Written by: @packyM, Not boring
Compiled by: Vernacular Blockchain
It’s no secret that one of the biggest risks facing crypto companies right now is that government regulation could slow down their growth or even lead to stagnation. I have been paying close attention to U.S. political trends over the past week, and I have found that the current situation has many similarities to what I usually discuss, and is more optimistic than expected. My gut tells me that we are standing at the beginning of all bubbles—a bubble-making machine that gave birth to bubbles of countless bubbles: the Trump Bubble.
One of the most shocking things about last week’s presidential election was how incredibly excited many people seemed to be about Trump’s victory, and that the extreme excitement some felt about some vision of the future was a sign that a bubble was starting to form.
Over the weekend, I read Boom: Bubbles and the End of Stagnation by Byrne Hobart and Tobias Huber. The core idea in the book is that certain types of bubbles play a huge role in moving the world forward. Bubbles, they argue, are the antidote to stagnation.
While reading the book, I noticed that the post-election reaction was strikingly similar to the very productive bubbles described in the book: the Manhattan Project, the Apollo program, Moore’s Law, the golden age of corporate R&D, the shale gas revolution, and Bitcoin .
Byrne and Tobias summarized five common characteristics of all the technologies and top projects they studied:
Overt optimism and focus Fear of missing out (FOMO) and living in the moment (YOLO) mentality Excessive risk taking and overinvestment Parallelization and coordination Reflexivity and hyperstition
defend the bubble
The “Trump Bubble” may sound worrying. When the average person hears the word “bubble,” they usually think of “something that is over-inflated and destined to burst.” The word often has a negative connotation, especially when it comes from some bad bubble. But this is not the only type of bubble. In their book Boom, Byrne and Tobias describe two types of bubbles:
1) Mean reversion bubble: “The basic bet is that the future will continue along the current trend.” For example, the subprime mortgage crisis. If you’re betting that the future will remain roughly the same, you can increase your bet by adding leverage.
2) Turning bubble: “Investors believe that the future will be significantly different from the past.” For example, the Internet bubble. If you believe that significant changes will occur in the future, you will buy assets that will benefit from such changes.
They argue that transition bubbles drive progress. This idea is similar to one I make in my book Infinity Missions: Turnaround bubbles drive progress by directing vast amounts of resources toward important projects that cannot be executed under normal cost-benefit analysis.
Take the Apollo program as an example:
In May 1961, when President John F. Kennedy announced that “this nation should commit itself to putting a man on the moon before the end of this decade,” no one knew how to achieve this goal. Rockets, launch pads, space suits, hardware, software, zero-gravity food—none of these exist, and there are no experts in the field. It wasn’t just that the space program lacked what it took to achieve a moon landing—scientists at the time weren’t even sure it was possible.
Turnaround bubbles drive future progress by focusing huge amounts of financial and human capital on a very specific vision of the future, and allow wasteful exploration and parallelization in the pursuit of that goal that would not normally occur.
Without the bubble, some things may never have happened. Byrne and Tobias point out that Moore’s Law itself is a classic bubble phenomenon: “The industry exhibits classic bubble behavior: predictions about the future—especially bold and almost irrefutable predictions—ultimately drive the policies that make those predictions successful. Real behavior.” For example, the expectation of continuous improvement in chips prompts people to design products that can take advantage of better chips, which in turn makes chip manufacturers aware of the need, thus stimulating investment in continuous improvement of chips.
In other words, a vision that is compelling enough can make it a reality. As Stripe Press writes on the Boom website, “Optimism can be a self-fulfilling prophecy.”
Source: Boom Website
As Peter Thiel, Byrne and Tobias emphasize, not all optimism is positive. Excessive optimism—the mere assumption that everything will go well—can be just as destructive as pessimism. Thus, the first common characteristic of productive bubbles is explicit optimism: a belief that the future will be better, and a concrete plan to achieve it.
What exactly is a bubble?
In the early post-election period, I began to notice common characteristics of bubbles, and I observed that the only unresolved question was its clarity—that is, where attention was focused.
Simply “making everything better,” such as “making America great again,” is too vague and imprecise to meet the book’s definition of a positive bubble: “The key is whether the vision contains a specific and actionable plan to transition from the present to the future.”
For example, the goal of building an atomic bomb before the Germans (or the Soviets) was clear and specific: to land on the moon within a decade. Each bubble Byrne and Tobias discuss is also clear and specific. But what about Trump’s bubble? What kind of bubble is it?
Elon Musk, who was instrumental in Trump’s victory and is likely to continue to be influential during his presidency, once called Tesla’s Gigafactory “a machine that makes machines.” If the Gigafactory works well, producing cars itself will be simple. And the United States is like “the machine that makes the machine,” but now it has dirt accumulated in its gears.
America can still create great companies, and those companies can still produce great products. But the slogan “Make America Great Again” doesn’t resonate with me because I’ve always believed that America is still the greatest country in the world, even if it’s now slower and more cumbersome than before. Comparisons to other countries obscure a deeper truth: America is not the greatest it could be.
If Trump’s bubble takes shape, it will be about upgrading and clearing the dirt from the “machine that makes the machine” so that the American machine can run at full speed. There is no more inspiring vision for those who believe in America, capitalism, and self. This vision seems powerful enough to inflate the strongest bubble in history.
signs of bubbles
While the Manhattan Project and Apollo are two examples in the book of direct government regulation, I think Trump’s bubble is more likely to develop like Moore’s Law.
As Byrne and Tobias write: “Moore’s Law is perhaps the most telling and persistent example of a two-way bubble, in which expectations of progress in one area drive growth in another, which in turn fuels growth in the first. .
There is a two-way relationship in the Trump bubble, too. The Trump administration’s message to people is that it will become easier to build, invest, and achieve big goals. This expectation itself has inspired greater enthusiasm to build, invest, and achieve big goals. The more energy and excitement people put into it, the easier it will be for the government to fix the machine.
Rainmaker’s Augustus Doricko put this sentiment perfectly: “We have four years to do our best.”
With control of the Senate, House of Representatives and the executive branch, the administration promised to streamline processes and eliminate friction. In return, the private sector plans to increase risk, investment and innovation.
While actually streamlining processes and removing friction may be far more difficult than expected, the mere belief that this is possible is enough to trigger a bubble.
Armed with the belief that anything is possible, people are sharing what they think governments can do.
Watch out for this meme: Make America X Again. Bryan Johnson posted a photo of himself and RFK Jr. with the caption “MAHA”, which stands for Make America Healthy Again.
Bryan Johnson is a tech founder. If he could connect with the key people responsible for the U.S. health system, wouldn’t it start to feel like the government might want to listen to his advice on health and other matters?
You may think this is a good thing, or you may think this is a bad thing, but what we want to focus on now is the dynamics of the bubble. The characteristic of a bubble is that people begin to feel that they are just one tweet away from influencing government policy. This also means that more and more people are starting to share their policy suggestions on Twitter. Interestingly, some of these ideas may actually become reality.
Of course, the government cannot see all the proposals and only considers a small part of them, and even fewer are actually implemented. But like a lottery or an incentive system, governments will almost certainly try to promote previously unimaginable schemes, and some of these schemes may succeed. And when these successes occur—such as sulfate injection to combat global warming—governments become bolder, trying things that were previously unimaginable.
By convincing people that change is possible—even just projecting their hopes on it—the Trump administration is making it “cool” to work with government. Bryan Johnson is one of them, as is Elon Musk, the richest man in the world who just caught a 22-story rocket with chopsticks. Talented people who never thought about working with government are now looking for opportunities to get involved. Sequoia’s Sean Maguire revealed that he has received inquiries from physics Ph.D.s asking how they could get a job in the Trump administration.
This is parallelization and coordination at the national level. The parallelism is that more and more entrepreneurs want to build in a more efficiently functioning American machine; the coordination is that more and more talented people want to be part of fixing that machine because they think now There is an opportunity to do so.
These phenomena once again prove a self-fulfilling prophecy. The increasing amount of talent devoted to fixing the government, with strong popular support, will make it more likely that they will succeed in fixing the government. This, in turn, will allow those working on building complex undertakings—whether in cryptocurrency or energy—to be more successful in building their “machines.”
People believe that ambitious projects that are pushed forward within the existing government framework will eventually succeed, and this belief creates a real “fear of missing out” (FOMO). This phenomenon is particularly evident in the cryptocurrency market, where the high liquidity and speed of price movements make this anxiety even more felt.
As of November 12, 2024, Source: Artemis Terminal
Investors are asking what exactly can cryptocurrencies accomplish if the SEC stops trying to exclude them through means that currently lack clear legislation?
Interestingly, this process also gave birth to a mini-bubble. Byrne and Tobias mentioned the case of Bitcoin in their book “Boom” and pointed out: “The value, security and network effects of any currency are driven by adoption, and Bitcoin is no exception.”
a16z Crypto has been emphasizing the price innovation cycle in cryptocurrencies: when prices rise, it attracts more attention and developers, who start building products, making the cryptocurrency more valuable over time.
The current state of cryptocurrencies in 2024, source: a16z crypto
This cycle is particularly evident in the cryptocurrency space because cryptocurrencies are inherently liquid, but similar dynamics play out across industries: rising prices attract talent, and talent creates the things that support rising prices. This is the manifestation of Hyperstition and Reflexivity.
I think the reason why the Trump bubble is so powerful is because it spawned these “little bubbles” everywhere, like a “bubble making machine.”
When the construction of cryptocurrencies becomes legal, more people will get involved and create more valuable crypto products; when the approval process for new nuclear reactors becomes feasible, more companies will start building these reactors; When SpaceX is free to launch rockets without FAA interference, it will launch more rockets.
This also makes us feel the concepts of FOMO (Fear of Missing Out) and YOLO (Only Live Once) again. If you’re paying attention to these developments, it’s hard not to feel as though something big is happening and you desperately need to be a part of it. I also felt like I wasn’t involved enough, and of course I mean financially, but I also mean something deeper, a spiritual feeling so to speak. I felt that I had done enough, but now I realize that I should have done more and that I needed to work harder to catch up – and this mentality is a characteristic of bubbles.
Byrne and Tobias mention in the book “Boom” that bubbles are often accompanied by a spiritual pursuit, writing: “To identify areas of future technological progress, you can start with the sense of transcendence they bring at the spiritual level. “
Now it does feel like we are facing an unprecedented opportunity to truly build our ideal future and realize our future vision ahead of schedule. It’s just that no matter how much you invest, there will always be someone who gives more than you. It is this atmosphere that is so motivating that it aligns thousands, even millions, of people and drives them to participate in a great project, whether it is improving an existing system or creating a new, more achievable system. All this is almost certain to lead to excessive risk-taking and over-investment, which is also the characteristic of bubbles.
Although “hard core technologies” (such as vertically integrated companies) are increasingly valued, many investors still prefer to err on the side of caution, considering the construction of these technologies to be uncertain and capital-intensive, even if they are successful, the rewards can be extremely generous. However, I expect that in the coming months, we may see a similar phenomenon of overinvestment as seen in the cryptocurrency market in areas ranging from nuclear energy to aerospace.
But this is actually a good thing! The beauty of a bubble is that even though some investors may suffer losses, it does not trigger a systemic collapse and the world still makes progress on solving major problems. Ultimately, companies that might not otherwise survive emerge and move the world in a better direction.
Of course, all this will not be smooth sailing and will inevitably be full of fluctuations and uncertainties. But I firmly believe that this process will lead to extraordinary results.
How the foam machine was formed
In 2021, Musk shared his five-step approach to improving the manufacturing and design process in a very famous video with Everyday Astronaut:
Source: https://www.youtube.com/watch?v=t705r8ICkRw&feature=youtu.be
Make requirements more reasonable Remove unnecessary parts or processes Simplify or optimize Speed up cycle times Automate
If you think of the United States as a “machine that makes machines,” then the approach Musk took in building SpaceX, the “machine that makes machines,” is not only worthy of attention, but also a very interesting point. Because this approach is very similar to the plan announced by the Trump administration:
Make requirements more reasonable → Regulatory reforms (eg: NEPA, NRC) remove unnecessary parts/processes → Eliminate agencies like the Department of Education Simplify/optimize → Streamline remaining processes to speed up cycle times → Improve approval speed Automation → Modernize government systems
Obviously, these changes may come with some risks! SpaceX’s rockets, for example, sometimes explode, showing that too radical an innovation can run into problems.
However, once these improvements and optimizations are implemented, many things will become smoother. That’s why there’s so much enthusiasm because they believe this is the first government in many years that is really pushing the envelope and testing the bottom line of the existing system.
But more importantly, this “breaking the rules” approach symbolizes an attitude of re-embracing risk.
summary
On November 13, Trump announced that Elon Musk and Vivek Ramaswamy would jointly lead the newly established “Government Efficiency Department.”
According to Trump, DOGE will “clear bureaucratic hurdles for my administration, cut excessive regulations, shrink wasteful spending, and reshape federal agencies.” He also said it would “create a kind of entrepreneurship that has never been done before.” type of government” and “unleash the vitality of our economy”. Simply put, the purpose is to repair the “machine that makes the machine” and promote a series of changes.
Can you understand why people are so excited? I mentioned Musk’s process of repairing the machine in the previous part. At the time, I thought this metaphor was a bit “too appropriate.” As a result, just after I finished writing, Trump appointed Musk to co-lead the process of “repairing the machine.” organization. Musk is undoubtedly the best candidate for this position, and he readily accepted the task.
While many point out that DOGE has no actual decision-making power and can only make recommendations, that is not the point. The point is that both supporters and opponents are beginning to believe that government might actually become more efficient. Even if Musk and Vivek can’t directly cut agencies and regulations, they can at least shine a light on the most wasteful parts of the federal government and use the power of the public to push for change.
This is a long-lost opportunity for people to feel that they can personally participate in the process of making the “big machine” of the United States run more smoothly. Musk also stated on the X platform that they will publicly share all actions of DOGE.
Vivek said on Twitter that DOGE will collect public opinions through crowdfunding: “Americans voted for radical government reform and they should have the opportunity to participate in repairing the government.”
This is exactly what I said before, any good and healthy bubble can stimulate people’s sense of participation. People will feel like they can actually fix the government and therefore put more effort into trying to improve it. The specific performance may be to submit suggestions or call members of Congress to push them to adopt DOGE’s suggestions.
Whether the end result is exactly as expected is not what matters. The key is that when a bubble forms, people have a strong belief that things will move in this direction, and that belief itself will shape their actions.
The issue now is no longer Democrats vs. Republicans, whatever the dissatisfaction and divisions in people’s hearts. More importantly, it is between those who believe that the American people can change the status quo and make America and the world a better place, and those who believe that government bureaucracies should Actions between people who do these things for us. This is not much more important than a mere political struggle!
No one wants to pay more taxes to fund a wasteful bureaucracy. No one wants to feel like there is something wrong with their country and there is nothing they can do about it. No one wants to see things move 100 times slower than they should, or cost 100 times more than they should. We can actually reach consensus on many aspects.
This is a “meta-bubble” that may spawn a transition bubble in the next few decades. Welcome to the Trump bubble.
