This is a blog about water and fish, but every now and then I post something off topic that I am interested in. In one of my previous lives I was a professional investment manager for a major Wall Street firm while based in Bend. In that capacity I became a fan of Jeremy Grantham, one of the most influential investors who you have probably never heard of. Widely derided as a “permabear”, someone who is always focused on potential market corrections, I have found him to be more like Warren Buffett, someone who does not jump on investing bandwagons and waits for opportunities when they arise. It is a philosophy that works for patient investors, like myself. It misses most of the upside when markets are irrationally exuberant as well as most of the downside when the correction inevitably comes. Slow, steady returns over time.

When others were piling in during the 2000 tech bubble Jeremy invested elsewhere and did not suffer when the bubble popped. He foresaw the 2006 housing bubble / financial crisis and accurately predicted (to the day!) when to get back in. His latest missive is about the potential for an AI bubble. It’s filled with technical investing jargon but worth pondering if you have money invested in the stock market. There is no prediction of an imminent deep correction, but Jeremy says it is coming. He has been very good at making these calls in the past.

The second part of the article is written by his long term collaborator, Edward Chancellor, comparing the enthusiasm around AI with previous bubbles. His basic argument mirrors perfectly what I learned in my first career in tech, mostly as an executive in startups. New ideas generate an amazing amount of interest and hype and early players gather significant amounts of private investment capital racing to lead the pack This is followed by the “trough of disillusionment”, when companies fall back to earth as revenues and adoption fall short of initial expectations. This creates a shake out in the industry and a few winners over time as they find real customers, real use cases, and profitable business models. The long term winners may or may not be the early leaders. This cycle is not always the case, but it generally is. The tech bubble in 2000 was an excellent example of this that I experienced all too closely.