Let It Crash: How to Steer What Comes After
I’m a venture capitalist, and I’m telling you to root for the crash that torches my own asset class. I mean it. The valuations are silly, the data-center spending is feverish, and half the people I talk to are quietly bracing for the fall. But here’s the argument almost no one will say out loud: the coming crash would be the best thing that happens to this technology. And it’s a necessary part of the Renaissance cycle I wrote about last time: the pattern by which a disruptive new technology forces a society to rebuild its picture of what a human being is for.
Economist Carlota Perez has found a common pattern: every great technological surge of the last 250 years took the same course: a revolution, a financial bubble, a collapse, and only then a golden age. Canals, railways, steel, cars, and computers all ran it. AI isn’t bound to repeat that course, though. What makes the pattern more than coincidence is its mechanism: the crash after the bubble.
The bubble and the crash that ends it are not a detour around the golden age. They are the road to it. But if done wrong, the same turning point that built the American suburbs built the gulag. The only variable is how we respond.
Today, that variable is a choice almost no one is naming: when the rebuild comes, do we tax the rich or spread the means by putting the machine in many hands? This essay is the case for the second.
The products of a technology bubble are more durable than the bubble itself. Technological fervor drags an absurd amount of capital into the new thing and pours it into infrastructure that no rational, sober investor would have built that fast. Britain got a railway network out of railway mania. The 1990s gave us the fiber that carried everything we built in the 2000s, laid by companies that mostly went bankrupt laying it. The investors lost their shirts; the rails and the fiber stayed.
We are living through the same process now, except the rails of today are compute, data centers, models, and the habit of millions of people learning to think alongside a machine. The chips will depreciate, sure, but the chips were never the rail; the power, the grid hookups, the data-center shells, and a generation that learned to work with machines are, and those outlive the hardware the way the fiber outlived the routers.
Then the crash does three jobs that nothing else can do.
It finishes the build. By the time the music stops, the new infrastructure is in the ground and the new way of working has become ordinary. The changeover is complete precisely because people overspent on it.
It sobers the money. A frenzy makes capital arrogant and stupid. A crash makes it humble again, and humble capital is the kind that builds real companies slowly instead of chasing paper.
And it forces the rebuild. In the boom, no one will touch the hard questions of how a technology should be governed, who it should serve, or what gets protected from it. There’s too much money in not asking. The crash creates the only moment of urgency in which a society will actually sit down and rewire its institutions. Antitrust, interoperability, and standards can do some of this, and we should use them now. But in the boom, they’re outspent by the people who profit from not asking. The crash clears the resistance. By 1935 we had deposit insurance, securities law, the whole architecture that made the postwar decades possible. None of that was conceivable in 1928.
A crash and a depression are not the same thing. The crash is the moment the paper values snap back to real ones. The depression comes after, and its length is not fixed in advance.
A depression, in Perez’s telling, is just a crash whose rebuild failed or came too late. 1929 turned into the 1930s because the monetary orthodoxy held for four more years before anyone was willing to change the rules. That option belongs only to a society still whole enough to exercise it. That wholeness is state capacity: whether a government can still turn a decision into a result (Whether our state qualifies is the question I take up next).
The size of the bubble sets how deep the hole goes; how fast and how well we rebuild sets how long we stay in it. And depth cuts both ways. A downturn that’s too mild is its own failure: it never breaks the old habits, and you get what Perez calls a gilded age instead of a golden one: growth resumes, finance stays in charge, and the tensions never resolve. Half a Renaissance at best. But a depression that runs too deep and too long does the opposite damage by radicalizing people. Severity raises the ceiling and lowers the floor at the same time.
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The bubble decides how hard the crash hits, left to right. We decide how well and how fast we rebuild, bottom to top. The same deep crash sits one move from Florence and one move from Weimar. And weak does not mean slow: Germany’s rebuild was fast, forceful, and aimed at the wrong portrait. A rebuild captured by the cheapest answer available is a failed rebuild, however quickly it moves.
The people praying for a soft landing—namely the Fed, the “this time is different” optimists, and the investors & founders hoping the music never stops—are all unwittingly praying for a slow death. We should not want the softest possible landing but a crash hard enough to break the current orthodoxy, met by a rebuild fast enough to keep the recession from curdling into something worse. Which means the answer has to be ready in advance.