Original author: Andrew Kang, founder of Mechanism Capital
Compiled by: Ken, Chaincatcher
For those who have experienced at least one complete market cycle, you develop an instinct to be wary of price increases far exceeding historical growth rates. Witnessing the dot-com bubble, the 2008 global financial crisis, and the rise and fall of cryptocurrencies will trigger pattern recognition alarms in your brain. You're hesitant to enter the market because prices are too high, yet you also want to sell your assets out of fear of being stuck at a peak.
But it's crucial to recognize that we are in one of the most profound and unique moments of asymmetry in history. The only course of action right now is to lengthen your time horizon and completely abandon short-sightedness.
It's foolish to worry excessively about bubbles. It's also foolish to try to time the market. Short-term fluctuations and pullbacks will always occur, but given how close we are to the "singularity," these fluctuations are nothing but noise. Artificial intelligence, robotics, energy, and innovation are poised for explosive, uncontrolled growth.
In the next decade, we will have a workforce of billions (or more) of AI-powered intelligent agents, humanoid robots, space data centers, multi-planetary colonies, and dramatically improved medical treatments; we will fundamentally change the pace and output of technological breakthroughs in all fields. The technological progress and economic growth we compress over the next twenty years will exceed the total of the entire history of human civilization.
We're already at the very steep J-curve, but this is hard to detect when we narrow our focus to the micro level of daily or weekly progress. At Anthropic, 100% of the product code is now written by Claude. Product managers have a virtual team of software engineers so efficient they seem to manipulate time itself. Companies that leverage AI effectively aren't seeing product iteration speeds increase by single digits, double digits, but triple digits.
Moreover, the capabilities of these tools are evolving at an even faster pace. Whether we officially achieve Artificial Superintelligence (ASI) in 2027 or 2029 is actually not important. It will inevitably happen. By the time the official announcement is made, the assets you want to own will have already increased in value many times over.
It is highly likely that real economic growth over the next 3-10 years will reach 20 standard deviations (20-sigma) under any historical distribution model. This growth, once considered almost impossible, will be driven by unprecedented second- and third-order changes. Traditional valuation models are no longer able to price these changes. The potential upside is so vast that traditional present value calculations struggle to capture it.
The speed of wealth accumulation will be staggering, much like when cryptocurrencies initially created numerous billionaires and multimillionaires in a short period, but on a much more extreme scale. Without risk exposure, it will be difficult to buy into such a vertically rising asset price; however, unlike previous bubbles, the creation of real economic value will better keep pace with the vertical rise in asset prices. Those who have operated in the market with an "exponential vision" over the past three years have already benefited immensely. If you haven't adopted this perspective yet, it's not too late.
While it's crucial to constantly monitor downside risks, this represents the largest upside risk in world history. We must learn to withstand risks over a longer time horizon. Now is not the time for swing trading. For most people, long-term investing typically outperforms short-term trading, but the gap in expected value between "trading" and "investing" will be wider than ever before. The question then becomes: what is the true value of the call option embedded in the singularity?
