Manufacturing a Tech Bubble

People think that bubbles magically just “happen”. That they come out of some mystical alignment reached by “market trends” and “indicators” and the unpredictable nature of “human innovation”. Particularly in technology, there is a belief that bubbles are the natural ebb and flow of technology development, that they are almost a law of physics; something we can do very little about, simply be smart enough to react to it and to be there when it starts with your horses lined up. This is more of the idea of venture capital as high-stakes gambling, as wild betting. 

Of course, in reality, this is not the case. The bubble that you see before you has been very carefully prepped, managed and arranged, by all of the venture capitalists and all of the tech giants, for a very long time. The exact time period that this bubble started of course depends on how you delineate, and we can always track everything right back to the start of fire; for our purposes, I think it makes sense to think of a few critical milestones in AR/VR, crypto and AI. Bitcoin of course was launched in 2009, in the extremely early days of the last bubble. For context, the iPad launched in 2010. The founding of Oculus is also a good meter. This established the reality of AR/VR at a commercially viable level and kicked off the competition in this space that solidified this as an agenda item. That was founded in 2012. And without going into the technical details for our purposes, there were a lot of developments in AI around this time as well. So the seeds of this were actually planted around the start of the last bubble; the last bubble has nurtured and incubated the one that we have now. Time is a flat circle. 

“Competition” plays a role in coordination of technology development because as one company moves into an area or as a VC moves into a new category, other players in the space will follow it; this is a double-down on the original vision and soon you have a critical mass of people working on the problem, just doing it in different ways and aimed at their particular niche of the market with whatever their core competencies are. In this way we end up building in fairly similar areas at about the same time. It’s a fucking huge market, and from the perspective of the industry, there is a lot of money to share and pass around and there is a whole world that we need to get inside of. 

 So we are looking at about a ten to 15 year window to actually assemble the bubble, during which time the previous bubble is entering its party and money phase; some portion of these funds are shot right into future-looking startups and tech giant-funded startups as well through their own VC arms and in large internal development projects that are working on the next priorities. New academic developments are another thing to watch. 10-15 years to assemble the bubble and 10 years of the bubble may be a reasonable time frame for these things; however, since a lot of these people are accelerationists, the timeline is apt to take a bit of a nip. 

How this divides down for web 3.0, is that the first 10-15 years are the development of the technology to the point where you can launch a bubble, which is where we are now, and then the next 10 years are about integration of the technology with the global infrastructure, the “adoption” cycle. I find it much more realistic to think of “adoption” as “integration”. In reality, we are forced to use and consume the technology they come up with, and are presented with a limited range of options, but the cost of our participation in new technology is mandatory to continue to function in society, for our jobs (who are integrating all this shit as we speak), to schools (ditto), even for doctors appointments, as well as socialization and recreation. “Adoption” gives the impression that consumer choice is the driving factor here and this is simply not the case. 

What creates the bubble is essentially the past 10-15 years of research and development of many kinds, through a process of negotiation between a small number of people who determine the industry priorities (VCs, tech elite, the giants), coming to a point when the foundations of the bubble, its core technologies, and its first consumer experiences and enterprise applications, are ready to go to market in a way that everyone feels is viable, the infrastructure is ready for global scale, etc. Then we are ready to make magic. 

It is not a mystery what technologies accompany bubbles; everything you see now has been worked on as a material push across the industry this entire time. Much of the research was out in the open, Meta headsets have even been on the market since 2016, this was the consistent theme of industry conferences and blog posts and training programs and the academic system. We all knew that everyone was working on AI, VR and crypto as our “next big thing”. 

We could have worked on other things. Tech has blue skies to focus on whatever we want. And only a very small number of people pick the focus: the ones with the capital to fund development. 

So the material of the bubble is set up way in advance. With every tech giant and massive numbers of startups executing on these strategies on VC orders, it is no question what the general substance of the bubble will be. Thus it becomes a matter of what specifically you will deliver to the market as a company or venture capitalist, and figuring out how that fits into the rest of the bubble, and then us figuring out how to get to a place where we can deliver a bubble as a body. 

One dynamic often missed in the bubble is how these matters are organized. Putting together a bubble is a lot of work. Imagine a fast-motion simulation of building a city. They build it up over the course of years. Designing a bubble is super hard work and that is across the technologies in the bubble and also in each specific area. 

Over the course of this “bubble development” process, there is a constant, live dialogue between the players on the market as they adjust to each other’s moves. Much of the bubble can be understood as something that happens after the entire industry has reached an agreement about what needs to be done, executing, and determining when things are ready to go. At that point, everyone starts unloading into the market together; Apple just kicked off the AR/VR launch and the other companies will follow soon. This is a good example actually of negotiation across the industry because it was in all of our best interest’s for Apple to go first, as global-scale consumer launches are what they are great at, the backbone of integration of new hardware form factors, and also who kicked off the last bubble with the launch of the iPhone in 2007. 

Everyone has their role. 

There is a lot of work that needs to be done outside the development of the core technology — in this case AI, VR/AR, etc, in the lead up to the start of the bubble; the bubble as demarcated by a sudden increase in energy, activity and money propelling market-wide integration of new technologies. Infrastructure needs to be ready to support a massive influx of data and a massive scale of computation. Marketing teams need to have a game plan for the foreseeable future, which requires massive launch preparations. Dry powder — cash that VCs have to deploy into the market — needs to be accumulated so that there can be a huge amount of VC cash flooding the market into startups. The giants engage in a quiet negotiation over things like launch dates and feature sets. 

Carefully, over time, in lockstep with each either, yoked to each other by competition and the delicate game of tech super powers, yoked together by the venture capitalists growing up a startup market, yoked together by the shared goal of creating a bubble, the ingredients for the bubble are put into place. 

I wrote more in this article about the INGREDIENTS to the bubble, or at least a large set of them. That is a good place to go to get into some of the technical aspects of the bubble and how each of them is created and shepherded. But this includes new computing form factors (hardware, like Apple headset); new development paradigms (coding AI, AI supercomputers, neural nets); open APIs that allow a development system to grow around a core technology (such as ChatGPT’s open API); a new financial infrastructure (crypto, fintech), and massive increase of data capture (through AR/VR, AI, more immersive experiences and applications), and lots of cash on hand to stimulate the market and to stimulate the startup ecosystem. And we can see that those same aspects were in place at both the first bubble and in the second bubble. So this is actually a recipe that we’ve seen before and especially those at the top of the industry and the executives in the tech giants, know exactly what is involved in this, they have seen and orchestrated it before. All of our states heads are veterans from the first bubble now in their 50s and 60s, which is really when they are coming into their true personal powers as executives.   

In the wake of the first dot com bust, it became mandatory to gain more centralized control and deliberant management of the bubble economic strategy. Which is what this is, more fundamentally: an agreement to use bubbles as our economic strategy and development model. 

There is widespread agreement across the major players, like venture capital and executives, that bubbles are the best way to go. What motivates this decision? For one, kicking things off with a bang — basically, the frenetic increase of consolidated energy of the Valley launching all at once, is infinitely more beneficial than each company launching as it goes along, and in even earlier phases of project and development, which would even out money, launches, funding rounds, etc. over a longer period. Unveiling everything all at the same time around the same time period, creates a ton of concentrated financial energy, creates a huge amount of hype and marketing, a huge amount of consumer interest; all of this increases the chances of widespread integration. This attracts a lot of money into venture capital through limited partners, it spurs exit activity, it spurs the creation of new startups, it spurs “critical mass”. There are many other options than bubbles. This a carefully architected design pattern that is used by these parties for specific purposes. 

The last bubble gave way not to a dramatic burst but elegantly into a quiet period of web 3.0 work underneath the surface; we were supposedly in a “crypto winter” last year, yet beneath the surface teemed massive crypto activity. Crypto faked its own death, it seems. 

And I think the fact that we didn’t have a catastrophic crash ending web 2.0 speaks a lot to maturity on the part of the industry and to a more mature understanding of how deeply our fates are intertwined. If a giant like Meta actually exploded, the consequences to the rest of the industry, including other “competitive” giants, would be monumental. In my thoughts, we are going into this bubble with a lot more clarity on how to balance the forces and the powers and the money to avoid an economic catastrophe (for us) and also to put together a bubble that is frankly an order of magnitude above the size of the last one. 

In the last few years leading up to this bubble, the industry has gorged on money and power and even over the course of the pandemic, accelerating the timeline on this bubble, they DOUBLED in power in money. The tech industry is monumentally larger, richer, better integrated, comprised of more people, more startups, more VCs and more giants. A larger tech industry means a larger bubble. That is another thing people don’t understand: they think this bubble will look a lot like the last one. And in more core architectural ways, this is absolutely the case. But as far as the scale of what we are looking at, especially with venture capital targeting the global south, and how aggressive this integration will be, and how fast the industry will grow on top of this bubble … that is going to be a very different thing this time around. That is what worries me the most, is that we don’t actually understand what we are looking at on a scale level. 

It should be assumed that all of our major players and VC firms will double in size and money again, as soon as the next few years. 

Even now, web 3.0 is incubating the bubble that will eventually replace it, bathing the tiny glimmer in cash and data and compute. Web 4.0 is in its womb of power and money as we speak. 

This happens in the dark.