Unfounded Hype vs Underestimated Potential

unfounded hypeCathy Wood/ARK Invest bought some RoBlox yesterday.

A 65-year old woman hyper-bullish on tech stocks and cryptocurrencies. Must be a rather remarkable woman?

A Google search says she is one of the wealthiest women in America.

But that’s not the topic for today’s discussion.

Today we’ll consider the intersection of the Hype-Cycle and the S-Curve.

This is my model.

Step 1: Think of a quadrant with two axes: Optimism vs Technology.

 

Step 2: Cross-reference with the Hype Cycle and the S-Curve.

 

And then you get my new model.

 

unfounded hype

Unfounded Hype = High Optimism + Low Technological Capabilities 

Examples:

  • Irrational Exuberance
  • Idealism
  • This time is different!
  • X will bring us utopia!

Underestimated Potential = Low Optimism + High Technological Capabilities

Examples:

  • The future is here sooner than most people think
  • Mainstream adoption coming soon!
  • 10x improvement / 10x lower cost
  • Exponential change underestimated

_________

Unfounded Hype = Stay away! 

(or try to speculate for as long as the momentum stays strong)

It’s trendy/popular for no good reason.

_________

Underestimated Potential =  Get in early 

(Invest and be patient. Err on the right side.)

“This is huge. Why don’t they get it?”

_________

This is my current framework for guessing at future technologies.

Questions:

(1) Which future industry do you think will be most useful 5 years from now?

(2) What would be an appropriate framework for staying up-to-date with involvements in this area?

Comments

  1. This is a really good analysis – IF the technology actually matures within a meaningful time frame.

    There are many purported advances that follow an inverted U-curve: unfounded hype followed by collapse and /generational/ disillusionment.

    Electric vehicles and solar power took this course in the Seventies. I expect them to take much the same course now, though without such a complete disaster.

    Remember the Babbage Machine? It was a rather long trough before computing became the material of viable enterprise. The Stirling Engine has been through multiple iterations of the inverted-U cycle (and yes I have a reason for mentioning this). Autonomous vehicles could be 20-30 years away — a good investment for a young person now, IF there is still a demand for that kind of transportation in 30 years. But my corpse would not profit.

    There is also the case where the technology is adequate, but the demand is lacking. This can go any direction at all. Charles Goodyear died in poverty because no one at the time needed tough, elastic materials. Crypto might take the same course (after idly transferring a great deal of wealth). Bitcoin presently has no /use/ value; the world would not change a whit if it ceased to exist tomorrow. Transistors might have taken another generation to be appreciated if there had not been a market for consumer radios.

  2. Start Gaining Momentum
    And
    Stranger in a Strange Land

    Almost the same thing, no?

    Personal development and OOOBEs at its finest.

  3. Great article. To answer your questions:

    1) Electric Vehicles

    2) Some way to keep up to date with the leading researchers and using a Scraping service to acquire new info.

  4. I like the post but how can I use this to make money?

  5. I don’t get it can you explain????

    • Hello Hassan,

      Think of it like this:

      1) UNFOUNDED HYPE:
      There are certain technologies that are not ripe for making money at this moment in time, but they might be great in another 5-10 years.

      2) UNDERESTIMATED POTENTIAL:
      *Recycling

      3) UNDETERMINED:
      *3D-Printers
      *Blockchain
      * AI/Machine Learning….

      There are many technologically skilled people who can explain it better than me.

      • Can’t agree about recycling. That’s been around for over a century, and there’s little chance of any unexpected change.

        Your “undetermined” items, yes. 3D printing is still developing and may find unexpected applications. Blockchain likewise – cryptocurrency is probably not the pinnacle of the adoption curve. Machine learning has lately been abandoned in favor of calling ordinary modelling techniques “artificial intelligence” but there is a vast air gap here between current achievement, potential, and application.

        Nanotechnology is another huge unknown. A breakthrough here could lead to the rapid end of the economic importance of every currently prevalent activity.

        • Abgrund, you should tell everyone what you think about these future technologies. Either on your own site or on mine as a guest post.

        • Francisco Rafael says

          I remember about 7 years ago there was a ‘pump and dump’ of sorts in the 3D printing space. I jumped into DDD for a quick momentum trade. There was a company I looked into at the time called Organovo which is trying to print human tissues as well. This technology is interesting but I think it is still decades away from practical implementation.

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