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Tech Maturity and What Lies Ahead
"Econ 102" with Noah Smith and Erik Torenberg
Deployment Pressure Breeds Overinvestment
The tech industry faces immense pressure to rapidly deploy innovations, driven by the promises made during capital fundraising. As generative AI becomes a dominant focus, an influx of investment leads to inflated valuations due to oversupply of capital. Additionally, the slow feedback loops experienced by limited partners in venture capital, which can take up to a decade, hinder timely realizations of overinvestment. The power law in venture capital creates a narrative where only the top firms succeed, fostering misguided optimism among investors who believe they will succeed with the best firms despite the high failure rates in the broader asset class.
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