Book review: Boom: Bubbles and the End of Stagnation, by Byrne Hobart and Tobias Huber.
Hobart and Huber (HH) claim that bubbles are good.
I conclude that this claim is somewhat true. That’s partly because they redefine the concept of a bubble in ways that help make it true.
Boom is densely packed with relevant information. Alas, it’s not full of connections between the various pieces of information and any important conclusions. Nor does it excel at convincing me that its claims are true.
E.g. HH want us to believe that bubbles will help us escape the Great Stagnation that we’ve been experiencing since about 1970. If this book were my first exposure to this claim of stagnation, I’d likely still be puzzled by the belief that we’ve stagnated. I’ll reiterate my advice to read Where Is My Flying Car?, the book that convinced me there’s something real and important about the Great Stagnation.
What do HH mean by a bubble?
The most important feature seems to be a definite or constrained vision of a future with something novel that attracts unusual commitment from early adopters. Their concept is broad enough to include financial bubbles, filter bubbles (ranging from QAnon to Moderna), the Manhattan Project and the Apollo Project.
Bubbles are full of FOMO, such as fear of missing out on the weapon that will win the war.
Bubbles help to generate risk tolerance. That matters because:
policies designed to preserve or optimize abstract macroeconomic aggregates, such as “wealth” or “employment” tend to inhibit the vital process of constant industrial revolution … “creative destruction without destruction,” “capitalism without bankruptcy,” and “risk without consequences” essentially amount to Christianity without Hell. And since hell is not an attractive political pitch, the technocratic policies of perpetual risk suppression constantly create more risk the harder they attempt to annihilate it. Naturally, eternal stagnation is preferred over economic collapse, which is not a political option. Stagnation, in other words, is a choice.
A few more relevant quotes:
only innovation-accelerating bubbles can prevent the apocalypse. … Reality-bending delusions are underrated drivers of techno-economic progress.
Unless they’re deliberately kept secret, transformative corporate R&D projects always face an uphill climb from a skeptical public and worried competition. But that also introduces the filter bubble phenomenon so necessary for transformative innovation. Some of the people working at OpenAI, Anthropic, and other AI companies feel like they’re part of a tiny minority who understand the implications of AI and therefore have a responsibility to make it happen first so they can make it happen right. It’s this kind of tension, between the fear of ending the world and the feeling of being the only one who can save it, that produces transformative technological change.
An especially striking example is the excessive risk-taking and over-investment in generative AI
Did I learn any investment-relevant ideas from Boom? Probably not. I expect some AI-related bubbles in the next 5 to 10 years (both by the standard concept of financial bubbles, and by HH’s concept). Those will likely be unusually big, since AI is causing unusually big changes. I’m not willing to predict whether those bubbles will be on balance good or bad. I don’t yet see over-investment or excessive risk-taking in AI. I do see the kind of trends that are likely to produce such excesses any year now.
I’ll guess the book is about 75% correct.
One example that I’m classifying as mostly false is the claim that Moore’s Law has been a self-fulfilling prophecy. See the descriptions of the more general Wright’s Law for counter-arguments.
It’s unclear who, if anyone, would benefit from reading this book.