The Rise and Fall of Hype in Modern Economies
In a healthy economy, the gravitational force that keeps business tethered to reality is customer satisfaction. A company grows because people feel better off after using its product. The demand is genuine, not manufactured. Failures appear early, before capital is wasted. Success, when it comes, rests on repeated demonstrations of value. But in an economy swollen by cheap credit, abundant liquidity, and a cultural appetite for technological prophecy, this gravitational force weakens. Enterprises begin to levitate, held aloft not by satisfied customers but by expectations, stories, and mood. The currency becomes belief, and belief is notoriously fickle.
Hype flourishes under such conditions because it offers a shortcut around the discipline of the market. Instead of building value brick by brick, firms can inflate a narrative that promises eventual greatness. Investors, caught in a cycle of low returns and abundant cash, participate willingly. They buy the story because they have little else to buy. Meanwhile, the company begins to behave in a way that makes sense only inside the story, hiring expands, costs swell, ambitions grow, and the rhetoric becomes more ambitious than the product. A feedback loop develops. Optimism funds growth, growth fuels optimism. For a time, the enterprise appears to transcend the ordinary physics of business.
But this condition is inherently unstable. The question is not whether hype will fall, but how. The collapse begins long before anyone notices it. The early signs are subtle, even boring. Growth slows, not dramatically, but just enough to disrupt the narrative of unstoppable momentum. A competitor gains traction. A new technology appears. Interest rates rise slightly. A charismatic founder becomes distracted or controversial. None of these developments is catastrophic on its own, but each introduces friction. Hype depends on the absence of friction. The moment the future looks less than inevitable, belief weakens.
The next phase is a change in tone. Investors who once spoke of revolution begin speaking of execution risk. Journalists who once wrote admiring profiles shift to asking pointed questions. Customers who once tolerated imperfections start noticing them. Employees feel the mood change first, recruitment slows, perks are trimmed, confidence dims. A company that thrived on grand vision suddenly has to speak in the language of discipline, focus, and profitability. In the world of hype, these words sound like confessions.
Tesla offers a good illustration of this transition. For years, it was propelled by a story more than by its fundamentals, a revolution in transportation, imminent autonomy, a future reorganized around electric mobility. The company did produce compelling cars, but the valuation rested on the idea that it was not merely a carmaker at all. When interest rates were low and innovation narratives were culturally dominant, this story expanded easily. As competitors matured and as the broader economic environment tightened, the story lost some of its shine. Tesla may continue to succeed, but the aura surrounding it is thinner, more contested, more grounded. It is not collapse; it is deflation of myth.
Sometimes the fall is more violent. WeWork rose on the claim that it was not simply leasing office space but reinventing the nature of work itself. The story attracted billions in capital, partly because it matched the psychological atmosphere of the time, cities were booming, remote work seemed a fringe idea, and charismatic founders were treated as spiritual figures. The company floated on language, consciousness, transformation—rather than on the economics of commercial real estate. Once the first cracks appeared, the reversal was swift. The narrative flipped from visionary to delusional almost overnight. Nothing about the business model changed, only the story did.
Bitcoin presents a different case because it is not a firm but a narrative embodied in code. Its volatility reflects not operational risk but shifts in collective psychology. The belief that it is a hedge against monetary decay sustains its value; the moment that belief weakens, the price spirals. Here the fall of hype would manifest not through bankruptcy or layoffs but through narrative displacement. If the cultural appetite for mistrusting central banks fades, or if a better technological vehicle satisfies the same desires, Bitcoin’s story might lose its central place. The mechanism is the same, a shift in perception undermines the foundation.
The most interesting aspect of hype collapses is how abruptly they occur. They rarely follow a slow, linear decline. They behave more like phase transitions. A long period of irrational enthusiasm is followed by a sudden, sharp correction when belief no longer sustains the fiction. The company may survive, but the story does not. It is the story that dies first. And stories, once dead, are very hard to revive.
The reason for this sharpness lies in the nature of hype itself. Hype asks people to believe in a future that has not yet arrived. As long as the future appears plausible, belief holds. When doubt becomes widespread, the very thing that sustained the enterprise becomes its weakness. Investors rush to exit, not because the fundamentals changed overnight, but because the narrative no longer protects them. Customers reevaluate, competitors seize the moment, employees lose morale. It is a chain reaction, not a gradual erosion.
In some cases, there is a period of rationalisation afterward. The company trims ambitions, restructures operations, and discovers the quieter reality of serving real customers at real margins. This process requires managerial competence rather than visionary zeal, which is why many hype-driven enterprises struggle to make the transition. Those that succeed often become respectable but unglamorous businesses. Those that fail disappear, remembered only as cautionary tales.
What ultimately makes hype fragile is that it stands in opposition to the natural discipline of the market. Real economies thrive on satisfaction, hype economies thrive on expectation. Satisfaction is cumulative and patient, expectation is volatile and emotional. When the two collide, satisfaction wins, eventually. The timeline can be long, and the spectacle can be entertaining, but the outcome is predetermined.
Every bubble in history, every speculative boom, every visionary enterprise that outran its own reality has followed this same arc. Hype inflates when money is easy and stories flow freely. Hype falls when reality reasserts itself. The pattern is simple, old, and endlessly repeated. The only variation lies in the characters and the technologies. The mechanism never changes.
