Pop!: Why Bubbles Are Great For The Economy [Hardcover]

Daniel Gross (Author)

Book Description

Publication Date: May 8, 2007

Daniel Gross is one of the leading economics and business writers in America today. His prolific commentary and unnerving insights are a staple of Slate, The New York Times, Fortune, Wired, New York magazine and dozens of other publications. In this lively romp, Gross makes a counter-intuitive argument. America in the first decade of the new century is not thriving despite the folly of the Y2K bubble-nor has it made a surprisingly quick recovery from the devastation of the crash in 2001 and 2002. Our current economic growth-and, indeed, the globalization that is a part of that growth-is a product of that wasteful bubble. Pop! will take readers on a fast-paced tour of economic history where the reckless expansion of previous eras in railroads and automobiles, telegraphs and land, streetcars and stocks all led to unsustainable booms, collapses and, then, surprising blossoms of prosperity. Gross is gifted writer with a deep well of historical knowledge and easy grasp of economic conflicts. His book will re-orient our view of recent economic history and re-color our understanding of American growth throughout the national experience.

--This text refers to the Kindle Edition edition.

Editorial Reviews

From Publishers Weekly

Starred Review. Three cheers for "exuberant, foolish, mad overinvestment!" Slate columnist Gross takes a counterintuitive look at economic bubbles—those once-in-a-generation crazes that everyone knows can't last, and don't. With each one, we lament having gotten in too late, and then not having gotten out soon enough, and finally shake our heads at the inevitable bankruptcies and lost jobs and general financial wreckage. The pattern is all too familiar, which is why Gross's argument is so intriguing: that these bubbles, with their hype and madness and overenthusiasm, are not to be feared—they're actually a primary engine of "America's remarkable record of economic growth and innovation." The author surveys modern bubbles and finds the benefits far more durable than the disruptions: in each case, most investors flopped, but businesses and consumers found themselves with a "usable commercial infrastructure" that they quickly put to new uses. The telegraph "led to the creation of national and international financial markets"; extra railroad lines made national consumer brands possible and gave consumers access to distant stores; extra fiber-optic capacity gave everyone Internet access after the bust. Gross drops zingers throughout his cheery history, amusingly highlighting parallels between past and current bubbles. He concludes—with admirable practicality—by calling for a "real bubble" to jump-start alternative-energy programs. (May)
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Review

Pop!’s good old-fashioned historical narrative is refreshingly unambiguous in its lessons for investors. (Barron's )

“Gross’s thesis is...thought-provoking...for modern investors, particularly given that the bubble phenomenon shows no sign of disappearing.” (Financial Times )

“This is a stimulating book, worth your time and money.” (Tyler Cowen, Marginal Revolution )

“The sort of analysis that makes economics and investing so intriguingly fascinating.” (Barry Ritholtz, The Big Picture )

Sizzle! Pow! Bam! Business history gets feisty in this attention-deficit-friendly guide to American booms and busts. (Conde Nast Portfolio )

“It’s hard to resist crossing your fingers...hoping that the next bubble bursts while you’re still around to enjoy it.” (New York Observer )

See all Editorial Reviews

Product Details

• Hardcover: 240 pages
• Publisher: HarperBusiness; 1 edition (May 8, 2007)
• Language: English
• ISBN-10: 0061151548
• ISBN-13: 978-0061151545
• Product Dimensions: 8.1 x 4.8 x 0.6 inches
• Shipping Weight: 11.2 ounces
• Average Customer Review: 2.3 out of 5 stars  See all reviews (7 customer reviews)
• Amazon Best Sellers Rank: #730,318 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

23 of 28 people found the following review helpful:

2.0 out of 5 stars A Short History of Financial Bubbles, June 15, 2007

By 

Mr. William Y. Chan (San Francisco, CA) - See all my reviews
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This review is from: Pop!: Why Bubbles Are Great For The Economy (Hardcover)

There's nothing really new in this book. The idea that bubbles are "naturally" recurring phenomena is a standard concept of economics known as the business cycle. The idea that bubbles lay down the expensive infrastructure investments that make the next boom/biz-cycle-upswing possible is also not new. An example of this is: Google's current success would not have been possible if tech companies had not built out our broadband infrastructure in the first dot-com bubble.

What's useful about this book is that it conveniently lays out several bubbles and how the overinvestment in each bubble contribute to economic rebirth. History may repeat in the chronicles of business cycles, but it's amazing and interesting each time. My recommendation is that you read this book if you find this angle interesting, but if you only want the main point, save your money as I've already given it away above.

I found the prose very distracting. I couldn't get more than a page before the author felt the need to write another glib metaphor comparing something to something else totally unrelated. It's as he feels a constant need to show you how clever he is. Read this book if you want to find out how annoying metaphors can be.

18 of 22 people found the following review helpful:

3.0 out of 5 stars Simple Thesis...Nicely Done, June 12, 2007

By 

dennis wentraub (schenectady, new york USA) - See all my reviews
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This review is from: Pop!: Why Bubbles Are Great For The Economy (Hardcover)

Taking the long view, bubbles - manic bursts of investment by entrepreneurs and investors - have had a positive impact on our economy. This is the simple idea that supports POP! a quick history of American hyper-growth. The infusion of capital, uncritical enthusiasm, and grand expectations - all to excess - leave in their abrupt aftermath an infrastructure - physical, legislative, or psychological - that those who follow ("consolidators") can use to ultimately realize the goals of the early dreamers. It is another of author Daniel Gross' contentions that the uniquely American aspect of the bubble experience has to do with the role of government. Government tax credits and grants stimulate American investment without an outright attempt to control the end results and thus diminish its longer term benefits to society.

Daniel Gross looks at the development of the telegraph, the build-out of railways, the internet boom-bust, the recent real estate boom, and the now bubbling, alternative energy phenomenon. In each earllier instance a collapse resulted in havoc and pain for the initial investors that left behind infrastructure (viz. national rail system, telecommunication network, new construction) that successors used for their profit. The 1929 stock market collapse is a classic bubble representing the pursuit of easy money (viz. credit and its wily twin, leverage). The infrastructure that resulted was not physical but legislative. Laws and regulations put in place after the Crash created an investment environment that would position the U.S. financial markets as preeminent. There is not a lot that is new in POP!, and its main idea that bubbles have had a positive effect on the economy is perhaps too fragile a foundation to support a book, but the commentary is presented selectively and with journalistic wit.

19 of 26 people found the following review helpful:

1.0 out of 5 stars Superficial and Lacking Applicability!, October 25, 2007

By 

Loyd E. Eskildson "Pragmatist" (Phoenix, AZ.) - See all my reviews
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This review is from: Pop!: Why Bubbles Are Great For The Economy (Hardcover)

Common thinking tells us that excessive investment in fixed assets is bad for investors, employees of the bubble companies, and the economy. Gross contends that the stuff built during infrastructure bubbles doesn't get plowed under when its owners go bankrupt - it gets reused by those with new business plans, lower cost bases, and better capital structures. In addition, he also contends that many major bubbles greatly benefited from government action (or inaction) - eg. telegraph, railroad, housing, and telecommunications.

Gross does not contend that all bubbles are useful - eg. investors buying Cisco at $70, only to see it fall to $16 have not helped the American economy - it is only when commercial infrastructure is left behind that others can use. Further, Gross concedes that government cannot be relied on or expected to pick those bubbles to support.

However, Gross does not consider the fact that overbuilding assets inevitably results in relative scarcities, higher than necessary costs, and misapplication of resources - certainly not beneficial. Further, qualifying his conclusions to "only when commercial infrastructure is left behind that others can use" severely limits the generalizeability and value of his thinking. Incredible amounts of valuable capital have been wasted in the Holland tulip craze, Motorola's satellite phones, agricultural subsidies, modernizing American industry (only to see the work move to China and India), providing college educations for jobs that don't require them (one expert estimates this at 50%), doubling inflation-adjusted per-pupil expenditures (including fixed assets) to no avail, and ballooning the costs of American health care (including fixed assets) to more than twice the costs of other developed nations.