To answer your main question: Yes, it does make sense.
"One of his key assumptions is that other civilizations exist that can simulate us. Why do we make this assumption?"
That assumption is not derived from a physical evidence, but is an assumption in itself for the sake of argument. So, Bostrom's argument is that (as I understand him from this interview: https://www.youtube.com/watch?v=nnl6nY8YKHs):
If, just by their nature, civilisations don't destroy themselves (in a nuclear war, for instance) before they reach the levels to be capable of creating simulations as advanced as our universe is...
If, once reached the required levels, they don't lose interest in creating such simulations (e.g. due to ethical issues)...
Then, the conclusion is that we probably live in a simulation.
He also stated that the chances of the third one is less than 50 percent because the first two assumptions are pretty strong ones. Well, his actual structure of Simulation Argument is a little bit different, but I restated it the above way for the sake of simplicity. I think I didn't lose the main idea.
I, personally, tend to believe that we actually live in a simulation and here is my speculation:
With our technological advances it is not difficult to imagine our own civilisation if continued uninterrupted for thousands or tens of thousands of years would reach levels being capable of creating pretty realistic simulations. In 60s several megabytes of random access memory was almost a scifi, while now we have gigabytes of RAM in our cell phones, let alone nowadays supercomputers, and that's just in 50 years. Extrapolate that into future for hundreds or thousands of years and it is not difficult to see that realistic simulations are not so unrealistic. With this and Nick's arguments put together we are left to believe in either of these two:
- We are in a top-level universe (base reality, if you will). We are not a simulation but an actual reality.
- We are just another simulation among many other simulations.
Last I checked when humans thought of themselves being something special:
- That the earth is the centre of the universe, the sun revolves around the earth, etc. The earth isn't even the center in our Solar system, let alone galaxy or the universe.
- That there are animals and there is a human being, created in the image of God. Which turned out that we are just another species among thousands of other species (if not hundreds of thousands).
So, believing that we are in the top-level universe would, similarly, put us in a special position (odds were against us previously).
My another argument is that we live in a deterministic world. If we look at the cosmos, every state of the universe is determined by its previous state. We might think that us, humans, have a free will and we can influence the future. But our decisions are made by our brains, by atoms and electrons bouncing around in our brains. Position of atoms and electrons in our brains is determined by the previous positions of atoms and electrons in our brain. So, it's one chain. There is no branching of future, just one possible future, which awaits us. This is consistent with simulation hypothesis. The creators just had to input the initial conditions (laws of physics and constants, if you will) and push the button. Or the simulator automatically tries different inputs on each iteration (also a possibility).
So, "We are not special" + "Deterministic universe" arguments.
There is also an argument than if this is a simulation than its creators must be cruel, because of so much suffering in this world. I don't believe anyone is watching us real time. Let me give you a rough example. Researchers at OpenAI run simulations to train artificial neural networks to do meaningful things. For instance, in this simulation researchers try to teach agents to play hide and seek: https://www.youtube.com/watch?v=Lu56xVlZ40M
Millions of simulations are run and no one is watching them play around real time. The researchers are interested in the end results. If someday we discover that those red and blue agents in a simulation actually feel pain (just imagine for the sake of argument), it would definitely raise the ethical questions. There would be people who would advocate for stopping those simulations. But, the thing is millions of simulations will have already been run.
Millions of runs of the simulations of this universe have been conducted already and millions will be run after our universe ends. While I am typing this, our creators are in the process of blinking their eyes (assuming they have eyelids), just an ordinary day at their office. They will be still in the process of that same blinking in many universes to come. At the end of their work week they will look at the end results and raise the question, maybe, they should stop these experiments.