In the double-time march of technological advancement, the term "bubble" surfaces with frustrating regularity. Every groundbreaking innovation seems to have, hot on its heels, masses of naysaying speculators hawking ominous warnings of an impending burst.

This relentless focus on downside risk—anti-bubbleism, we might call it—is so frustrating because it dangerously misunderstands how the world gets built. And as so often happens, the world often ends up looking like what we imagine it to be. If we imagine bubbles are bad, our incentive-design choices reflect that, I'd argue, to our detriment.

What's in a name?

This term, "bubble" is predominantly wielded by those whose primary interest in technology is financial—stock analysts, venture capitalists, and corporate executives fixated on balance sheets. That association should make us suspicious. Increasingly and unfortunately, these are the class of people at the top of leading tech companies and to whom the tech press seems to be speaking. To them, a bubble signifies overvaluation and unsustainable growth, a precarious structure teetering on the brink of collapse.

However, for the technologists—the engineers, developers, and visionaries who are building the future—the concept of a bubble holds little relevance. Their focus is on solving problems, pushing boundaries, and exploring uncharted territories. That's a divergent-thinking task that benefits from rapid, intentionally unsustainable growth. This sprint, this frenzy, can often prove greater than the sum of its parts. Having two designers, for instance, usually proves to offer more than double the bandwidth of one.

The bubble FUD is counter-productive

Closer inspection shows that bubble FUD is short-sighted. For one, each time I wonder from within my bubble: what would Chicken Little have us do? Build slower? The call is coming from inside the house; it's those same people who are injecting the funds that inflate it. No, most often there's a 20/20 hindsight desire to simply find the right answer up front without all of this pesky, inefficient exploration stuff on which that eventual breakthrough is predicated.

See, financial people do not like risk. And the biggest horseman of risk is ambiguity (surely its chief companion is greed). But creativity requires ambiguity. Divergent ambiguity, which we might more positively frame as optionality, is the lifeblood of creativity and innovation. We need to allow things to remain the safe, sheltered, judgement-free-zone of exploration until they're grown enough to weather the solar winds of the real world.

History shows the hollowness of the bubble FUD

History provides ample examples of how speculative periods have yielded substantial benefits. The dot-com era of the late 1990s, often criticized for its excesses and subsequent crash, laid the foundational infrastructure for the modern internet. Companies that emerged from that period, such as Amazon and Google, have become integral to daily life and the global economy.

Similarly, the rapid investment in renewable energy technologies, despite early skepticism and financial volatility, has led to significant advancements in sustainability. The recent surge in artificial intelligence investment is another instance where intense focus and resources are accelerating developments that could transform industries ranging from healthcare to transportation.

It's not a bubble, it's a surge

Rather than dismissing these periods of intense activity as mere bubbles destined to burst, it is more constructive to recognize them as essential phases in the cycle of innovation. They mobilize talent, capital, and attention toward solving complex challenges. While there are risks involved—including the potential for financial losses—the broader benefits often outweigh the negatives.

Speculation drives competition, which in turn fosters innovation. It creates a sense of urgency and possibility that can break through complacency and convention. Embracing this dynamic allows for a more nuanced understanding of how industries evolve and how groundbreaking advancements are achieved.

It can be painful when bubbles burst—or more positively, if well-managed, contract. And it's understandable how people are inclined to ask how we might tolerate, let alone encourage, seeing much value seemingly disappear. But, we must remember, it didn't disappear; it's reflected, indirectly, in a long-term sense, in the progress that we were able to make.

It's like forest fires: they're scary and destructive and it's reasonable to want to make every effort to prevent them. But what we've come to discover is that forest fires are a natural, necessary, and essential part of many healthy ecosystems, most notably California's. It allows for continual renewal, the cleanup of the old to make way for the new.

Break the cycle; let's redefine how we invest

In today's age of VC unit-economics sobriety, folks are again turning to this question in the context of the bubble of the year: artificial intelligence. It would be a powerful thing for us to reframe what's being described as an AI bubble instead as a surge—an ephemeral season—that is valuable while it lasts and when it ends.

As I've said many times before, incentive design—how we design the systems of reward that shape what gets built, by whom, and for whom—is the prevailing design challenge of our time. And in that vein, how we describe and conceptualize of the work we do, matters; it shapes the path that work takes. How might we teach capitalism to appreciate a journey, not only a destination? Are our systems too structurally set up to resist such a radical idea? How might we create a system of investing that's gainful even though it, by design, contracts later?

Let's build a system that isn't afraid of change. One that doesn't scorn the winter for having taken away the summer, but rather, one that welcomes it as a part of the seasons that make summer possible.