It is comforting to believe that when the world breaks—when housing markets collapse, when “unicorn” startups vaporize, or when seasoned scouts overlook generational talent—it is because of a miscalculation. We want to believe the math was wrong, the data was bad, or the algorithm was flawed. We want to believe it was a glitch in the intellect.
I heard a commentator recently mention that Michael Lewis, the chronicler of our most expensive delusions in his best selling books, has suggested something far more unsettling. In looking at the connective tissue between The Big Short, Moneyball, and Going Infinite, he identifies a different culprit. He notes that the “glue” holding these irrational systems together isn’t incompetence. It is FOMO: The Fear Of Missing Out.
“They are more afraid of being left behind than they are of being wrong.”
This observation completely reframes the narrative of catastrophic failure. It explains why high-IQ individuals—people paid millions to be rational—consistently make decisions that look insane in retrospect. The banker, the VC, and the scout aren’t necessarily blinded by greed, though greed is certainly a passenger in the car. They are blinded by the terror of the empty chair.
Lewis points out that for the social animal, the pain of being left behind is acute and immediate, whereas the pain of being wrong is often abstract and distant. If you sit out a bubble and the bubble keeps inflating, you look like a fool today. You are isolated. You are the cynic at the party who refuses to dance. If you join the bubble and it bursts, well, you have company. As the old financial adage goes, “It is better to fail conventionally than to succeed unconventionally.”
There is a profound, empathetic tragedy in this. It suggests that our systems don’t fail because we aren’t smart enough; they fail because we are too human. We are wired for the herd. The biological imperative to stay with the group—originally a survival mechanism against predators—has been warped into a financial suicide pact.
When we look at the irrational exuberance of a market, we aren’t seeing a mathematical error. We are seeing a materialized anxiety. We are seeing a collective hallucination held together not by logic, but by the sticky, desperate glue of not wanting to be the only one who didn’t buy the ticket.
The antidote, then, isn’t just better data or faster computers. It is the emotional discipline to be lonely. It is the willingness to stand apart from the warmth of the herd and accept the short-term social cost of being “out” for the long-term reward of being right.
We are culturally conditioned to hedge. We are taught the virtues of a balanced portfolio, a balanced diet, and a balanced life. We spread our chips across the table—a little bit of energy here, a little bit of time there—hoping that if we just cover enough bases, the aggregate sum of our efforts will amount to a meaningful existence. We find comfort in the average because it protects us from the zero.
But nature, and certainly the mechanics of outsized success, rarely operates on a bell curve. It operates on a Power Law.
Sam Altman, reflecting on the errors of intuition in investing, noted that his second biggest mistake was failing to internalize this mathematical reality. He said:
“The power law means that your single best investment will be worth more to you in return than the rest of your investments put together. Your second best will be better than three through infinity put together. This is like a deeply true thing that most investors find, and this is so counterintuitive that it means almost everyone invests the wrong way.”
The math is brutal in its clarity. It suggests that the drop-off from our primary point of leverage to everything else is not a gentle slope; it is a cliff.
When we apply this to capital, it makes sense. One Google or one Stripe returns the fund. But this is a “deeply true thing” that transcends venture capital. It applies to our attention, our relationships, and our creative output.
Consider the “investments” of your daily energy. Most of us spend our days in the “three through infinity” zone. We answer emails, we manage low-leverage maintenance tasks, we entertain lukewarm acquaintanceships. We busy ourselves with the long tail of distribution because the long tail is where safety lives. It feels productive to check fifty small boxes.
However, if Altman’s observation holds true for life as it does for equity, then that single, terrifyingly important project—the one you are likely procrastinating on because it feels too big—is worth more than the rest of your to-do list combined.
The “counterintuitive” pain point Altman mentions is that to align with the Power Law, you have to be willing to look irresponsible to the outside observer. You have to neglect the “three through infinity.” You have to let small fires burn so that you can pour all your fuel onto the one flame that actually matters.
We invest the wrong way because we are afraid of the volatility of focus. We dilute our potential because we are terrified that if we bet on the “single best,” and it fails, we are left with nothing. But the inverse is the quiet tragedy of the modern age: we succeed at a thousand things that don’t matter, missing the one thing that would have outweighed them all.
The behavior of today’s stock market is yet another sign that many will point to as indicating there’s an “AI bubble”. Today’s market action is largely attributed to Blue Owl Capital deciding not to participate in the debt financing of a new Oracle data center (being built for OpenAI) in Michigan. This news came out overnight last night and soured the market at the opening as it added fuel to the fires already raging from last week about bubbles in AI and, in particular, some of the debt financing being used to build new data centers – especially but not exclusively by Oracle.
Watching the market action today a brought to mind a recent paper on the subject of bubbles authored by Oakmark Capital’s Howard Marks. Marks is widely followed in the investment community for his almost “sage-like” prognositcations of which he’s authored many over the years. His memos are always full of insights and valuable learning opportunities. His recent one drilled into this question of bubbles — and, in particular, the role of debt financing. That’s especially interesting as Marks’ long career at Oakmark has been primarily involved in debt financing and, indeed, sometimes distressed debt.
Marks points out why he thinks the current situation with respect to AI is problematic as it shows many of the common characteristics of bubbles which in the past have resulted in wealth destruction instead of wealth creation.
As I’m writing this, I’ve just begun watching the latest Tim Ferriss interview which is with long-time venture investor Bill Gurley. Right up front in the conversation, Tim asks Bill for his take on the bubble in AI question. It’s a great conversation – well worth a listen.
Speaking of listening (or watching), on Monday I watched the latest episode of the Acquired podcast – this one celebrating the tenth anniversary of Acquired. This was the most fascinating conversation I’ve listened to or watched in recent memory. The two hosts of Acquired were being interviewed by author Michael Lewis – and they were interviewed in depth! Lewis asked lots of probing questions as well as provided some illustrative commentary of his own along the way. An incredible episode – highly recommended!
After publishing this post, I asked Google Gemini 3 Fast: I just published a blog post. Review it critically and help me improve it. Act like a tough but compassionate editor. Here’s the post: https://sjl.us/2025/12/17/bubble-bath/
Here’s the critique it gave me – tough but compassionate!
Alright, sit down. Let’s look at “Bubble Bath.”
You’ve got the ingredients for a great piece of timely analysis here: a specific market event (the Blue Owl/Oracle snag), a heavy-hitting intellectual framework (Howard Marks), and contemporary expert commentary (Bill Gurley and the Acquired team).
But right now, this isn’t an essay or a cohesive blog post—it’s a link log. You’re telling me what you’re watching and reading, but you aren’t telling me what you think.
Here is my critical review.
The “So What?” Factor You start strong with the Oracle/OpenAI data center news. That’s a “hook.” But then you pivot immediately to: “I read a memo by Howard Marks… I’m watching Tim Ferriss… I watched Acquired.”
As an editor, I’m asking: Where are you in this post? You’ve gathered the smartest people in the room, but you’re standing in the corner taking attendance.
The Fix: Don’t just tell us Howard Marks wrote a memo. Tell us which one specific point he made that explains the Oracle news. Connect the dots for us. Is the Oracle situation the “wealth destruction” Marks warned about, or is it just a healthy correction?
The Title vs. The Content “Bubble Bath” is a clever pun. I like it. But usually, a “bubble bath” implies a cleansing or a soaking. Are we getting soaked (losing money)? Or is the market being “cleansed” of irrational exuberance?
The Fix: Use your conclusion to pay off the title. Right now, the post just ends with a recommendation for a podcast. Close the loop: “If Marks and Gurley are right, this isn’t just a market dip; it’s the start of a very cold bubble bath for AI investors.”
Structural “Pass-Through” The second half of the post feels like a “What I’m consuming” list. It dilutes the urgency of the first paragraph.
The Fix: If the Bill Gurley and Acquired links are just “further reading,” put them in a “Resources” or “Deep Dive” section at the bottom. If they are central to your argument, quote them. What did Bill Gurley say about AI debt that makes the Oracle news more frightening?
Tighten the Prose You have some “wordy” habits that slow down the reader.
“The behavior of today’s stock market is yet another sign that many will point to as indicating there’s an ‘AI bubble’.” * Editor’s Edit: “Today’s market volatility is the latest fuel for the ‘AI Bubble’ fire.” (Go for the jugular).
Compassionate Closing Scott, you have a great eye for sourcing. You are curating high-signal content (Marks, Gurley, Lewis). That is valuable. But your readers come to your blog because they want to know how you are synthesizing this information.
My Challenge to You: Rewrite the middle paragraph. Instead of saying the Acquired podcast was “the most fascinating conversation,” tell us one thing Michael Lewis asked that changed how you view the AI bubble.
Give us your brain, not just your bookmarks. Now, go back to the keyboard.
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