I like the idea of "bubble syncing", but I somewhat think "bubble" is being used a little too loosely.
A bubble seems to imply gratuitous overinvestment, and by using the word bubble everywhere, it almost feels like such "irrational exuberance" is a _necessary condition_ of planned investment. Is it? I don't think so.
It seems more like production capital says: "we expect AWS will be the new infra layer, so let's plan our next 5 years _given that_ expectation." Is it a bubble if this company invests in a new project given AWS infra, and then AWS _does not_ become infra layer? Personally I think not.
Somehow I think there has to be some distinction between (a) irrational exuberance and (b) realized returns that don't quite match the pro forma returns. The former is based on speculation & intuition, the latter on more rigorous analysis. (Of course, both can be and are rationalized!)
It's hard to define because ultimately you're backing into a state of mind at t-0 by looking at returns as of t-1 or t-2. Sometimes you can really see it, but you have to get lucky (e.g. somebody says something that's revealing after the fact, like Chuck Prince's "When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.")
Some of the difference is just levels of certainty. If you invest in a company that sells hearing aids because you know the population of older people is rising, that's not bubbly. If you invest in it because you think live machine translation will cause everyone to wear hearing aids when they travel, that's a little more likely to be a bubbly decision. And if you rejected the translator thesis when the hearing aid company's stock was at $10, but started believing it at $30 and insisted it was inevitable at $100...
Yes I think uncertainty is the right direction; it's always somewhat difficult in practice because the level of conviction people have in certain bets (e.g. crypto, AI, etc.).
Seriously at some point, someone needs to compile all of your evergreen stuff (as is) from all of your writing around the Internet (Medium, blog, newsletter) and throw it into a book
I like the idea of "bubble syncing", but I somewhat think "bubble" is being used a little too loosely.
A bubble seems to imply gratuitous overinvestment, and by using the word bubble everywhere, it almost feels like such "irrational exuberance" is a _necessary condition_ of planned investment. Is it? I don't think so.
It seems more like production capital says: "we expect AWS will be the new infra layer, so let's plan our next 5 years _given that_ expectation." Is it a bubble if this company invests in a new project given AWS infra, and then AWS _does not_ become infra layer? Personally I think not.
Somehow I think there has to be some distinction between (a) irrational exuberance and (b) realized returns that don't quite match the pro forma returns. The former is based on speculation & intuition, the latter on more rigorous analysis. (Of course, both can be and are rationalized!)
It's hard to define because ultimately you're backing into a state of mind at t-0 by looking at returns as of t-1 or t-2. Sometimes you can really see it, but you have to get lucky (e.g. somebody says something that's revealing after the fact, like Chuck Prince's "When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.")
Some of the difference is just levels of certainty. If you invest in a company that sells hearing aids because you know the population of older people is rising, that's not bubbly. If you invest in it because you think live machine translation will cause everyone to wear hearing aids when they travel, that's a little more likely to be a bubbly decision. And if you rejected the translator thesis when the hearing aid company's stock was at $10, but started believing it at $30 and insisted it was inevitable at $100...
Yes I think uncertainty is the right direction; it's always somewhat difficult in practice because the level of conviction people have in certain bets (e.g. crypto, AI, etc.).
Your local/global point on Value reminds me of Alex Danco's insightful points:
* Credit bubbles are an overextended bet that things won't change. Equity bubbles are the bet that they will
* Similarly, I think value is a bet that things will stay the same, and growth that they won't
I’m a fan of that model: http://www.byrnehobart.com/blog/good-bubble-bad-bubble/
Seriously at some point, someone needs to compile all of your evergreen stuff (as is) from all of your writing around the Internet (Medium, blog, newsletter) and throw it into a book
Ugh, 2010. Of course!