I keep going back to Theranos and the russian proverb: doveryai, no proveryai. There always seems to be a rush to a new hype, whether it is digital currency, the cannabis market, or the next hot fintech, startups seem to oscillate according to market perception rather than actual value. On private equity, one would think that the market would be more stable and value oriented but time and again we have seen prominent names be revered as oracles of their times only to have them prove the market wrong in assigning them those titles (i.e.: Madoff).
You are right it seems to be a recurring theme. It seems to be attributable to what Daniel Kahneman would call our mental "system 1" inability to forecast reliably and to give unwarranted weight to improbable events. Kahneman is the inventor of behavioural finance so his recent book 'Thinking fast and slow' would probably provide some insights into this problem.
It's a part of human tendency to search for new avenue and hoping for the best. So people tends to invest or search for such "New Hypes"
It goes as “Nothing in life is as important as you think it is, while you are thinking about it” - by Daniel Kahneman
Illusions have a great significance in social life and political economy, e.g. the new economy illusion of the 1990s. Economic Analysis (a posteriori) can work out rational essentials, but economic practice is about human action, which is to a great extent guided by irrational expectations (a priori), i.e. game behavior by informed and uninformed guesses, opting for miracles in the jackpot of life.
Christopher C Kelly Ajay H Shukla Stephen I. Ternyik Emmanuel V Murray
Thanks for chipping in guys. I will read into Daniel Khaneman's work.
I would love to test this out: create a fictitious startup (with a proper strategy and documentation to back it up), build up the hype through targeted PR campaigns, and gauge investors' perception on value as we announce a round of fund raising. I think it would shine some light on how perception of value is now based on PR investments (a.k.a. media coverage and spin), provided some minimal trust conditions are met.
Hopefully the author of this project will share some of his insight and develop this further.
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