Every generation gets a hype cycle, and every hype cycle is described, while it is happening, as different from the previous ones. Tulips, railroads, radio stocks, conglomerates, dot-coms, housing, crypto, AI. The narratives differ. The structure does not. The people who sell into hype get rich. The people who buy into hype mostly lose, and the ones who do not lose mostly were already rich enough to absorb the loss.
The risk is not the technology or the asset. It is the part where you decide it is different this time.
Hype reliably routes capital to the wrong stage of a cycle
Hype peaks when retail capital is fully committed and incremental upside is small. By the time a story is loud enough to reach people who do not work in the field, the asymmetric returns are gone. The professionals who priced the early opportunity have already taken their profits. What remains is the marketing layer, where products are pitched on narratives rather than fundamentals. Dot-com retail buyers in 1999 were not wrong that the internet would change everything. They were wrong that buying Pets.com at $14 captured that change. The general claim was correct; the specific trade was not. This is the recurring shape of hype: the macro thesis is often true, and the micro execution is usually a transfer of wealth from latecomers to insiders. Distinguishing the two requires effort the hype cycle is designed to discourage.
The narrative incentives are stacked against you
Coverage of hype cycles is produced by people whose incentives are not aligned with yours. Financial media gets clicks from upside stories. Influencers get sponsorships from the projects they are evaluating. Analysts at investment banks face career risk for being wrong and bearish, and almost none for being wrong and bullish, because the bullish error is a peer error. Researchers studying analyst behavior have documented this for decades. The result is a coverage environment where the loudest signals come from the most conflicted sources, and skepticism gets framed as missing the moment. The contrarians who turned out to be right at the top of every previous cycle were called wrong for years before they were called prescient.
The thing being sold is usually a feeling, not an asset
What hype cycles actually sell is participation. The asset is a vehicle for belonging — to the future, to the smart crowd, to a generational moment. That is why warnings do not work. Telling someone the math does not support their position misses what they are buying, which is a position. The losses, when they come, are absorbed because the experience of being part of the moment was real even if the financial outcome was not. This is not a moral judgment. It is an accurate description of what makes hype durable. People do not buy hype because they are stupid. They buy it because the social rewards arrive on a faster timeline than the financial verdict.
The takeaway
Be honest with yourself about which one you are buying. If the answer is “participation,” size it accordingly and do not call it an investment.
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