BIS Whispers About Bubbles; VCs Cover Ears With Money

The Bank for International Settlements—that venerable institution known as the "central bank for central banks"—has issued a new warning that today's AI buildout resembles earlier technological revolutions that ended in, shall we say, "painful busts." The BIS is not some two-bit research shop. It's the club where the world's most senior monetary authorities gather to discuss systemic risk. When they say something looks like a historical bubble, they are not making a cute observation. They are describing a pattern that, across multiple technological eras, has preceded capital destruction on a staggering scale.

What makes this warning particularly delicious is the timing. We are living through perhaps the most aggressive capital deployment in modern venture history, where "AI company" has become sufficient justification for a Series A valuation that would have required actual revenue in 2015. The BIS is essentially saying: "We have studied revolutions—railroads, electricity, telecommunications—and when capital floods in this way, it floods into things that cannot possibly justify the money at the prices being paid." This is not contrarian thinking. This is pattern recognition from the institution literally tasked with watching for systemic financial danger.

The historical record the BIS is referencing is damning and specific. The railroad bubble of the 1800s saw capital mobilized with religious fervor, creating infrastructure that took decades to become economically rational. The dot-com era saw the internet itself—a genuinely revolutionary technology—nearly discredited because so much money was stupidly deployed into companies with negative unit economics and no coherent business model. Electricity, perhaps the closest parallel to AI in terms of transformative potential, took far longer to produce returns than early investors imagined. The pattern is consistent: genuine technological breakthrough, legitimate long-term potential, catastrophic near-term overvaluation, painful correction.

Yet here's where the satire writes itself. Every VC in the room—every single one—knows the BIS warning is mathematically, historically, and logically correct. And every single one is simultaneously doubling down on the bet that this time is different. The language has evolved, of course. No one says "I'm betting on the bubble." Instead, they say they're "backing category winners in the AI infrastructure layer" and "backing founders building the compounding returns flywheel." Translation: they're moving fast and hoping to exit before the music stops, which is exactly what participants in the last four bubbles said.

What could go wrong? Well, according to the BIS—which has watched this movie in multiple formats—capital could be deployed into AI applications that sound brilliant in a pitch deck but make no economic sense at scale. Compute resources could be priced irrationally. Companies could be valued at multiples of revenue they may never achieve. Entire categories could face margin compression as competition intensifies and the AI utility itself becomes commoditized. The correction, when it comes, will surprise almost no one. It will also destroy the portfolios of people who insisted they understood the difference between hype and substance.

The broader commentary here is that the VC industry has reached a point where ignoring a "central bank for central banks" warning is considered normal risk management. The BIS is essentially the financial world's emergency room doctor, and Silicon Valley's response is to cheerfully ignore the diagnosis and order another round of IV bags. This is not confidence in the AI revolution. This is confidence in momentum, in the greater fool theory, in the assumption that your exit timing will be better than everyone else's.

When the institution literally designed to prevent financial systemic risk tells you a boom resembles historical busts, you can either listen or you can deploy another fund. Guess which one's happening.