Bubbles

Asset prices can detach from fundamental value when speculation, social contagion, and positive feedback loops drive prices far above intrinsic worth. The pattern is remarkably consistent: displacement (new opportunity), boom (prices rise), euphoria (everyone participates), profit-taking (smart money exits), and panic (crash). Bubbles are powered by the gap between price and value widening through self-reinforcing belief.

When to use it

When asset prices are rising rapidly with increasing popular participation; when narratives replace analysis; when 'everyone is doing it' becomes the primary justification; when risk assessment is dismissed as pessimism.

How it can help

Recognizing bubble dynamics in real time is extraordinarily valuable—whether in markets, hiring frenzies, technology hype cycles, or startup valuations. The key diagnostic: when price is justified by 'this time is different' rather than fundamentals, you're likely in a bubble.