For each technological revolution to flourish, you need a lot of new investment in infrastructure. If you don’t have railroads, who can build locomotives? If you don’t have roads or electricity, how can you sell cars or refrigerators? But if you don’t have enough cars or refrigerators, you can’t justify the roads or power plants. The solution comes through asset inflation. As money flows into new technological stocks, investors make capital gains by reselling them. It doesn’t matter if there are no profits or dividends yet – the money keeps coming. Many of the canals and railways of the manias in the 18th and 19th centuries were completed years after their stock market boom ended, and many of the dot-com and telecom companies never realized any benefit from their investment. But the frenzy left enough infrastructure in place for everyone to benefit.
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