Read Byrne Hobart's book, Boom: Bubbles and the End of Stagnation.

Core Themes

Hobart's central thesis is clear: speculative bubbles, while seemingly irrational and destructive, can actually be powerful accelerators of innovation. He confidently asserts that bubbles drive technological progress in the following ways:

They foster a "risk-taking" spirit. Bubbles create an environment where bold ideas and seemingly impossible projects can be funded and supported. As Peter Thiel rightly observed: "The problem with the world today is not that there is too little innovation, but that there is too much innovation and not enough rockets to the moon. When you're successful for too long, you stop taking risks. (pp. 11-16)

DISTORTING PRICE SIGNALS AND STIMULATING OVERINVESTMENT: Bubbles distort traditional risk assessments and inevitably lead to overinvestment in emerging technologies. This overinvestment inevitably leads to losses when the bubble bursts. However, it also paves the way for future innovation. The railroad bubble gave rise to a finer conception of time, while the Manhattan Project fostered the early development of the transistor and the modern computer. (p. 13, p. 141)

Parallel Innovations: Bubbles occur in multiple complementary industries at the same time. Each industry's prosperity justifies the existence of the others. The rise of the automobile industry coincided with expectations of demand for gasoline, and the two fuelled each other to fuel explosive growth. (pp. 148-149)

Social Cohesion: Bubbles bring together people with a common vision, creating a sense of common purpose and belonging that fosters collaboration and knowledge sharing – it's as simple as that. (Page 152)

There is a reduction in collective risk aversion. Bubbles encourage participants to be less risk averse because the risk of not participating is perceived to be greater than the risk of the bubble itself. (Page 9)

Important points and facts

The book presents a number of important points and facts, which are listed below:

Successful bubbles have a positive impact on the world around them. The railroad bubble led to a more accurate conception of time, the Manhattan Project spurred the development of nuclear energy and rocket technology, and the Apollo program subsidised the early development of the transistor. These developments had a profound impact on the world. Bubbles cluster innovation. Innovation clusters have emerged in different eras and regions throughout history, including Venice during the Renaissance, the Ruhr area in Germany, Detroit, and Shenzhen. Bubbles facilitate the formation of innovation clusters. They do this by concentrating resources and talent over a specific time period. (pp. 150-151)

Bubbles offer a way to escape the trap of "imitative desire". René Girard's theory is clear: our desires are often borrowed from others. Bubbles help people break free from the cycle of imitation and competition by leading them to pursue new things that are not yet fully defined. The rise of the semiconductor industry is a textbook example of bubble-driven innovation. From government subsidies to free-market competition to today's giant monopolies, the chip industry's journey has been one of bold predictions and self-fulfilling prophecies. (Page 182)

Moore's Law is a self-fulfilling prophecy. The prediction that chip density would double every two years was bold, but it was also accurate. It drove chip designers to keep working toward that goal, and they succeeded. (Page 214)

Bitcoin is a multi-layered, self-referential bubble. The Bitcoin algorithm is designed to provide greater value, security and network effects as adoption increases. Each price crash is a test of the bitcoin network's robustness and proves it is a reliable store of value. (p. 296)

There is no doubt that Bitcoin's success is inextricably linked to its social nature. Bitcoin's decentralised and deflationary nature has attracted a fervent group of believers who have developed a unique online culture and spread its ideas through modals, jargon, and heated debate. (pp. 308-309)

Conclusion.

Hobart is clear that understanding the role of bubbles in innovation is critical to future economic growth. He asserts that we should embrace bubbles and find ways to channel their energy so that they play a positive role.