Bubbles and AI

Bubbles and AI

This week has several themes; some are continuations of the recent past, particularly the discussion of AI, ChatGPT, and Bing's Sydney, and the discussion surrounding the Supreme Court hearings about Section 230. In last week's video and podcast, I mentioned Stephen Wolfram's lengthy piece on how ChatGPT works. It is excellent.

makes clear that the anti-ChatGPT tsunami is a panic, perhaps a moral panic. That is humorously echoed by in - "It's a chatbot, Kevin," reacting to Kevin Rooses' piece from last week. @John Battelle writes a good "Is Google F*cked" story.

These are all great pieces.

When I write these editorials, I usually look for a theme. The articles Igor Ryabenkiy and Hunter Walk penned suggest this week's title- Bubbles and AI.

Igor, speaking about AI, states:

Inexperienced investors often feel an almost religious ecstasy over each new technological breakthrough while old-timers recognize them as a natural part of the market cycle.

And Hunter:

During the Installation Phase of a new technology (HT Carlota Perez) there's a bubble phase that coincides with the frenzy ahead of deployment. It's when it feels like the New Thing has limitless upside, that "anything is possible and everything before will be disrupted" mindset. This is largely a feature, not a bug, of our industry (and of venture investing).

These are exactly right. If there were no bubbles, then it is likely that there would be no opportunity. Engaging with new and transformational technology is a rational rush, even when it appears irrational. That is because all new value has a tipping point moment, and smart observers see it before others and are soon followed by those they influence until finally everybody wants in.

Those who shout loudest about the bubbles are those who likely missed out on the opportunity.

This week's new themes concern the events in Israel and the Visual Capitalist piece on how China became the number one trading partner of Saudi Arabia replacing US dominance.

PBS covered the Israeli developments in Israel's new far-right government unveils plan to weaken Supreme Court.

The proposals call for a series of sweeping changes aimed at curbing the powers of the judiciary, including by allowing lawmakers to pass laws that the high court has struck down and effectively deemed unconstitutional.

Levin laid out a law that would empower the country's 120-seat parliament, or Knesset, to override Supreme Court decisions with a simple majority of 61 votes. Levin also proposed that politicians play a greater role in the appointment of Supreme Court judges and that ministers appoint their own legal advisers, instead of using independent professionals.

Levin argued that the public's faith in the judicial system has plummeted to a historic low, and said he plans to restore power to elected officials that now lies in the hands of what he and his supporters consider to be overly interventionist judges.

"We go to the polls and vote, choose, but time after time, people who we didn't elect decide for us," he said. "That's not democracy."

The plan provoked a reaction in the Sheckle and was widely covered in the financial media.

Bessemer Partners, a strong investor in the Israeli high-tech sector sent a letter to its companies:

"In its first six weeks in power, the government regularly ignores the opinions and warnings of experts including economists, bankers, investors and business owners. Instead, it calls for the imprisonment of certain critics and attacks the media."

Further:

"Our recommendation is to maintain a shekel exposure of up to six months, and seriously consider holding foreign currency in overseas bank accounts,"

The relationship between politics and economics is turned upside down here. The normal pattern is for economics to influence politics. Witness the impact of inflation and Fed rate rises on public markets worldwide. But in this case, politics is impacting economics.

And the VC community is expressing economic concerns and suggesting companies move money out of the country into other currencies.

Alongside these self-protecting decisions, Israelis should protest the removal of democratic balances if the laws proceed. Fixing politics is a precondition for fixing economics in the Israeli context.