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In finance a bubble means an economic cycle where asset prices rise faster than their actual value. It is a term of art/analogy but it does not map 1:1 with phy
by elil17 4y ago
In finance a bubble means an economic cycle where asset prices rise faster than their actual value. It is a term of art/analogy but it does not map 1:1 with physical bubbles such as soap bubbles. It does not mean that the underlying asset has no actual value.
The housing example is a great one. The 2008 housing bubble was due (in part) to overvalued houses. Those houses still have value though (they weren't scam houses that only existed on paper).
- kilgnad 4y agoIt is a 1:1 mapping to physical bubbles. Like soap bubbles. I never said the bubble implies the underlying asset has no value. The bubble encases the difference in value and current value. The bubble does not encase the actual asset. When a bubble pops that difference disappears. But the asset value remains because the intrinsic value was not what the bubble was referring to.
- elil17 4y agoMy main point was that just because there is an AI bubble does not mean that AI is not useful/valuable. Seems like we agree on that.