Investment bubbles get a bad rap. Perhaps we should mock them a little less and express our gratitude to them a little more. Why? Because while they leave huge misery in their wake, they also eventually leave us with good things paid for by other people’s capital.
The bicycle bubble of 1896, for example, left us with better bicycles. It also led to a significant improvement in the quality of the roads in the US. As Sandy Nairn points out in his 2002 book Engines That Move Markets (a must read for anyone interested in how new technology drives bubbles), at the time, “surfaced roads remained a rarity.” By getting them resurfaced, the bicycle boom paved the way for the arrival of the automobile.