Uncanny Valley | WIRED The Four Criteria for a Tech Bubble
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Nov 6, 2025 
Brian Merchant, writer and author of Blood in the Machine, dives into the intricacies of tech bubbles. He outlines four key criteria used by researchers to recognize them, highlighting historical examples like electricity and radio. The conversation reveals how AI investments, particularly in companies like NVIDIA, are creating systemic risks, especially for novice investors. Merchant warns of the potential fallout from these bubbles, emphasizing that while useful technologies may endure, the economic pain could be severe and uneven.
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Definition Of A Tech Bubble
- A bubble forms when investment in a technology far exceeds expected future returns from revenues and profits.
- Historical examples like Pets.com show investors can lose everything when returns never materialize.
Four Factors That Signal A Bubble
- Goldfarb and Kirsch identify four factors that reliably mark tech bubbles: uncertainty, pure-play firms, novice investors, and coordinated belief.
- These factors let analysts compare historical booms to current tech trends like AI.
Electricity’s Long Commercialization Arc
- Early electricity investment thrilled observers but took decades to find clear business models like home light bulbs.
- That long uncertainty mirrors today’s AI excitement without obvious monetization paths yet.
