Contrary to the belief that bubbles are based on hype, Gurley asserts they are a byproduct of a real technological breakthrough. The initial, genuine value attracts talent and capital, which then draws in speculators and 'fools' who create the bubble. The underlying technology's reality is the catalyst.

Bubbles provide the capital for foundational technological shifts. Inflated valuations allow companies like OpenAI to raise and spend astronomical sums on R&D for things like model training, creating advances that wouldn't happen otherwise. The key for investors is to survive the crash and back the durable winners that emerge.

History shows that transformative technologies like railroads and the internet often create market bubbles. Investors can lose tremendous amounts of capital on overpriced assets, even while the technology itself fundamentally rewires the economy and creates massive societal value. The two outcomes are not mutually exclusive.

Venture capitalist Seth Levine argues that bubbles are an inevitable, and even productive, part of the innovation cycle. While many investments will fail, the frenzy ensures massive capital flows into transformational technologies like AI, allowing the market to eventually find the winning companies and ideas.

Blinder asserts that while AI is a genuine technological revolution, historical parallels (autos, PCs) show such transformations are always accompanied by speculative bubbles. He argues it would be contrary to history if this wasn't the case, suggesting a major market correction and corporate shakeout is inevitable.

The memo argues that the "hysteria of the bubble" compresses the timeline for building out new technologies from decades into just a few years. Patient, value-focused investing would never fund the massive, parallel, and often wasteful experimentation required to jump-start a new technological paradigm at such a rapid pace.

A genuine technological wave, like AI, creates rapid wealth, which inherently attracts speculators. Therefore, bubble-like behavior is a predictable side effect of a real revolution, not proof that the underlying technology is fake. The two phenomena come together as a pair.

Gurley posits that a bubble isn't a sign that a technology is fake. Citing economist Carlotta Perez, he argues that if a tech wave is real and generates wealth quickly, it will inevitably attract speculators and charlatans, making a bubble an expected consequence of its success.

Howard Marks distinguishes between two bubble types. "Mean reversion" bubbles (e.g., subprime mortgages) create no lasting value. In contrast, "inflection bubbles" (e.g., railroads, internet, AI) fund the necessary, often money-losing, infrastructure that accelerates technological progress for society, even as they destroy investor wealth.