I’m currently reading Griftopia by Matt Taibbi, and while I don’t totally agree with everything in it, I think it’s useful to read an account of the 2008 financial crash as it was happening in real time. Taibbi is a great writer, and the book itself is very interesting and engaging.
Through the first couple of chapters, Taibbi explains how the mortgage bubble was created and lays it mostly at the feet of former Fed Chairman Alan Greenspan.
The validity of that aside, there are a couple of quotes in the book from Greenspan during the dot com bubble that I think are somewhat applicable today. That is not to say I think a crash is imminent or a bubble exists in the market right now, but his language is eerily similar to me, a layman, with the language around artificial intelligence in 2023.
“When we look back at the 1990s, from the perspective of say 2010, the nature of the forces currently in train will have presumably become clearer. We may conceivably conclude from that vantage point that, at the turn of the millennium, the American economy was experiencing a once-in-a-century acceleration of innovation, which propelled forward productivity … at a pace not seen in generations, if ever.
Alternatively, that 2010 retrospective might well conclude that a good deal of what we are currently experiencing was just one of the many euphoric speculative bubbles that have dotted human history.”
There is certainly an artificial intelligence boom today. To suggest otherwise would be asinine. Just as the dot com bubble changed our world forever in positive ways, AI will as well. Amazon, PayPal, EBay, and a whole host of other companies came out as winners in the early aughts. But imagine pitching those stocks in 2008-2009 during 10% unemployment, or while 5 million homeowners were facing foreclosure.
There’s an old saying you don’t know you’re in a bubble until it pops. In my unsophisticated view, there are too many financial pundits speaking in absolutes about artificial intelligence when very few actually understand it. Of those who understand it, even fewer of them can predict which companies will be long term winners and losers. And even if those predictions come true, the market may correct itself anyway because of a totally uncorrelated crisis. Apple was down 50% from December 2007 to September of 2008. The same is true for Amazon and a whole host of stalwarts.
I am not in the business of telling people what to do with their money. There are folks on this platform far more intelligent and knowledgeable than me in every conceivable financial topic.
I’m not suggesting people sell everything or buy, buy, buy.
My only piece of advice is to be mindful of who you take advice from and how their opinions and actions might be influenced by their emotions and the general exuberance of a technology they don’t understand in any meaningful way other than to say “this changes everything.” AI absolutely changes everything - but the follow up questions should be: in which direction? For who? When? Will it matter if people are unemployed? Will it matter if they can’t make their mortgage payments?
New technologies rise and fall. Human nature largely stays the same.
