Courtyard of the Amsterdam Stock Exchange (Beurs van Hendrick de Keyser) by Emanuel de Witte, 1653
Is there such a thing as ‘good bubble’ — and even if it is — is this the sound of it bursting? Plus, the 10 most famous bubbles in history.
In an era when investors have learned to fear the word bubble, Amazon founder Jeff Bezos offers a contrarian reassurance: not all bubbles are bad. Speaking at a technology conference in Turin, Bezos described the current wave of artificial intelligence (AI) investment as a “good kind of bubble,” one he believes will ultimately yield lasting benefits for society — even if markets stumble along the way.
“This is kind of an industrial bubble as opposed to financial bubbles,” Bezos said, contrasting today’s AI fervor with the credit excesses that led to the 2008 crash. “The banking bubble, the crisis in the banking system, that’s just bad, that’s like 2008. Those bubbles society wants to avoid.”
“The ones that are industrial are not nearly as bad, they can even be good,” he said. “Because when the dust settles and you see who are the winners — society benefits from those inventions. That’s what is going to happen here too. This is real. The benefits to society from AI are going to be gigantic.”
For financial planners and portfolio managers, Bezos’s optimism echoes a familiar tension: distinguishing genuine technological transformation from speculative excess. His argument — that AI’s infrastructure spending will outlast its early investors — recalls how fiber-optic networks from the dot-com boom later powered the modern internet.
The ‘good’ bubble thesis
Bezos’s remarks come amid growing anxiety over the sustainability of the AI rally, which has driven equity markets to new highs. He drew parallels between the current moment and Amazon’s own experience two decades ago, when its stock plunged from $113 to $6 during the dot-com collapse before becoming one of history’s most valuable companies. “When people get very excited as they are today about AI for example, every experiment gets funded, every company gets funded,” Bezos said. “Investors have a hard time in the middle of this excitement distinguishing between the good ideas and the bad ideas.”
That exuberance, he suggested, is also what fuels innovation. “It doesn’t mean that anything that’s happening isn’t real. AI is real, it is going to change every industry,” he said. “We don’t know how long it will take exactly but that is very real.”
A divided market mood
Not everyone shares Bezos’s enthusiasm. Goldman Sachs chief executive David Solomon, speaking earlier at the same event, warned that much of the capital now pouring into AI “will turn out not to deliver returns.” “It’s not different this time,” he said, adding that while AI’s promise to transform work is “very exciting,” he was “not smart enough to know” if the market’s excitement had tipped into mania. “If you were having this conversation in 1998 you would have been asking the same question but the [market] would run for another three years,” Solomon said. “We are at the beginning of the movie, not the end of the movie.”
For wealth managers, the subtext is clear: duration risk, concentration risk, and valuation risk are once again colliding in technology portfolios. AI-linked firms — chipmakers, data-center developers, and cloud giants — have come to dominate major equity indices, raising the question of how much of the market’s growth story depends on a single theme.
Implications for financial advisors and clients
For RIAs and independent advisers, Bezos’s vision of a “constructive” bubble poses both opportunity and hazard. On the one hand, client portfolios tilted toward innovation may capture long-term productivity gains if AI does indeed reshape industries from finance to logistics. On the other, advisors are confronting déjà vu: valuations stretched to dot-com-era levels, companies using vendor financing to fuel their own demand, and speculative capital flooding into ventures without proven earnings models.
The practical takeaway, say many in the advisory community, is to treat the AI buildout as infrastructure—an essential but cyclical sector. Allocating through diversified thematic ETFs or broad-market funds may help clients participate without assuming single-company risk. Some planners are also looking to counterbalance tech exposure with real assets and short-duration fixed income, given the sensitivity of high-growth equities to interest rate changes.
A familiar cycle
Bezos’s assertion that “industrial bubbles” can be socially beneficial resonates with financial historians, who note that past booms — railways in the 19th century, fiber optics in the 1990s — left behind infrastructure that advanced commerce and communication. Yet, as Goldman’s Solomon pointed out, capital markets rarely price these benefits evenly. The challenge for advisors lies not in predicting the pop, but in managing client expectations when it comes.
History’s bubbles: The fine line between folly and foundation
The idea that some bubbles might be “good” is not new. History is filled with episodes in which investors’ collective mania produced ruin for many — but also left behind the bones of modern prosperity.
In the late 18th century, British investors poured fortunes into canals, convinced that man-made waterways would unlock boundless wealth. Many of those projects failed; one in five never paid a dividend. Yet the network that survived became the arteries of the Industrial Revolution, moving coal and iron more cheaply than ever before.
A generation later came the railway mania of the 1840s. Ordinary families staked savings on new lines; banks lent freely to promoters with little oversight. By 1850, railway shares had collapsed roughly 80 percent from their peak, but the country was left with a national rail grid that would power commerce for decades. It was an infrastructure bubble — a frenzy that misallocated capital but built enduring value.
America’s own rail boom a few decades later followed the same pattern. Overbuilt lines and speculative land grants culminated in the Panic of 1873, wiping out fortunes and freezing credit for years. Still, those rails stitched together a continental economy, transforming the United States into an industrial superpower.
The 1990s dot-com boom offered a modern echo. Venture money chased web addresses and “eyeballs” rather than profits; telecom carriers borrowed billions to string fiber optic cable across oceans and continents. When the bubble burst, investors were ruined — yet the dark fiber they left behind became the infrastructure of the cloud economy, streaming, and e-commerce. What had been a graveyard of bankrupt balance sheets became the foundation for trillion-dollar enterprises two decades later.
Economists sometimes call these cycles “productive bubbles” — periods when exuberance finances the future more quickly than sober capital ever would. But they also serve as reminders that innovation does not immunize markets from arithmetic. The line between progress and peril is only clear in hindsight.
For financial planners and investors, the lesson is timeless. Booms born of technological promise often end with disappointment, but they can also redefine the economic landscape. The challenge is to capture the lasting value without mistaking speculation for strategy — to own the rails, not the dreams that built them.
10 Famous bubbles at a glance
1. Tulipmania (1630s, Netherlands)
Story: Exotic scarcity becomes a luxury status asset; futures-like contracts spread.
Tell: Prices outrun incomes and tradeable uses; rampant forward deals with tiny capital.
Bust: Contract disputes + waning buyer confidence.
Aftermath: No lasting economic dividend; classic example of a purely speculative bubble.
2. South Sea & Mississippi bubbles (1719–1720, Britain/France)
Story: Monopoly trade rights + government debt swaps sold as a financial miracle.
Tell: Equity-for-debt schemes, insider dealing, political sponsorship.
Bust: Confidence collapses; liquidity vanishes.
Aftermath: Tighter securities rules; limited real-economy payoff.
3. British canal mania (late 1700s) – Infrastructure bubble
Story: Waterways promised cheaper transport and national growth.
Tell: Dozens of flotations; optimistic traffic projections.
Bust: Credit crisis of 1793; many canals unprofitable for years.
Dividend: A functioning canal grid that lowered coal costs—helped power the Industrial Revolution.
4. British railway mania (1840s) – Infrastructure bubble
Story: Railways would “shrink” distance; every line looked viable on paper.
Tell: Capital floods into duplicate routes; accounting gimmicks; retail speculation.
Bust: Banking strain in 1847; share prices fall ~80% from peak by 1850.
Dividend: A national rail network that underpinned decades of growth.
5. US railroad boom & panic (1860s–1873) – Infrastructure bubble
Story: Continental scale via track-laying and land grants.
Tell: Overbuilding; fragile railroad finance; high leverage.
Bust: Failure of Jay Cooke & Co.; long downturn.
Dividend: Integrated national markets; logistics transformation.
6. Electric utilities/radio (1920s, US)
Story: Electrification and mass media will lift all boats.
Tell: Investment trusts with leverage; momentum valuations.
Bust: 1929 crash and Depression.
Dividend: U.S. grid and broadcasting infrastructure endure.
7. Japan asset bubble (late 1980s)
Story: Land and equities as perpetual collateral; “Japan Inc.” dominance.
Tell: Property worth more than entire countries; banks stuffed with real-estate risk.
Bust: Policy tightening; multi-decade balance-sheet recession.
Dividend: Limited; financial scars overshadow infrastructure gains.
8. Dot-Com/Telecom (late 1990s–2000s) – Infrastructure bubble
Story: Internet will rewrite economics; build bandwidth at any cost.
Tell: “Eyeballs” over earnings; vendor financing; fiber glut.
Bust: Nasdaq down ~80%; telecom bankruptcies.
Dividend: Dark fiber later lit; the cheap bandwidth enabled cloud, streaming, and modern SaaS.
9. US housing/credit (mid-2000s)
Story: Housing never falls nationally; securitization spreads risk.
Tell: No-doc mortgages; synthetic exposure; ratings complacency.
Bust: Subprime cracks → systemic crisis.
Dividend: Regulatory and risk-management reforms; little durable “infrastructure” payoff.
10. Crypto boom-busts (2017, 2021–2022)
Story: Decentralization as a new financial operating system.
Tell: Leverage, shadow banking, self-referential tokens; yield schemes.
Bust: Stablecoin/risk-platform failures; policy scrutiny.
Dividend: Payment, custody, and tokenization tooling survive—smaller than the hype.
