Economist Tyler Cowen argues that if AI doom scenarios are credible, proponents should be able to provide quantifiable estimates of the economic damage and prove their conviction by shorting relevant stocks.

The AI revolution is a double-edged sword for software. While some firms will boost margins using AI for development, many others, particularly smaller, leveraged companies, face existential disruption. This creates significant shorting opportunities for investors who look beyond current earnings to future terminal value.

Economist Tyler Cowen argues that serious AI fears should be convertible into financial bets. However, the unique nature of existential risk (X-Risk) makes this logic fail; if humanity is wiped out, there's no one to collect the payout, making the bet meaningless.

The argument that AI doomers should short the market if they truly believe in existential risk is flawed. As pointed out in the discussion, such bets are nonsensical because in a world-ending scenario, there would be no one left to collect the winnings, making it an impractical measure of belief.

While the AI capex boom may seem unsustainable, the mechanics of shorting it (e.g., buying puts) reveal the extreme difficulty of the trade. The bet requires being correct not just on the eventual downturn but on its precise timing. The risk of losing the entire premium makes it an unattractive risk-adjusted bet.

There is a fundamental asymmetry in AI's impact. Benefits like new cancer drugs do not prevent catastrophic risks like an engineered pandemic. However, a catastrophic event makes a world with cancer drugs irrelevant. Therefore, downside mitigation must be the absolute priority.

The argument that AI doomers should 'bet against the market' is financially naive. Historical parallels with societal collapse, like Nazi Germany, show that in such scenarios, financial exchanges are shut down. Paper claims become worthless, making it impossible to profit from shorts. The only viable strategy is holding real assets.

As AIs optimize investment strategies, they may inadvertently make the overall market system more fragile and susceptible to rare, high-impact "fat tail" events. This could create a niche for patient human investors who can identify and exploit these moments of system-wide fragility, similar to the collapse of Long-Term Capital Management.

Unlike traditional risk hedging where you sacrifice upside, the AI boom has turned the "put option on humanity" into a "call option on technology." Early believers in AI's world-changing (and potentially world-ending) potential became fabulously wealthy by investing in the very technology they feared, creating an unprecedented financial alignment where doomers profit.