Mind Over Models: An Economist’s Take on AI Speculation

Greetings and welcome to Mind Matters News.

I'm your bubble boy host, Robert J.

Marks.

I'm not an economist, but I've always found fascinating stories about bubbles in the market.

Market bubbles are marked by cycles of incredible excessive speculation followed by dramatic collapses.

One of the earliest recorded bubbles that everybody talks about in introductory courses is something which is totally beyond my comprehension, totally beyond my understanding.

And it's called the Dutch tulip mania.

And it happened in the 1630s where the prices for tulip bulbs just soared to extraordinary levels before they began to crash.

And I read at least in one place that at the height of this bubble before it popped, a tulip could cost in today's money like a million dollars.

It was really ridiculous.

So that was one of the earliest bubbles.

There's been others in the 18th century.

The South Sea bubble in Britain promised lots of profit from trade ventures.

but there was just over-exuberant, rampant speculation, and that led to catastrophic collapse, and that was another bubble that popped.

Similarly, the 1929 stock market crash ended the roaring 20s with a sharp decline, and it triggered the Great Depression.

Everybody was borrowing money to buy stock, and that just wasn't sustainable.

More recently, the dot-com bubble of the late 1990s and early 2000s attracted investors to internet startups.

I remember talking about this with people.

Investors ignored the bottom lines of startups.

They said that, well, this is the internet.

The bottom line doesn't matter as much anymore.

So the bubble ultimately popped loudly.

We're going to be talking more with our guest, Gary Smith, about the dot-com bubble and how it relates to the AI bubble in a little bit.

Another bubble more recently is the 2008 housing market collapse.

That was fueled by subprime mortgages being bundled into a big bundle and then sold as something which was beyond what it was.