Bubbles vs. Megatrends: How to Tell What Lasts

Originally a thread on X/Twitter:

Nothing is normal anymore. The VC landscape is nuts. Public markets are on fire. The adoption of Web3.0 technologies is unlike anything seen before. Separating bubbles from mega-trends is really difficult. It’s the stuff of dreams and nightmares. A few thoughts:

2/9: None of us have a crystal ball that can accurately predict what the future holds. But there is less of a difference than one would think between mania and durability. Fleeting interests and beliefs drive mania. Value creation and societal acceptance drive durability.

3/9: It makes me want to re-read a seminal book that was published in 1841 that many see as the “OG” of crowd psychology and mania:

“Extraordinary Popular Delusions and the Madness of Crowds” by Scottish journalist Charles Mackay

4/9: If you haven’t read it, you should. The topics he covers are fascinating and the language he uses is lyrical. There certainly are better, more current books on the topic, but I can’t help but return to Charles Mackay when I need a reminder about societal mania.

5/9: A few of my favorite quotes from the first volume of his masterpiece follow. But I have to start with a quote that I can’t forget. It reminds me of the “why” behind most manias:

“Credulity is always greatest in times of calamity.”

6/9: “Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.”

7/9: “We find that whole communities suddenly fix their minds upon one object and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first.”

8/9: “In the meantime, innumerable joint-stock companies started up everywhere. They soon received the name of Bubbles, the most appropriate that imagination could devise.”

9/9: Not all hot trends are flashes in the pan. Some outlive mania and become the “stuff of the future” that replaces historical norms and preferences.

But it is worth keeping one eye skeptically open and the words of Charles Mackay close to heart just in case.