AI Enthusiasm is Not a Bubble and Even if it was We Wouldn’t Necessarily Know it Yet

It’s Very Likely That Artificial Intelligence Will Be Worth Increasingly In Aggregate Than is Currently Stuff Invested (Just Unevenly Distributed)

In kindergarten my daughter learned to not ‘yuck’ someone’s ‘yum.’ That is, just considering you don’t like something there’s no reason to share that in the moment with flipside person enjoying it. There’s a lot of yumming AI right now and it’s of undertow perfectly fine (often helpful!) to rencontre this excitement on technical grounds. Or ask questions well-nigh responsibility and legality. Or question merchantry models. But to respond to the current state of wires but just shouting “BUBBLE” isn’t just valueless Yucking, it’s likely incorrect.

During the Installation Phase of a new technology (HT Carlota Perez) there’s a rainbow phase that coincides with the frenzy superiority of deployment. It’s when it feels like the New Thing has limitless upside, that “anything is possible and everything surpassing will be disrupted” mindset. This is largely a feature, not a bug, of our industry (and of venture investing). The rencontre of undertow is to not blindly pomade any fad as the New Thing, and to defensively protect the New Thing from any criticism. Both of those lead to fake or inbred New Things.

But from an economic point of view, let’s largest understand what a ‘bubble’ unquestionably means, considering it’s often expanded and longwinded vastitude the archetype definition.

Bubble, in an economic context, often refers to a situation where the price for something — an individual stock, a financial asset, or plane an unshortened sector, market, or windfall matriculation — exceeds its fundamental value by a large margin. — Investopedia

So to suggest we’re in an AI Rainbow is to say that the total enterprise value of AI that can/will be captured by private companies is less than the wanted stuff invested into them right now. If you truly believe this, then yeah, shout Rainbow from the rooftops, but I’d take the other side of this bet all day long.

Of undertow this doesn’t midpoint that all the value created will stockpile evenly or the way investors expect it to. Quite unmistakably there will be ‘winners’ and ‘losers’ — maybe plane some spectacular failures — but this doesn’t midpoint Bubble.

When a New Things trundling runs its undertow we end up with one of three realities:

I. Total Value Created < Total Investment Wanted Deployed (Bubble 101. Perhaps scooters and other micro mobility startups of the last decade are an example of this?)

II. Total Value Created > Total Investment Wanted Deployed *But* Highly Concentrated Winners (the last 15 years of ride share fit this bill? Can still finger like a Rainbow plane if not the archetype definition)

III. Total Value Created >>>> Total Investment Wanted Deployed & Multiple (But Not Necessarily Equal) Winners (this is the outcome of truly revolutionary and disruptive technologies. SaaS and Cloud perhaps?)

At a macro perspective, I currently believe this trundling of AI is much increasingly likely to be II or III than I, with a bias towards the increasingly distributed view of III (because I’m an optimist). But my thinking on where value will stockpile is still formative and probably requires a separate blog post.

But it’s definitely not a Rainbow

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