Eliezer S. Yudkowsky pointed out in a 2003 "agi" post titled "Breaking
Solomonoff induction... well, not really" [1] that
Solomonoff Induction is flawed because it fails to incorporate anthropic
reasoning. But apparently he thought this doesn't "really" matter because in
the long run Solomonoff Induction will converge with the correct reasoning.
Here I give two counterexamples to show that this convergence does not
necessarily occur.

The first example is a thought experiment where an induction/prediction
machine is first given the following background information: Before
predicting each new input symbol, it will be copied 9 times. Each copy will
then receive the input "1", while the original will receive "0". The 9
copies that received "1" will be put aside, while the original will be
copied 9 more times before predicting the next symbol, and so on. To a human
upload, or a machine capable of anthropic reasoning, this problem is
simple: no matter how many "0"s it sees, it should always predict "1" with
probability 0.9, and "0" with probability 0.1. But with Solomonoff
Induction, as the number of "0"s it receives goes to infinity, the
probability it predicts for "1" being the next input must converge to 0.

In the second example, an intelligence wakes up with no previous memory and
finds itself in an environment that apparently consists of a set of random
integers and some of their factorizations. It finds that whenever it outputs
a factorization for a previously unfactored number, it is rewarded. To a
human upload, or a machine capable of anthropic reasoning, it would be
immediately obvious that this cannot be the true environment, since such an
environment is incapable of supporting an intelligence such as itself.
Instead, a more likely explanation is that it is being used by another
intelligence as a codebreaker. But Solomonoff Induction is incapable of
reaching such a conclusion no matter how much time we give it, since it takes fewer bits to algorithmically describe just a set of random numbers and their factorizations, than such a set embedded within a universe capable of supporting intelligent life. (Note that I'm assuming that these numbers are truly random, for example generated using quantum coin flips.)

A different way to "break" Solomonoff Induction takes advantage of the fact
that it restricts Bayesian reasoning to computable models. I wrote about
this in "is induction unformalizable?" [2] on the "everything" mailing list.
Abram Demski also made similar points in recent posts on this mailing list.

[1] http://www.mail-archive.com/agi@v2.listbox.com/msg00864.html
[2] http://groups.google.com/group/everything-list/browse_frm/thread/c7442c13ff1396ec/804e134c70d4a203

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