The Economy, Stupid Every revolution starts with a bubble. AI is no different
Dec 11, 2025
In this discussion, John Simon, a former head of economic research at the Reserve Bank of Australia, and Gerard Minnack, an investment strategist and founder of Minnack Advisors, explore the complexities of economic bubbles with a focus on AI. They highlight how historical bubbles share features of hype and fear of missing out (FOMO). Both agree AI is currently overhyped but debate whether it will lead to a significant market crash. They also discuss the role of competition, the impact on consumers, and long-term benefits versus short-term risks.
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Novelty Fuels Bubble Narratives
- New technologies always provide a compelling "this time it's different" story that fuels bubbles.
- The novelty also makes valuation hard, letting storytelling and speculation dominate rational pricing.
Irrational Exuberance Marks A Bubble
- Bubbles shift from sensible adoption to irrational exuberance once storytelling spreads widely.
- That second phase draws in firms and investors chasing momentum rather than fundamentals.
From Mining Tenements To .com Fever
- Gerard recalls mining and dot-com cycles where vague projects and renamed firms exploded in price.
- He notes many mining stocks relisted and then added ".com" in the 1990s and went stratospheric despite unclear business plans.