PJFP.com

Pursuit of Joy, Fulfillment, and Purpose

Tag: FOMO

  • The Benefits of Bubbles: Why the AI Boom’s Madness Is Humanity’s Shortcut to Progress

    TL;DR:

    Ben Thompson’s “The Benefits of Bubbles” argues that financial manias like today’s AI boom, while destined to burst, play a crucial role in accelerating innovation and infrastructure. Drawing on Carlota Perez and the newer work of Byrne Hobart and Tobias Huber, Thompson contends that bubbles aren’t just speculative excess—they’re coordination mechanisms that align capital, talent, and belief around transformative technologies. Even when they collapse, the lasting payoff is progress.

    Summary

    Ben Thompson revisits the classic question: are bubbles inherently bad? His answer is nuanced. Yes, bubbles pop. But they also build. Thompson situates the current AI explosion—OpenAI’s trillion-dollar commitments and hyperscaler spending sprees—within the historical pattern described by Carlota Perez in Technological Revolutions and Financial Capital. Perez’s thesis: every major technological revolution begins with an “Installation Phase” fueled by speculation and waste. The bubble funds infrastructure that outlasts its financiers, paving the way for a “Deployment Phase” where society reaps the benefits.

    Thompson extends this logic using Byrne Hobart and Tobias Huber’s concept of “Inflection Bubbles,” which he contrasts with destructive “Mean-Reversion Bubbles” like subprime mortgages. Inflection bubbles occur when investors bet that the future will be radically different, not just marginally improved. The dot-com bubble, for instance, built the Internet’s cognitive and physical backbone—from fiber networks to AJAX-driven interactivity—that enabled the next two decades of growth.

    Applied to AI, Thompson sees similar dynamics. The bubble is creating massive investment in GPUs, fabs, and—most importantly—power generation. Unlike chips, which decay quickly, energy infrastructure lasts decades and underpins future innovation. Microsoft, Amazon, and others are already building gigawatts of new capacity, potentially spurring a long-overdue resurgence in energy growth. This, Thompson suggests, may become the “railroads and power plants” of the AI age.

    He also highlights AI’s “cognitive capacity payoff.” As everyone from startups to Chinese labs works on AI, knowledge diffusion is near-instantaneous, driving rapid iteration. Investment bubbles fund parallel experimentation—new chip architectures, lithography startups, and fundamental rethinks of computing models. Even failures accelerate collective learning. Hobart and Huber call this “parallelized innovation”: bubbles compress decades of progress into a few intense years through shared belief and FOMO-driven coordination.

    Thompson concludes with a warning against stagnation. He contrasts the AI mania with the risk-aversion of the 2010s, when Big Tech calcified and innovation slowed. Bubbles, for all their chaos, restore the “spiritual energy” of creation—a willingness to take irrational risks for something new. While the AI boom will eventually deflate, its benefits, like power infrastructure and new computing paradigms, may endure for generations.

    Key Takeaways

    • Bubbles are essential accelerators. They fund infrastructure and innovation that rational markets never would.
    • Carlota Perez’s “Installation Phase” framework explains how speculative capital lays the groundwork for future growth.
    • Inflection bubbles drive paradigm shifts. They aren’t about small improvements—they bet on orders-of-magnitude change.
    • The AI bubble is building the real economy. Fabs, power plants, and chip ecosystems are long-term assets disguised as mania.
    • Cognitive capacity grows in parallel. When everyone builds simultaneously, progress compounds across fields.
    • FOMO has a purpose. Speculative energy coordinates capital and creativity at scale.
    • Stagnation is the alternative. Without bubbles, societies drift toward safety, bureaucracy, and creative paralysis.
    • The true payoff of AI may be infrastructure. Power generation, not GPUs, could be the era’s lasting legacy.
    • Belief drives progress. Mania is a social technology for collective imagination.

    1-Sentence Summary:

    Ben Thompson argues that the AI boom is a classic “inflection bubble” — a burst of coordinated mania that wastes money in the short term but builds the physical and intellectual foundations of the next technological age.

  • The Risk Curve: Navigating the Perilous Path to Higher Returns in Finance and Crypto

    Ever feel like everyone around you is swaggering into markets with a devil-may-care grin, tossing chips on the table, and somehow waltzing out with pockets full of digital gold? Welcome to the weird, wondrous world of the “risk curve.” It’s not some stale old finance concept reserved for tweedy bankers. Think of it more like a cosmic seesaw: on one side you’ve got safer bets—your rock-steady, no-nonsense bonds and blue-chip stocks—while on the other, you’ve got the wilder stuff—tiny, volatile crypto tokens, offbeat emerging markets, and whatever else the hot money is whispering about this week.

    A Quick Primer on the Risk Curve

    Visualize a line sloping upward. At the bottom: sleepy, stable assets that rarely make headlines. They’re the old guard, the Grandpa Joes of the investment world, handing out modest but steady returns. But as you tilt your gaze upward, you wander into the high-voltage territory where dreams and nightmares get equal billing. Here the returns can be enormous—but so can the panic attacks.

    • Down in the Safety Zone: This is where you’ve got your dull-but-comforting government bonds or maybe a big, boring tech giant that’s not going anywhere soon. These are the slow-and-steady wins-the-race types. At best, they’ll help you sleep at night; at worst, you’ll be irritated you didn’t get rich faster.
    • Up in the Danger Zone: Now we’re talking rickety rollercoasters at midnight with half the bolts missing. Emerging markets? Check. Shiny altcoins promising the moon if not the entire galaxy? Double check. These are high-octane plays where you might get laughably rich—or get flattened like a pancake when the big correction hits.

    “Moving Out on the Risk Curve”—A Fancy Way of Saying “Going Risky”

    When people say they’re “moving out on the risk curve,” they’re basically admitting: “I’m bored with this safe stuff. Let’s up the ante.” It’s what happens in a bull market—the kind of market where your grandma’s pottery collection would probably double in price. Everyone’s feeling like a genius, tempted by even wackier bets. It’s all fun and games until the lights go out.

    Why Does This Happen in Bull Markets?

    • Everything’s Going Up, So Why Not Me? As prices soar, you’re standing in the middle of a party where everyone’s whooping it up. The DJ is spinning “Money for Nothing,” and you’re suddenly sure that grabbing a slice of that wild NFT project is the key to eternal glory.
    • FOMO: The Investor’s Frenemy: Fear of missing out isn’t just for teens scrolling social media. Markets are full of people kicking themselves for not buying the last hot thing. When everyone else is making it rain, you don’t want to be the one holding an umbrella.
    • Low Interest Rates = Bored Investors: When the “safe stuff” pays peanuts, even the timid think, “Why not go big?” Low rates push people out of their comfort zones and straight into the arms of high-risk gambles.
    • Herds Gonna Herd: Investors often move in flocks. It’s more fun to be wrong together than wrong alone, right? When the crowd moves into sketchy crypto derivatives, even the skeptics start eyeing them.

    The Dark Side of the Uphill Climb

    The shiny promise of huge returns is always balanced by a shadow: the possibility that you’re stepping into a money pit.

    • Volatility: The Wild Mood Swings of Assets: These aren’t just minor ups and downs—think dizzying elevator rides where your money’s value can spike like a bottle rocket one day and crash like a dropped phone the next.
    • Inevitable Market Hangovers: History is basically a highlight reel of parties followed by brutal headaches. Tech bubbles pop. Crypto winters come. If you’ve crammed your portfolio full of high-risk shiny objects, a downturn will hit you like a brick to the face.
    • Overvaluation: When Everyone’s Drunk on Hype: In bull markets, some assets hit prices that make zero sense. Once reality sets in, it’s a swift tumble back down. If you showed up late to the party, you’ll be stuck cleaning the mess.

    Surviving the Ride

    If you’re going to play this game, at least buckle your seatbelt.

    • Diversify, Diversify, Diversify: Don’t put all your chips on one square. Spread your bets. So when the crypto moonshot fails to ignite, your steady stuff might keep you afloat.
    • Know Yourself: Some people thrive on chaos. Others lose sleep if their portfolio budges a millimeter. Figure out where you stand before you’re knee-deep in questionable altcoins.
    • Do Some Homework: Don’t just trust social media hype and subreddit whispers. Dig into fundamentals, peek under the hood, and understand what you’re actually buying.

    Epilogue

    The risk curve is basically a reminder that your shot at stratospheric gains is tied to taking a walk on the wild side. Yes, you can try your luck at the high-stakes table, but remember that gravity is always waiting for you to slip. If you’re cool with that—if you thrive on the thrilling uncertainty—go ahead. Just don’t whine when the rollercoaster loops upside down.