Are Booms and Busts a Sign of the Singularity?
Peter Thiel, co-founder of Paypal and venture capitalist extraordinaire (he was a lead investor in Facebook as well) recently gave a speech at the Singularity Summit.
Among the other topics he discussed was the uncertainty of investing in a pre-singulitarian world. Specifically he mentioned the booms and busts over the past 30 years and attributes them merely bad bets.
The problem with this of course is that in all of the examples he cites (Japan Inc, LTCM, Asian Financial crisis, subprime collapse) were all caused in large part by central banks. In short, it is the malinvestment spurred by artificially low interest rates that first sparked the booms. And government malfeasance through subsidies, tax burdens, and the redistribution of scarce resources partially contributes to the bust.
In addition, instead of trying to forecast the future with aggregates such as stock indices, would it not be wiser to simply look at specific industries to predict future technological trends. Perhaps those surrounding 3D Scanning, 3D Printing, and extreme miniturization?
See also:
What Happened to Japan?
Can the Future Do Without Economic Logic?
"Transparency" and Other Sugar Pills
Asian Tiger or Asian Kitten?
In Monetary Affairs, Crisis Follows Crisis
The Subprime Mortgage "Crisis" Will Fix Itself
The Austrian Theory of the Trade Cycle
Study Guide to Uncertainty
Comments (7)
David Bratton
In this article the bad bets referred to are not bets on individual business projects. They are bets on the direction of the entire market. If the author is correctly representing the speaker's view then Thiel is attributing the boom bust cycle to some kind of herd behavior. He may have had a clear vision when he created Paypal, but to explain the business cycle he is resorting to a mysticism.
Published: September 28, 2007 7:58 AM
CosmicV
Nice find Tim. I wanted to go to that conference, but couldn't pull together the time or funds to go. I still have to get the recorded material and go over it.
Published: September 28, 2007 9:17 AM
Scott Yokim
How fast does the disutility of labor decrease before/during/after the singularity?
Published: September 28, 2007 3:50 PM
Edgar729
It is incredible to me that great businessmen and investors (like Warren Buffett, Charlie Munger, or Lou Simpson) are so damn clueless when it comes to fundemental economics. The greatest investors have made it a habit to disregard the laws of economics all together! Peter Lynch is most famous for remarking that "of you spend 11 minutes a year going over economic data, you have wasted 9 minutes" (or something close to that lol).
As an investor myself it is extremely discomferting. At the same time these great investors are incredible regulation supporters. One wonders how these individuals would fair in a anarcho-capitalist society.
Published: September 30, 2007 8:55 PM
Anthony
The competitive order does not abide such ignorance. So it'd depend on how they adapted.
Published: September 30, 2007 9:51 PM
Fundamentalist
Edgar729: "Peter Lynch is most famous for remarking that "of you spend 11 minutes a year going over economic data, you have wasted 9 minutes"
Although Lynch might be right, considering the economics most people learn is either Keynesian or neo-classical. There have been a lot of articles and books written over the past 20 years about what's wrong with economics. The econ profession is held in low esteem by most professionals because it has no practical applications and its policy recommendations are failures. Someone has written that the Fed has operated without econ theory since the 1980's, flying by the seat of their pants. All of this is due to the failures of Keynesian and neo-classical econ.
Reading about those failures is what drove me to Austrian econ. If Austrian econ was more widely known, there would be much less talk about the failure of econ and much more respect for the field.
Published: October 1, 2007 8:03 AM
David
No surprise here.
Peter Thiel has had some very impressive hits in the venture capital field, and from what I understand has done quite well for himself as an investor/hedge fund manager.
But having witnessed Theil's discomfort with the "Fed is the drug" argument (as explained by Marc Faber in a Bloomberg interview), it comes as no shock that he refers to these instances as simply "bad bets", and not the symptoms of a larger trend of fiat money inflation and its subsequent bubbles.
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vo69YlO4h3SE.asf
Published: October 2, 2007 11:56 PM