A speculative bubble, wrote Nobel laureate Robert Shiller in Irrational Exuberance, his landmark book on human foolishness, is “a situation in which news of price increases spurs investor enthusiasm, which spreads by psychological contagion from person to person, in the process amplifying stories that might justify the price increases and bringing in a larger and larger class of investors, who, despite doubts about the real value of an investment, are drawn to it partly through envy of others’ successes and partly through a gambler’s excitement”.
Observers of the tech industry are wearily familiar with this kind of irrationality. Throughout 2020 and 2021, as Covid-19 wreaked economic havoc on countries throughout the western world, the tech industry remained strangely untouched by what was happening on the ground. While the rest of us cowered in lockdown, the pandemic made tech bosses and owners insanely richer. Their companies grew faster and became even more profitable while other industries languished. Apple had so much extra cash that it spent $90bn (£74bn) – nearly the gross domestic product of Kenya – buying its own shares. Amazon laid out $50bn in 2021 on warehouses, hiring tens of thousands of employees, ordering fleets of electric vehicles and building cloud computing centres. And so on.
