Lemming-Like Irrationality and the Benefits of Micro Markets

Back in the before times (actually, just as the global panic was ramping up), I gave a talk at the Deconstructing DeFi event. I decided that rather than shill, I would entertain. It was about bubbles and panics and black swan events. The talk went well and I’ve been asked to share the slides.

Here’s the slides:

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And I have photographic proof it happened.

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I’m still looking forward to doing more of this. You know, after the world stops burning.

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You can do a post-Covid follow up! :smiley:

I think that’s a great idea. After I gave that talk, a friend of mine made a good case for bubbles being how we fund projects, experiments, and infrastructure that wouldn’t otherwise get funded. I decided that if I was ever going to do that talk again, I would make that be the focus of the conclusion. In this case the bubble seems to be a pandemic free society. Now that that’s changed, it’d be worth exploring how that’s changed how we function as a species.

Though the changes may be slow, there have still been repercussions of the 2008 meltdown even recently. Very interesting way to end it, thinking about the value of bubbles rather than just the popping part.

@danny I think there’s a difference between a bubble bursting and an event that changes (reduces) the economic reality.

Bubbles do indeed fund experimentation and can be a good thing. (Though I think we can probably learn to manage them and even spread them out over time better, there’s always going to be economic pain at a macro level but that doesn’t mean it’s impossible to protect individuals from the fallout.)

IMO the biggest bubble right now is what I’d call the “Warren Buffett” bubble in corporatism/economies of scale. Governments and the eeconomic system massively favour big companies and incumbent products and markets and there’s FAR too much money to be made in mediocrity + momentum. The internet, automated manufacturing and distribution, “software eating the world”, decentralisation, etc. will eat away at that. I also hope people get wise to it and stop accepting incompetent politicians in the pocket of big and crappy businesses. There are glimmers of hope but they are just glimmers.

Bad things sometimes really do happen though. The recession caused by a pandemic doesn’t happen because from a bunch of the cool new experiments we were trying 90% didn’t work out, it’s just a recession. We’re all stuck at home, noone is eating out, noone is flying, some people and businesses rely on those things and all of it generates economic activity. Of course it’s going to go badly for them when it stops. That’s why it’s the right thing to bail people out and run things like the UK’s furlough scheme — we haven’t suddenly discovered that restaurants were a bad idea, we just can’t use them right now.

Watch out for the bubble in COVID-boosted stuff… a bunch of money is being thrown at good ideas that might but ultimately don’t help (vaccines trials that fail, treatments that don’t work, test and trace schemes and apps, PPE and ventilators, etc.) as well as things that seem super exciting and fun when you can’t go to the pub or go travelling but lose their lustre once a bit of normality returns. A whole bunch of these will come back down to earth in a year or 3. Doesn’t mean investing the money now is a bad idea, we’ll also find some genuinely new cool things and create some lasting trends- that’s a part of every bubble too, and why they’re exciting and valuable as well as risky.

There’s a reason VEGA is named after the ‘Greek’ for volatility :smirk_cat:

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Excellent point.

I agree with you in this case, the recession is not a bubble, but there’s a bubble in things like PPE etc. VR is experiencing a boom right now, if you are correct (which seems reasonable) this will recede when the world can go outside a bit BUT (to the “bubbles pay for weird things” point) in the mean time, there will be a bunch of great advances that wouldn’t have been viable had there not been an artificial demand for the tech.

Good points all around. Thanks for your thoughts on this!

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