Stay Alert When New Technology Overheats: Investors Can Wait, but Founders Cannot

You must stay alert when a market overheats. Losing our composure is part of human nature. Whenever a new wave arrives, people find it hard to remain calm. That is normal. It will inevitably trace a curve. New technology initially attracts intense excitement. People believe it can change everything, immediately. Later, they discover that it needs more time to mature, or that they themselves need more time to learn to use it. Expectations then plunge to a trough. But if the technology genuinely advances humanity’s progress toward digitalization and intelligence, it will gradually meet and even exceed those earlier expectations. AI today is also overheated. Almost every entrepreneur is thinking about how to move into it. Major entrepreneurial changes emerge as cycles alternate between overheating and excessive pessimism. Truly remarkable revolutions often need an environment outside the consensus to take shape. Think of each wave that produces outstanding entrepreneurs, extraordinary stories, and remarkable companies. Their approach was never the prevailing consensus. Everyone collectively getting excited—or everyone collectively calming down—cannot be right. Usually, a small group is very excited while a much larger group is gradually cooling off. The excited group may ultimately make the right bet: what they believed in turns out to be right. ---- Robin: “When a new technology emerges, an experienced investor can wait a little longer. But investors being able to wait and observe does not mean founders can watch from the sidelines. Others are moving ahead. You cannot wait until the market is settled before entering; you have to keep running and adjust flexibly along the way. “Another thought: be very careful about market ‘consensus.’ If your startup idea reflects a broad market consensus, think more deeply about it. As in investing, following the herd is bound to lead to trouble. Good investors need independent thinking, and good entrepreneurs need their own distinctive insights. Those insights are usually not products of consensus; they are more likely those of a lone wolf going its own way. Stock-market rallies generally begin amid widespread doubt. Entrepreneurship, too, requires taking an unconventional path.”