A surge in highly speculative assets may not indicate a strong economy. It can be a sign that people feel so far behind financially that they're placing huge bets, believing in an "only up" market out of desperation rather than confidence.

Today's massive AI company valuations are based on market sentiment ("vibes") and debt-fueled speculation, not fundamentals, just like the 1999 internet bubble. The market will likely crash when confidence breaks, long before AI's full potential is realized, wiping out many companies but creating immense wealth for those holding the survivors.

While painful for retail investors, significant market downturns serve a crucial function by purging speculative excess and redirecting capital toward higher-quality assets. This consolidation allows for a more sustainable market structure, with wealth built first in Bitcoin before diversifying into riskier assets.

The dot-com era was not fueled by pure naivete. Many investors and professionals were fully aware that valuations were disconnected from reality. The prevailing strategy was to participate in the mania with the belief that they could sell to a "greater fool" before the inevitable bubble popped.

The NFT market's boom and bust mirrors the web 1.0 crash. Greed-fueled speculation has given way to a focus on genuine collecting. A small number of projects with real utility and community will survive and become the dominant players, much like Amazon and PayPal did post-2000.

Contrary to popular belief, the most dangerous speculative bubbles aren't con jobs. They are built on universally recognized, transformative ideas like railroads, the internet, or AI. Widespread belief in their world-changing potential is precisely what fuels the speculative mania and subsequent crash, as everyone wants a piece of the future.

During the dot-com bust, internet company valuations crashed. However, the actual adoption and societal impact of the internet continued to accelerate, surpassing even the most optimistic forecasts. This shows the importance of separating market hype from fundamental technological shifts.

While the 17th-century Dutch tulip mania is the textbook example of a speculative frenzy, a quantitative index of NFT prices reveals that their boom-and-bust cycle was even more extreme. This makes the NFT phenomenon one of the largest financial bubbles in recorded history.

The root cause of market bubbles isn't the new technology itself, but recurring human behaviors like greed, optimism, and social proof. Technology is merely the narrative vehicle for these powerful psychological tendencies that have existed for centuries.