Boom: Bubbles and the End of Stagnation

Book Author: Lars Tvede

Most of us alive today have witnessed a transformational technology trigger an investment bubble. My generation experienced the dot-com boom and bust of the late 90s. The next generation lived through crypto's wild ride from 2017 to 2022. Today, we're watching AI startups raise $100 million in seed funding with no product and no employees—a familiar pattern that makes everyone ask: "When will this bubble burst?"

Boom, by Lars Tvede, reframes this question entirely. Instead of asking when bubbles will end, Tvede argues we should be asking how to create more of them.

The book's central thesis challenges decades of conventional economic wisdom: financial bubbles, rather than being destructive market failures, are actually the primary drivers of technological breakthroughs. Tvede contends that since the 1970s, we've entered a period of "great stagnation" precisely because we've become too risk-averse and bubble-phobic. The very attempts to prevent bubbles have starved us of the massive, coordinated investments needed for transformational innovation.

Tvede methodically walks through the great technological leaps of the mid-20th century—the Manhattan Project, the Apollo Program, and the semiconductor revolution that birthed Moore's Law. Each breakthrough, he demonstrates, was fueled by what we would today call bubble dynamics: overfunding, decreased individual risk through collective participation, and the gathering of brilliant minds in high-bandwidth, high-stakes environments.

The book's most provocative argument is that these weren't accidents or byproducts of innovation—the bubble dynamics were essential to the breakthroughs themselves. Conservative institutions and individuals, given permission by collective mania and FOMO, suddenly take massive risks they would never consider in normal times. The result is a concentration of talent, capital, and urgency that creates conditions impossible to replicate through conventional funding mechanisms.

Tvede spends considerable time analyzing more recent bubbles—dot-com, crypto, and fracking—arguing that these represent a return to the bubble-driven innovation model. While each crash left behind failures and excess, they also delivered foundational technologies that transformed entire industries. The internet infrastructure built during the dot-com boom enabled the next generation of companies. The blockchain experiments of the crypto era are reshaping finance. The fracking boom revolutionized energy markets and propelled the United States from being a net energy importer to one of the world’s largest energy exporters (and the world’s largest LNG exporter).

The book concludes with an optimistic vision: rather than fearing or trying to prevent bubbles, we should learn to harness their innovative power while minimizing their destructive effects.

Why I Recommend This Book

Boom fundamentally challenges how we think about risk, innovation, and economic cycles. While we're busy debating whether we're in an AI bubble and when it might pop, Tvede suggests we're asking the wrong questions entirely.

Tvede's contrarian insight is that bubbles solve a fundamental coordination problem in innovation. Breakthrough technologies require massive, simultaneous investments across multiple fronts—exactly the kind of coordinated risk-taking that rational markets typically can't deliver. Bubbles provide the social permission structure for this coordination to happen.

Consider our current AI moment through this lens. Instead of debating bubble timing, we might ask: How do we maximize the innovative output of this period? How do we ensure the talent and capital flowing into AI generates lasting breakthroughs rather than just inflated valuations?

The book's historical perspective is particularly valuable for anyone navigating today's technology landscape. By understanding how past bubbles generated genuine progress alongside spectacular failures, we can approach current market dynamics with both appropriate caution and strategic optimism.

Boom is dense with historical detail and economic theory, but the payoff is a completely reframed understanding of how transformational change actually happens. In a world increasingly focused on risk management and bubble prevention, Tvede makes a compelling case for embracing the controlled chaos of innovation bubbles.