Jeremy Grantham explains that the biggest bubbles (railroads, internet, AI) are not scams. They are fueled by genuine belief in a world-changing technology, which leads to massive over-investment and an eventual, inevitable collapse.

Glenn Fogel draws parallels between the current AI hype and previous speculative booms like the dot-com era. He predicts that while many AI companies will fail and investors will lose money, the frenzy will also produce companies that create immense, lasting value, following a historical pattern of innovation.

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.

The current AI boom mirrors the dot-com era. The underlying technology is revolutionary and will transform the economy, but valuations may have already priced in decades of future growth. This means investors buying now risk poor returns even if the companies ultimately succeed, as both technology enthusiasts and valuation skeptics can be correct simultaneously.

Investor Howard Marks notes that every major technological revolution, from railroads to the internet, has produced a money-losing bubble. The current AI excitement, characterized by the belief that "no price is too high" and that rules have changed, mirrors the psychology of past bubbles, suggesting extreme risk for investors.

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.

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.

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.

The most significant market bubbles, like railroads, the internet, and AI, are driven by genuinely transformative ideas. Their obvious, world-changing potential attracts massive investment, which inevitably gets overdone, leading to a bubble and subsequent crash, even for successful underlying technologies like Amazon.