From The New Atlantis, Spring 2025
Why the future needs more people willing to be duped
For Byrne Hobart and Tobias Huber, partners at the tech investment firm Anomaly, a financial bubble is the closest that human beings can get to spooky action at a distance. Their provocatively titled new book Boom: Bubbles and the End of Stagnation aims to make the case that the visionary cascades, which almost always end in collapse, are on balance actually good. A few massive successes, in their argument, more than pay for the short-term rise and falls. Bubble dynamics are marked, the authors write, by “definite optimism.” Bubbles, at their best, are a mechanism for trust and collaborative action. Major technological breakthroughs of the past century would have been impossible without them.
The several definitions of bubbles provided in the book don’t leave a reader totally clear on what counts as one. While in general use a “bubble” often has a fraud at its heart, for the authors it doesn’t have to. It can even involve an endeavor as tightly coordinated and official as the Manhattan Project. They offer little discussion of conventional bubbles like the Dutch tulip mania or the blood-testing fraud Theranos.
Instead, what the reader gets is an inside view of belonging to a growing bubble, and of what good the authors think society and the individual can derive from these moments of intense collaboration. Participating in a bubble can feel like being in on a secret, belonging to a sworn confederacy whose actions reinforce each other. Hobart and Huber see “a belief system oriented toward self-reference and self-fulfillment” as core to a bubble’s dynamic. Epistemic closure is a feature, not a bug, as long as you’re closing ranks around some not-yet-widely-appreciated truth. The insular nature of the bubble gives members the chance to abandon persuasion and focus on living out the consequences of their possible insight — for better or for worse.
If the reading experience of Boom seems a little deliberately alienating — in stark contrast to Stripe Press’s beautiful, pick-me-up construction of the physical book — perhaps that’s the authors imposing a “you must be this crazy to enter” filter of their own. Before readers get to consider the authors’ case for bubbles, they’ll need to get through lengthy recriminations over the end of the Bretton Woods monetary system and the rise of fiat currency. Hobart and Huber care deeply about inflation as a risk inhibitor — they feel that a world where money loses value moment to moment leads to a general devaluation of and disinvestment in the future.
A nation of calm, prudent index fund investors (guilty!) is limiting what the authors see as the proper flow of money and talent toward the projects that reshape the world. Hobart and Huber aren’t interested in breakthroughs by a lone genius. They are interested in the achievements that require many different people, operating with limited communication and little coordinating authority, pouring time and treasure into a project that requires them all to keep faith. A bubble, as they see it, is a way of meeting in the cooperate–cooperate cell of a prisoner’s-dilemma matrix.
Hobart and Huber identify Moore’s Law as an example of a straightforwardly positive bubble that required this sort of solidarity to stay true. Gordon Moore, the co-founder of Fairchild Semiconductor and Intel, noted in 1965 that the number of transistors on an integrated circuit doubled about every year and a half, and that he expected this trend to continue. His industry took his claim and reified it to a law. Software makers planned projects that presumed that chips would continue to increase in potency and decrease in price. Chip manufacturers pushed past the present state of the art, trusting that their customers would innovate in a way that required better than the current best.
If it hadn’t been for Moore’s pronouncement, progress might have been more halting. It takes a certain appetite for risk to build something your customers do not yet know to desire....
....MUCH MORE
If interested see also December 2024's William Janeway: "Productive Bubbles".
The railway mania of the 1840's is often pointed to as a productive bubble. We have on offer:
New York Fed's Crisis Chronicles: Railway Mania, the Hungry Forties, and the Commercial Crisis of 1847The Time Charles ('Popular Delusions...') MacKay Thought 'This Time it's Different'
"This time is different: An example of a giant, wildly speculative, and SUCCESSFUL investment mania"
Finally, as Adam Smith put it in his book on the 'sixties bull market, The Money Game:
“Now you know and I know that one day the orchestra will stop playing and the
wind will rattle through the broken window panes, and the anticipation of this
freezes us. All of these kids but one will be broke, and that one will be the multi-
millionaire, the Arthur Rock of the new generation. There is always one, and
maybe we will find him.”
—As seen in February 2024's "JPMorgan's Jamie Dimon On The Business Case For AI: "This Is Not Hype" (JPM)"
