It’s the latest hype. It’s what everyone is pining after. It causes prices to spike. Everyone seems to be into the Next Big Thing.
These days, it is Artificial Intelligence (AI). Tomorrow it will be something else. And the past is littered with whatever the Next Big Thing was at the time.
It has been said that the past is a series of bad predictions about the future. With that in mind, let’s unpack this latest AI craze.
Yes, But Not Really
Yes, I believe that AI will be a force going forward. No, I don’t this all the lofty prices and valuations of recent memory are sustainable.
Right now, it seems many companies that make AI products are riding high. In a few years, some of these companies will be acquired, some will go out of business, some will acquire others. It’s that way of the world.
Classic
The classic definition of Shiny Object Syndrome is “…is the situation where people focus undue attention on an idea that is new and trendy, yet drop it in its entirety as soon as something new can take its place. ” When it comes to Wall Street, the phase “drop it entirely as soon as something new can take its place” usually takes months if not years.
Where Things Are
It is the nature of Wall Street to scream and shout about the latest new New Thing. That is what attracts the money. Needless to say. money is the name of the game on Wall Street.
So whenever there is a extraordinary large amount of attention given to any one thing, one can be sure there are some marketers behind it all, aiming for getting investors to buy this new something.
Confusing The Future with The Present Hype
As mentioned, AI will be a big force in the years to come. Already some companies are implementing AI in their organizations. But this does not yet translate to extraordinary returns. While many are profiting from the flow of investments, few are profiting from the implementation of AI. Only the suppliers of AI chips seem to be the ones gaining.
Therefore, as a long-term investor, one that buys and holds, I can confidently say that for me, I just wait and watch. The past is littered with stocks that boomed based on the hot topic of the moment, and just came back down to earth shortly thereafter. The spectacular growth of a stock’s price was followed by the spectacular reversion to the mean.
The Cure
I believe the cure for the shiny object syndrome is to be a buy and hold investor. Yes, profits on shiny objects can be made in the short run. In the short run, one needs to be alert and know not only when to buy, but also when to sell. On the other hand, the long term investor needs to know which company is doing well enough to continue doing well.
Because as a long term investor I focus on dividends, I can easily pass up the hottest new craze because most of those companies do not pay dividends, or their dividends are too paltry to be considered.
Others may scoff at my perspective, and maybe they are making money, but I need not worry about what other think of me or my methods. That is because I don’t worry at all.
Do shiny objects bedazzle you? Let me know here.
Illustrated is the title page from “The Woven Book of Hours, ” 1886-7. This book of prayers was woven on Jacquard looms, with the text and imagery encoded in hundreds of thousands of punch cards that directed the weaving of black and silvery gray silk threads. Courtesy The Walters Museum, Baltimore, Maryland.
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