The More Frequent The Trading, The Lower The Returns

Are we in an AI bubble?

We might not care. Although if so and it bursts, we'll be hit. As corporate buying will likely freeze.

I remember first studying bubbles as a teen. Tulip Mania seemed quite the Dutch chuckle, with flowers and their bulbs rocketing in price twentyfold - beyond the price of a house - only to crash after six months to nothing. Then The South Sea Bubble overegged Empire trade from Latin America. And the world's first railway building bang. All from times so long ago they were difficult to register.

Yet since back then we've had modern-day ones that have really struck us. From handing Japan their lost decade of the 1990s, Millennium-straddling dotcommery, and hardest of all the GFC hastening credit crunch from American housing value being at the mercy of casino banksters trading debt pyramids.

And since? VR (hello, Meta), NFTs (remember them?), crypto. And right now, all things AI.

Of which it's not just their soaring stocks. The whole thing can get upended overnight. As has happened already throughout this year. If you follow what I read used to be called the 'noise traders', they can get rich quick before everyone else overconfident through 'irrational exuberance' of FOMO then loses.

The summary of my title up top comes from Undercover Economist, Tim Harford. Citing findings from assessing trading behaviour.

Its broader message won't be lost on sellers.

Churning through hires. Switching set-ups for market. Chopping and changing suppliers and tools and systems.

We too then hear that 'pop' of burst.

And how about with our clients?

Surely if they chase what we consider a superficial draw then aren't we duty bound to have a quiet word? One that reassures sticking with us, and appreciating the true horizons.

How often is too quick these days?

If it adversely affects us, we must be across ensuing turmoil, switching costs and sunk cost (with its fallacy).

For instance, despite the monthly subs model ubiquity, there's budgetary approval procedures for the next year to navigate.

Do you really want to lose out when your customer's top brass send down their edict that everyone must cut their spend, so that they may themselves bounce aboard the AI bandwagon?

Decoupling from how we might get dropped and having our own terms of monitoring and developing returns looms as more important than ever.