when a challenger comes forward with a counterargument. The predictor may then choose to make a bet with the challenger. The predictor and challenger will agree on a wager, and each will choose a charitable cause to receive the winnings.

When the end-date for the bet passes, The Long Now Foundation adjudicates the bet and donates the proceeds to the winner’s charity of choice.

Long Bet #2.
Long Bet #7.
Long Bet #11.
Long Bet #382.
Long Bet #712.

The Long Bets site offers a public record of all predictions and bets. It highly encourages discussion about what we may learn, or what we have learned, from bets and their outcomes. This discussion feeds improvement of long-term thinking — the real pay-off.

The bets on Long Bets range from the serious, inculcating questions about what it means to be human, to the playful. The first Long Bet on record was between Mitchell Kapor, co-founder of The Electronic Frontier Foundation, and the futurist Ray Kurzweil, who popularized the idea of the technological singularity. Kapor bet Kurzweil $10,000 that by 02029, no computer — or “machine intelligence” — will have passed the Turing test (the test conceived in 01950 by mathematician Alan Turing that tests whether a machine is capable of human intelligence).

Long Bet #1.

The first winner of a Long Bet was actor and Red Sox fanatic Ted Danson. In 02002, the late Time Editor Michael Elliott bet Danson $1,000 that the U.S. Men’s soccer team would win the World Cup before the Red Sox win the World Series. “The Red Sox have had such bad luck in the 20th century,” Danson argued, “I have to believe that in the new millennium it can only get better.” Danson would be vindicated a mere two years later.

Long Bet #8.

The stakes of Long Bets typically ranged in the hundreds and thousands of dollars. Through 02007, the largest bet was the Kurzweil-Kapor Turing test bet. Then along came Warren Buffett.


III. The Tortoise and the Hare

Buffett invested in the Vanguard index fund. Protégé picked five hedge funds of funds (whose names have never been publicly disclosed — although Buffett does see their annual audits).

Buffett and Protégé initially wagered an investment of $320,000 each that was expected become $1 million at the end of the bet. Seides chose the charity Absolute Return for Kids, a London-based philanthropic organization. Buffett chose Girls, Inc. from his hometown of Omaha.

“Buffett’s bet is an ideal Long Bet,” Kevin Kelly wrote once the bet was announced. “It makes a huge difference to anyone who invests in stocks (as do a large percentage of the US, either directly or indirectly) whether a boring index fund yields as much as fancy private hedge funds. The answer either way would be a huge influential signal.”

Carol Loomis, a friend of Buffett’s and reporter for Fortune, wrote at the time that, despite Seides’ confidence that Protégé would win easily, the hedge fund fees Buffett railed against were a significant hurdle. Further, because Protégé chose funds of funds, there was a second level of fees that would be imposed:

On top of the management fee, the hedge funds typically collect 20% of any gains they make. That leaves 80% for the investors. The fund of funds takes 5% (or more) of that 80% as its share of the gains. The upshot is that only 76% (at most) of the annual return made on an investor’s money accrues to him, with the rest going to the “helpers” that Buffett has written about. Meanwhile, the investor is paying his inexorable management fee of 2.5% on capital. The summation is pretty obvious. For Protégé to win this bet, the five funds of funds it has picked must do much, much better than the S&P.

Once the bet was officially announced, the webpage was flooded with comments and vigorous debate. “Voting Against Buffet? [sic],” Louise Murphy commented. “Am quite a novice when it comes to hedge funds and such, but I would never vote against one Warren Buffett. Time will tell.” It was a sentiment many shared.

“Fortunately for us, we’re betting against the S&P’s performance,” Seides said at the time. “Not Buffett’s.”

\The 02008 Financial Crisis hit soon after the bet began. Business Insider UK

In the initial going, the S&P performed horribly. The global financial crisis intensified by November 02008, leaving the S&P down 45% from its 02007 high. After the first year, Protégé fund of funds trounced Buffett’s index fund. But all things considered, it was a bad year for both, with Buffett down 37% and Protégé down 23.9%. Buffett maintained his sense of humor.

“I just hope that Aesop was right,” he said, “when he envisioned the tortoise overtaking the hare.”

He was. Buffett steadily gained ground in the years that followed, finally overtaking Protégé in the bet’s fifth year. And he never looked back. By 02017, it was clear that, short of another collapse in the stock market, Buffett would prevail.

The final scorecard for the bet.

Over the decade-long bet, the index fund returned 7.1% compounded annually. Protégé funds returned an average of only 2.2% net of all fees. Buffett had made his point. When looking at returns, fees are often ignored or obscured. And when that money is not re-invested each year with the principal, it can almost never overtake an index fund if you take the long view.

“In my opinion, the disappointing results for hedge-fund investors that this bet exposed are almost certain to recur in the future,” Buffett said in last year’s Berkshire Hathaway annual report. “When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.”

Seides, meanwhile, thinks Buffett just got lucky, and that the S&P’s performance over the previous decade “vastly overperformed” his expectations. “My guess is that doubling down on a bet with Warren Buffett for the next 10 years would hold greater-than-even odds of victory,” he wrote in his 02017 concession essay.

Perhaps. Buffett, as you might expect, feels otherwise.

“Human behavior won’t change,” he said. “Wealthy individuals, pension funds, endowments and the like will continue to feel they deserve something ‘extra’ in investment advice. Those advisors who cleverly play to this expectation will get very rich. This year the magic potion may be hedge funds, next year something else. The likely result from this parade of promises is predicted in an adage: When a person with money meets a person with experience, the one with experience ends up with the money and the one with money leaves with experience.

Left: Warren Buffett and Long Now Executive Director Alexander Rose present the $2.2 million check to Girls Inc. of Omaha on February 16, 02018.

And what of the winnings? As it happens, the bond value of the initial wager appreciated faster than expected, resulting in shifting the investment strategy and growing the winnings to $2.2 million.

It’s a huge win for long-term thinking. But it’s an even bigger win for Girls Inc. of Omaha, which has an annual operating budget of $2.8 million. Protégé, Buffett and Long Now’s Executive Director Alexander Rose settled the bet on Friday, February 16, 02018 at Girls Inc. headquarters.

Long Now co-founder Danny Hillis, Jeffrey Tarrant of Protégé, Alexander Rose, and Warren and Susie Buffett at the Girls Inc. of Omaha check event on February 16, 02018.

“I just told [Executive Director Roberta Wilhelm] to use it where it’s going to do the most good,” said Buffett.

The sum will be used to help renovate an old convent into a transitional home for girls as they age out of foster care. It will be called the Protégé House.


Learn More

  • Do you have strong opinions about the future? Put your money where your mouth is. Make a bet with Long Bets here.
  • Listen to Planet Money’s primer on the Bet.
  • Read Wired’s 02002 Long Bets profile.
  • Read Long Now’s year-by-year accounting of the bet.
  • Read Warren Buffett’s 02018 Annual Report, where he shares his lessons from the bet.

Warren Buffett Wins Multi-Million Dollar Long Bet

Posted on Friday, February 9th, 02018 by Ahmed Kabil
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SAN FRANCISCO, CA. February 9, 02018.* The Long Now Foundation today announced that it has arrived at a decision for Long Bets #362, popularly known as the “Million Dollar Buffett Bet,” between Warren Buffett and Protégé Partners LLC. Warren Buffett has won the bet, and by a significant margin.

In the bet, Warren Buffett predicted that “Over a ten-year period commencing on January 1, 02008, and ending on December 31, 02017, the S&P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.”

Warren Buffett invested in the Vanguard index fund. Protégé picked five hedge fund of funds (whose names have never been publicly disclosed—although Buffett does see their annual audits).

While Protégé’s position pulled ahead in the early years of the bet, which occurred during the global financial collapse, Buffett’s position more than made up for it, taking the lead for the first time in the bet’s fifth year. Over the decade-long bet, the index fund returned 7.1% compounded annually. Protégé funds returned an average of only 2.2% net of all fees. Buffett’s point, which was well-illustrated, is that when looking at returns, fees are often ignored or obscured. And when that money is not re-invested each year with the principal, it can almost never overtake an index fund if you take the long view.

“In my opinion, the disappointing results for hedge-fund investors that this bet exposed are almost certain to recur in the future,” Buffett said in last year’s Berkshire Hathaway annual report. “When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.”

Girls Inc. of Omaha

Buffett and Protégé initially wagered an investment that would become $1 million at the end of the bet, but the bond value appreciated faster than expected, resulting in shifting the investment strategy and growing the winnings to $2.2 million. The winnings will go to the charity of Buffett’s choosing, Girls Inc. of Omaha. Given that Girls Inc. currently has an operating budget of $2.8 million annually, the winnings will go a long way in furthering the charity’s mission to inspire girls to be “strong, smart and bold.”

“Long Bets is honored to have hosted this decade-long wager,” said Alexander Rose, Executive Director of The Long Now Foundation. “It is both gratifying to see long-term thinking winning the bet, and to have such a great outcome for the worthy charity receiving the winning stakes.”

About Long Bets

Long Bets is a public arena for enjoyably competitive predictions of interest to society, with philanthropic money at stake. The Long Now Foundation furnishes the continuity to see even the longest bets through to public resolution.

The Long Bets forum is intended as a tool to improve long-term thinking. We often make statements about the future, but there’s little that compels us to really think about what we say: even the craziest statements will never have to be revisited. We only remember the tiny fraction of statements that turn out to be correct, leading us to think all predictions generally come true.

Long Bets is changing all this by encouraging us to hold ourselves accountable for the predictions we make. We ask all predictors to put their name, a solid argument, and a financial pledge down in support of their statement about the future. And Long Now, in turn, provides a long-term record where any prediction can be revisited, reviewed, and discussed at any time.

How to make a Long Bet

A Long Bet always starts with a prediction. Anyone can visit the Long Bets website and click on “Make a prediction.” All predictions should come with an argument in support, a financial pledge, and an end-date. The minimum term for a prediction is two years; there is no maximum term.

A prediction becomes a bet when a challenger comes forward with a counterargument. The predictor may then choose to make a bet with the challenger. The predictor and challenger will agree on a wager, and each will choose a charitable cause to receive the winnings.

When the end-date for the bet passes, The Long Now Foundation will adjudicate the bet and donate the proceeds to the winner’s charity of choice.

The Long Bets site offers a public record of all predictions and bets. We highly encourage discussion about what we may learn, or what we have learned, from bets and their outcomes. This is what feeds improvement of long-term thinking—the real pay-off.

*The Long Now Foundation uses five-digit dates. The extra zero is to solve the deca-millennium bug which will come into effect in about 8,000 years.

Warren Buffett maintains his lead in his $1 million Long Bet

Posted on Friday, March 13th, 02015 by Andrew Warner
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In 02008, Warren Buffett placed a Long Bet that will take until 02017 to resolve. He predicted that for those ten years, “the S & P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.

Below is a summary of how things went in the seventh year of this Bet, as published by Fortune Magazine:

Warren Buffett adds to his lead in $1 million hedge-fund bet

warren-buffett

By Carol Loomis

Seven years into a 10-year performance wager, the Berkshire Hathaway CEO is winning easily.

Results are in for the seventh year of what’s sometimes called The Million-Dollar Bet—Warren Buffett’s 10-year wager that the S&P 500 would outperform a sampling of hedge funds—and, for now at least, it’s looking like a rout for the CEO of Berkshire Hathaway.

Under the terms of the wager, Buffett is betting (with his own money, not Berkshire’s) on the stock market performance of an S&P 500 index fund while Protégé Partners, a New York money manager, is banking on five funds of hedge funds (the names of which have never been publicly disclosed) that Protégé carefully picked at the outset. Through the seven years, Vanguard’s 500 index fund, as represented by its Admiral shares, is up 63.5%. That’s the portfolio carrying Buffett’s colors. Protégé’s five hedge funds of funds are, on the average—the marker the bet uses—up an estimated 19.6%. (The “estimated” takes into account that not all of the five funds have final figures for 2014).

A charity of the winner’s choice will receive $1 million—or more, which we’ll get to in a moment—at the bet’s end.

This was the sixth straight year that the contest has tilted in Buffett’s direction: The Admiral shares were up 13.6% in 2014 and the average gain for the funds of funds was 5.6%. Only in the first year of the bet—which began in 2008, a year that was a train wreck for both the economy and the stock market—did the funds of funds win, so to speak. They were down, on average, only 24%. The Admiral shares plummeted by 37% that year.

In Fortune (which exclusively wrote about the beginning of the bet in 2008 and has since annually made public how the bet stands), Buffett pictured himself after the 2008 tumult as a tortoise, up against a hare. Since then, Buffett has stuck to the plot of the Aesop fable and methodically moved ahead of his rival.

With only three years left in the bet, is there a scenario that would leave Protégé closing the yawning gap and winning? One scenario, maybe, and it is articulated by Ted Seides, the Protégé partner who in 2007 negotiated the bet with Buffett (after Buffett, in a speech, threw out a challenge to the hedge-fund world). Says Seides: “The odds now are that we’ll need to see a severe market contraction for our side of the ledger to stage an epic comeback.”

And he adds the deeper meaning of such a contraction. “One lesson from 2008 is that no one wins when that occurs,” says Seides.

To amend that statement only slightly, this contest will definitely have one certain winner: The charity that gets the proceeds of the bet. The odds say that will be Girls Inc. of Omaha, which Buffett designated to get the money if he emerged the victor.

The amount handed over, though, is not likely to be $1 million, because of changes that Buffett and Protégé made in the wager a couple of years ago. The original bet stipulated that each side in the bet would put up $320,000 to be invested in a zero-coupon bond that after 10 years would be worth $1 million. Thus the name of the bet.

But, when the recession hit, interest rates went down so insistently—which sent zero-coupon bonds up—that the valuation of the bond that Buffett and Protégé bought was by the fall of 2012 very close to the promised land of $1 million.

The two contenders then agreed that the bond would be immediately liquidated and the proceeds put into the B stock of the company that Buffett heads, Berkshire Hathaway. Buffett also issued a guarantee: He will pay the winning charity $1 million if the Berkshire stock bought isn’t worth that much at the bet’s end.

And what’s happened since those changes? Berkshire, like the S&P 500 overall, has done well, and the bet’s stock is now worth about $1,680,000.

That’s a tough figure for headline writers to handle. In its annual rundown, Fortune will probably stick to the “Million-Dollar Bet,” even as that description—for the minute, at least—understates the case.

Carol J. Loomis, who retired recently from Fortune as a senior editor-at-large, is a long-time friend of Warren Buffett’s, a Berkshire Hathaway shareholder, and editor of Buffett’s annual letter to shareholders.

How Hard Should the Turing Test Be?

Posted on Tuesday, July 29th, 02014 by Austin Brown
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www_princetonai_com

It seems clear that computers are becoming more intelligent, but in the face of this fact, our definition of intelligence itself seems increasingly blurry. The University of Reading recently made an announcement exemplifying this trend:

The 65 year-old iconic Turing Test was passed for the very first time by computer program Eugene Goostman during Turing Test 2014 held at the renowned Royal Society in London.

At its face, this is huge and historic news. Alan Turing’s proposal of the eponymous test threw down the field of Artificial Intelligence’s original gauntlet. For a computer program to pass for human is no small feat and the creators have done something no one has achieved until now.

Within the world of Long Now’s Long Bets, as well, $20,000 is on the line – Mitch Kapor predicted in 02002 that “By 2029 no computer – or “machine intelligence” – will have passed the Turing Test.” He argued that when it comes to human knowledge and culture,

It is such a broad canvas, in my view, that it is impossible to foresee when, or even if, a machine intelligence will be able to paint a picture which can fool a human judge.

Ray Kurzweil, who helped popularize the Turing Test in his books The Age of Spiritual Machines and The Singularity is Near took him up on the bet, countering that sufficient reverse-engineering of the human brain will allow for computer programs that can think like a human and that trends within the relevant research are accelerating much like the power of computers themselves.

Eugene Goostman would appear to have beat Kapor’s deadline by 15 years!

As with any wager, though, the devil is in the details, and here is where we come back to fuzzy definitions of intelligence. Eugene Goostman the computer program poses as a 13 year-old who is communicating in a language that isn’t his first. Interrogators had only had 5 minutes with which to get to know “him.” And in the end, a “passing” grade for this test was 30% – the program managed to convince 33% of judges it was human.

In a way, we have to talk about Turing tests. The Turing test passed by Eugene Goostman in not the same Turing test proposed by Kapor and Kurzweil. Indeed, Kurzweil found Eugene Goostman to be rather lacking, posting a transcript of a conversation he had with the program and pointing out some of its clearly non-human characteristics:

I chatted with the chatbot Eugene Goostman, and was not impressed. Eugene does not keep track of the conversation, repeats himself word for word, and often responds with typical chatbot non sequiturs.

His bet with Mitch Kapor stipulates that interviews will last 2 hours, which would allow for significantly more in-depth conversation and, one assumes, a much easier time in determining computer or human. Kurzweil has not conceded the bet and even explains that he expects a long period of dubious and debated claims that computers have passed Turing’s test.

Turing’s test was explicitly meant to ignore the mechanisms of thought and to focus on the experience of it, but in tweaking the rules of the test we implicitly set a bar and work towards a definition for human intelligence. The bar cleared by Eugene Goostman may not be high enough to indicate human-level intelligence to Kurzweil or many others, but there can be little doubt that higher bars will yet be cleared and each one’s demonstration of intelligence debated.

Paul Sabin on the Gamble over Earth’s Future

Posted on Wednesday, October 9th, 02013 by Charlotte Hajer
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sabin_the_bet_wr

In 1980, a bet was made between a Malthusian ecologist and a Cornucopian economist – between optimism and pessimism – about the fate of humanity and planet Earth. The wager concerned fluctuations in the market prices for several crude metals. If prices rose over the next decade, civilization must be facing scarcity and thus inevitable doom; falling prices, on the other hand, would signal abundance, ingenuity, and human prosperity. In 1990, optimism won. (A longer-term bet, however, would have turned out differently.)

Last month, Yale historian Paul Sabin published a book in which he revisits this iconic bet. Delving into the philosophical disagreements between doomsday-saying environmentalists and optimistic believers in the adaptive powers of human innovation, the book ultimately asks: how should we measure global prosperity, and what will spur us to act on a changing environment?

While the (rising) price of essential commodities can be a powerful motivator for action, Sabin writes, some important indices of civilizational well-being may not be reflected in the behavior of the free markets (think, for example, of the impact of carbon dioxide emissions, which currently carry no financial burden). Nevertheless, doomsday-warnings about the impact of environmental destruction do not seem to be much better at prompting productive responses to our evolving world. Advocating a middle ground between these two entrenched perspectives, Sabin ultimately argues that the future of our planet is best served by actions and decisions that are driven by social values – and a long-term perspective:

“I think that environmentalists would find a more solid foundation to advocate action if they made their case based on social values, rather than apocalyptic fear. What kind of world do we want to live in? Humans might survive, and even prosper economically, in a warmer and more populated world. But are the risks associated with climate change worth taking? (The answer, I think, is clearly “no.”) Do we want to live on a more biologically impoverished, albeit economically productive, planet? These are profound social questions that, I might point out (as a historian), cannot be answered by economics or biology alone but rather depend on the humanities and can only be resolved through politics.”

The Bet: Paul Ehrlich, Julian Simon, and Our Gamble Over Earth’s Future has been published by Yale University Press. You can read more about and by Paul Sabin here.

Long Bets Table at WorldFuture2013

Posted on Friday, August 2nd, 02013 by Andrew Warner
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longbets

From July 19th- 21st in Chicago, the World Future Society hosted their annual conference, WorldFuture 2013. The conference had over 60 sessions, workshops, and special events over the course of two and a half days, including a keynote from former SALT speaker Nicholas Negroponte. Topics ranged from Artificial Intelligence and the future of education to gaming and politics.

This year, Long Now hosted a table on Long Bets. For the weekend, we waved the $50 prediction fee and gave conference guests the chance to make predictions for free. The table generated much interest and led to predictions on topics as diverse as urban farming and the future of libraries.

One of the keynote speakers and Long Now member, Ramez Naam, paid the table a visit and made two predictions, both of them concerning our environmental future:

“By 2020, across at least 25% of the continental US, the cost of new solar or wind will be lower than the cost of either new coal or new natural gas”

“The first ice-free Artic day (as defined by NSIDC) will occur by the end of 2020.”

Wendell Wallach, a bioethicist at Yale and presenter at the conference, made a controversial prediction concerning the timeline of fully autonomous cars:

“Neither the Google car nor any other fully autonomous car will be marketed to the general public by 2025”

To see the predictions from the conference and other recent predictions, visit the Long Bets site. If you find yourself in disagreement with any of the predictions, join the conversation by creating an account and challenging the prediction.

The Long Now Foundation on Tumblr

Posted on Friday, July 19th, 02013 by Mikl Em
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Photo closeup of a prototype Geneva wheel by Raphael Varieras
Geneva wheel prototype photo by Raphael Varieras

We recently launched a Long Now Tumblr blog where you will find even more about Long Now and related topics. If you’re unfamiliar with Tumblr, you don’t need to join the service to read the blog, just follow the link. But if you are on Tumblr, please follow and share the posts you enjoy.

Our Tumblr will complement what we publish on this blog. We’ll share a lot of Long Now images, information about our projects, fundamentals of what we do and why, and a look back at some highlights from our past.

Every Friday on Tumblr we will share audio from a past Seminar About Long-term Thinking. Our decade-old speaking series is building a compelling body of ideas about long-term thinking. It is curated and hosted by Stewart Brand, Long Now’s co-founder and Board President.

Philip Tetlock, January 02007
Philip Tetlock (screen shot from high-res Seminar video available to Long Now members)

This week we’ve chosen Philip Tetlock’s January 02007 talk from the archives. The research he shares in Why Foxes Are Better Forecasters Than Hedgehogs explores the confidence of forecasters, and it’s timely to revisit as we approach Daniel Kahneman‘s Seminar, just a few weeks away. We’ll tell you more about the relation between Tetlock and Kahneman’s work in our Seminar primer post next week.

The Tetlock Seminar begins with a mention of Long Bets, Long Now’s forum for competitive and meaningful long-term predictions. A good chance to remind you that Long Now will have a Long Bets table at the WorldFuture 2013 conference this weekend in Chicago. If you are there, look for us. Come by the table and make a Long Bet prediction for free.

Long Bets table at WorldFuture 2013

Posted on Thursday, July 11th, 02013 by Andrew Warner
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WFSlogo

From July 19th- 21st in Chicago, the World Future Society will be hosting their annual conference, WorldFuture 2013. The conference has over 60 sessions, workshops, and special events over the course of two and a half days, including a keynote from former SALT speaker Nicholas Negroponte.

Topics range from Artificial Intelligence and the future of education to gaming and politics. The World Future Society was founded in 1966 as an organization dedicated  to thinking about the future, and has been publishing the forecasting magazine The Futurist since 1967.

This year, Long Now will be hosting a Long Bets table at the conference. For this weekend only, we will be waiving the $50 prediction fee and giving conference guests the chance to make predictions for free. We’re hoping that the thought-provoking panels and discussions at the conference will lead to some new exciting predictions and bets.

In the long-term, Long Bets aims to track the specific elements common to predictions that succeed, thus providing a better framework for everyone to think about the future. To attend the conference and visit our table, please visit the WorldFuture 2013 site.

image credit: http://vintagefuture.tumblr.com/

The Imagined Future of 02013

Posted on Monday, May 6th, 02013 by Charlotte Hajer
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LAtimes

Long Now’s Long Bets project is founded on the premise that we can improve our long-term thinking by holding ourselves accountable for the predictions we make about the future. By revisiting our forecasts as time goes by, we reveal the subtle mechanics of society’s evolution, and teach ourselves something about what kinds of visions might turn into reality.

Jerry Lockenour, a professor of engineering at the University of Southern California, has turned this premise into a lesson plan. Students in his Technology Development and Applications class are going back to the future: they are studying a 01988 issue of the Los Angeles Times’ Magazine, which offered a vision of the futuristic LA of 02013.

“In class we study emerging science and technology that can change the future,” he said. The magazine helps students see the relevance of the developments they are reading about in textbooks and professional journals, he said.

The 01988 feature offers a detailed description of a day in the life of a fictional family. Written in consultation with more than 30 futurists and experts, the article offers prospects for the technological innovations, environmental challenges, economic issues, and demographic shifts we might expect to deal with in 02013.

The LA Times itself recently interviewed Lockenour’s students to evaluate the quality of its 01988 predictions. “To their surprise, the students – some of whom weren’t even born when [the magazine’s] look into the future was published – found that many predictions have become reality.” Though robots have not quite become a staple in our households, we do indeed drive our cars with the aid of “electronic navigation systems,” schools have embraced the interactive learning potential of computers, and the population has indeed exploded.

To read the complete feature – and compare its vision of the unimaginable future to today’s present moment for yourself – please visit the LA Times’ website here.

Buffett pulls ahead in wager against hedge funds

Posted on Wednesday, February 13th, 02013 by Austin Brown
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In 02008, Warren Buffet placed a Long Bet that will take until 02017 to resolve. He predicted that for those ten years, “the S & P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.

Below is a summary of how things went in the fifth year of this Bet, as published by Fortune Magazine:

Five years into a ten-year bet that an S&P index fund can beat hedge fund funds-of-funds, Warren Buffett is in the lead for the first time.

warren-buffett

By Carol Loomis

FORTUNE — It’s halfway time in the 10-year stock market wager sometimes called The Million-Dollar Bet—that’s Warren Buffett backing the performance of an S&P index fund vs. a New York money manager backing five funds of hedge funds—and there’s double-barreled news.

Item One: For the first time since the bet started five years ago, Buffett has moved ahead—by an okay margin to boot. Item Two: For the first time ever as well, both sides have crawled out of the ditch (though the funds of funds barely made it) and are showing positive results.

About that history of bad results, of course, you need to keep in mind that this bet started in the gut-wrenching year of 2008, which left both contenders deep in the red. Buffett, though, was definitely a deeper shade of red: Vanguard’s Admiral shares—the S&P index fund he’d backed—lost 37% in 2008 vs. a 24% drop, on the average, for Protégé’s five funds of funds.

Reporting on that first year of the bet, Fortune quoted Buffett as just hoping he could be like the fabled tortoise that ultimately passes the hare.

So now the tortoise, after crawling four more years, indeed leads. At the five-year mark, the Vanguard index fund backed by Buffett is up by 8.69%. The five funds of funds picked by Protégé Partners to carry its flag in the race are up, on the average, only—”gulp,” says Protégé partner Ted Seides—0.13%.

By the terms of the bet, the identity of those five funds has never been made public. It has always been assumed, however, that one of them is a fund of funds run by Protégé itself.

The strength of 2012’s stock market is naturally what carried the contestants into the black. The market’s vigor is displayed in the performance of the index fund, which rose by 15.96% last year. In contrast, the five funds of funds managed a 2012 gain, on the average, of only 6.46%.

From his trailing position, and probably having heard enough about the tortoise, Protégé’s Seides imagines an alternative future for the bet by recalling the movie, City Slickers. In it, says Seides, “Billy Crystal’s character asks Jack Palance’s character, Curly, if he has killed anyone today—and Curly answers, ‘Day ain’t over yet.'”

We’ll let that suspense hang and report still one more piece of news about this bet. This bulletin concerns the 10-year zero-coupon bond that the two bettors, Buffett and Protégé, bought with the collateral they put up as the bet began. Each contributed about $320,000, so a total of roughly $640,000 went into the bond. Its value was set to rise gradually to $1 million—thus the nickname for the bet—by its conclusion on December 31, 2017.

But as Fortune.com reported last year (Buffett gains ground in hedge fund bet), the zero-coupon bond proceeded to perform so splendidly in the prevailing environment of falling interest rates that by 2012 it was already worth almost $1 million.

That remarkable result suggested to Buffett and Protégé that they could revise the terms of the bet and quite possibly get more than $1 million to the charity ultimately benefitting from the bet. That will be Girls Inc. of Omaha if Buffett wins and Absolute Returns for Kids if the victor is Protégé.

So the zero-coupon bond was sold for nearly $1 million toward the close of 2012, and by agreement between Buffett and Protégé, the proceeds were put into the B stock of Buffett’s company, Berkshire Hathaway (BRKA). Berkshire’s shares have risen since, and the current value of the investment is well over $1 million.

And couldn’t the stock fall? It certainly could, but that won’t make a whit of difference to the winning charity—because Buffett has guaranteed that it will get at least $1 million at the end of the bet. On the upside, meanwhile, there’s no ceiling on what the charity can walk away with. That depends simply on what happens to Berkshire’s stock between now and the bet’s conclusion.

Fortune senior editor-at-large Carol Loomis, who wrote this article, is a longtime friend of Warren Buffett’s, a Berkshire Hathaway shareholder, and editor of his annual letter to shareholders.