TLDR:
- History tends to repeat itself in tech booms and busts, says Venrock’s Ethan Batraski.
- AI boom is currently being primarily driven by venture dollars, unlike previous tech booms.
Ethan Batraski, a partner at Venrock, discusses how history tends to repeat itself in the world of tech booms and busts. Despite the cliche, many fail to use historical lessons in their decision-making process, leading to predictable cycles of boom and bust. The AI boom, for example, is being primarily fueled by venture dollars, with venture capitalists subsidizing various tech trends throughout the years. Unlike previous booms, such as the dotcom or direct-to-consumer boom, the AI boom is driven mainly by venture funding, as public markets remain closed to startups.
Ethan Batraski highlights the direct-to-consumer boom from 2013 to 2016, where VC dollars were used to subsidize the advertising efforts of numerous companies. Today, a similar pattern is seen in the AI realm, where VC funding is used to subsidize AI companies offering services at a loss. Despite the high valuations and investments in the AI space, the return on investment remains uncertain, leading to skepticism about the sustainability of these valuations.
Bataski emphasizes the importance of learning from past mistakes and not falling into the trap of thinking “this time, it’s different.” As the AI boom continues to evolve, with companies like Nvidia and OpenAI making headlines, the importance of understanding historical patterns and lessons becomes increasingly crucial. The future of AI and tech remains uncertain, but recognizing the cyclical nature of tech booms and busts may help investors navigate the ever-changing landscape.
