Ethical AI investments?

I'm not claiming "low probability implies expectation is negligible", and I apologize if what I wrote gave the impression that I was. The thing that seems intuitively clear to me is pretty much "expectation is negligible".

What is the actual effect on Microsoft of a small decrease in their share price? Before trying to answer that in a principled way, let's put an upper bound on it. The effect on MS of a transaction of size X cannot be bigger than X, because if e.g. every purchase of $1000 of MS stock made them $1000 richer then it would be to their advantage to buy stock; as they bought more the size of this effect would go down, and they would keep buying until the benefit from buying $1000 of MS stock became <= $1000.

(MS does on net buy stock every year, or at least has for the last several years, but my argument isn't "this can't happen because if it did then MS would buy their own stock" but "if this happened MS would buy enough of their own stock to make the effect go away".)

My intuition says that this sort of effect should be substantially less than the actual dollar value of the transaction, but if there's some way to prove this it isn't known to me. This intuition is the reason why I expect little effect on MS from you buying or selling MS shares. But let's set that intuition aside and see if we can make some concrete estimates (they will definitely require a lot of guesswork and handwaving). How does a higher share price actually help them?

• If they choose to raise money by selling shares, they can get a bit more money by doing so.
• If they choose to use shares for money-like purposes (e.g., buying another company with MS shares rather than cash, incentivizing employees by giving them shares), any fixed fraction of the company they are willing to part with is worth a bit more.
• If they choose to borrow money, they can probably get slightly better terms because their company is seen as more valuable, hence better able to raise money, hence less likely to default.

To estimate the impact of the first two of these, we could e.g. look at how the number of outstanding Microsoft shares changes each year; if we (crudely?) suppose that this doesn't depend strongly on small changes in share price, then a decrease of x in the Microsoft share price lasting a year costs Microsoft (number of MS shares issued that year) times x, because that's how much less money, or perceived money-equivalent benefit, they got from issuing those shares.

It turns out, as I mentioned above, that for the last several years the number of outstanding Microsoft shares has decreased every year, so that crude model suggests that a decrease in their share price actually helps them, because as they (on net) buy back shares they are paying less money to do it. Oops.

The third effect seems like it's definitely of the right sign, since whatever the net chance in MS's debt over time it isn't literally taking out any anti-debt. Do we have any plausible way to estimate its size? We could look at e.g. Microsoft bond coupon figures and try to correlate them with the MSFT share price after correcting somehow for generally-prevailing interest rates, but I don't have the expertise to do this in a meaningful way and also don't have access to any information to speak of about Microsoft bond sales. Let's try an incredibly crude model and see what we get: suppose that right now MS can borrow money at 2% interest, and that if their stock price dropped 3x then they would be seen as a much bigger risk and the figure would go up to 4%, and that what happens in between is linear. The current stock price is about $300, so this is saying that a $200 fall in stock price would mean a 2% rise in annual interest rate, so each cent of stock price change means a 1/10000% change in annual interest rate.

How much borrowing does MS do? Hard to tell. (At least for me; perhaps others with more info or more business expertise can do better.) Over the last several years their total debt has consistently decreased, but not by very much; it sits at about $60B. With total debt roughly steady, that total debt should be the number of "debt dollar-years incurred per year". So one year of 1c-higher stock prices would mean a reduction of $60B x 1/10000 x 1% in debt interest payments; that is, of $60K.

There are also the other two effects, but crudely those appear to point in the other direction given MS's decision to buy back more stock than it issues. I'll assume they're zero. Maybe there are other mechanisms too (e.g., some sort of intangible thing where MS is a more attractive employer if its stock price is high) but I expect these to be smaller than the three concrete ones listed above.

What should we assume about the lasting effect of your buying or selling MS stock? If we assume the price is a pure random walk then a 1c decrease in price lasts for ever, but that seems incredibly implausible (at least in the case where, as here, your reasons for selling don't have anything to do with your opinion about the future value of the company). On the basis of pure handwaving I'm going to suppose that the effect of your selling your stock is to depress the share price by one cent for one month. (Both figures feel like big overestimates to me.) That would suggest that selling $300K of MS stock costs the company, via this particular mechanism, about 1/12 of $60K, or about $5K.

That doesn't mean $5K less for AI work, of course. I think MS spends about $50B per year. MS's total investment in OpenAI is $10B but that isn't happening every year, and presumably they do some internal AI work too. Let's suppose they spend $5B on AI per year, which feels like a substantial overestimate to me. Then giving them an extra $5K means an extra $500 spent on AI.

So, after all this very rigorous and precise analysis, my crude estimate is that by selling a $300K stake in Microsoft you might effectively reduce their AI spending by $500. I'm pretty comfortable calling that negligible. But, of course, the error bars are rather larger than the number itself :-).

(Counter-argument: "Duh, the value of a company as measured by the market, which knows best, is just its total market capitalization. So if something you do changes the share price by x and there are y outstanding shares, then you changed the value of the company by exactly xy. This value is much larger than your estimate, so your estimate is bullshit." But I claim that this argument is bullshit: if, as I believe, transactions that are independent of any sort of estimation the actual future value of the company have only transient effects, then it is just not true that you have changed any actually meaningful measure of the value of the company by exactly xy.)

Voting for Hitler does nothing for you personally unless you actually want a Nazi government. If you have investments in say NVIDIA then presumably you expect them to make you more money than whatever else you're proposing to invest in instead. I am suggesting that the first-order effects of having more money are likely to outweigh the second-order (or whatever higher order they actually are) where you sell what in the big picture is a rather small number of NVIDIA shares, this has a probably imperceptible effect on NVIDIA's stock price, this makes them an imperceptibly more favourable company to lend money to, they borrow more money on better terms and make imperceptibly better GPUs, and all the AI research happens a tiny bit faster.

To be clear, I warmly endorse getting out of NVIDIA if owning shares of a company that might contribute to AI development makes you feel terrible. That's a first-order effect too. But it still looks to me as if the effects are likely negligible, and I don't think I buy any superrationality-style arguments along the lines of "whatever you do, other similar people are also likely to do, so you should multiply your estimate of the effect severalfold".