It seems appropriate, in this thread, to have ChatGPT provide the summary:
In The Prize: The Epic Quest for Oil, Money & Power, Daniel Yergin explains the boom-and-bust cycle in the oil industry as a recurring pattern driven by shifts in supply and demand. Key elements include:
1. Boom Phase: High oil prices and increased demand encourage significant investment in exploration and production. This leads to a surge in oil output, as companies seek to capitalize on the favorable market.
2. Oversupply: As more oil floods the market, supply eventually exceeds demand, causing prices to fall. This oversupply is exacerbated by the long lead times required for oil development, meaning that new oil from earlier investments continues to come online even as demand weakens.
3. Bust Phase: Falling prices result in lower revenues for oil producers, leading to cuts in exploration, production, and jobs. Smaller or higher-cost producers may go bankrupt, and oil-dependent economies suffer from reduced income. Investment in new production declines during this phase.
4. Correction and Recovery: Eventually, the cutbacks in production lead to reduced supply, which helps stabilize or raise prices as demand catches up. This sets the stage for a new boom phase, and the cycle repeats.
Yergin highlights how this cycle has shaped the global oil industry over time, driven by technological advances, geopolitical events, and market forces, while creating periods of both rapid growth and sharp decline.
This isn't just the story of GPUs or Oil, this is the entire story of capitalism going back to the early Industrial Revolution in the 1700s. The economist Hyman Minsky added asset prices and debt financing to it to round out a compelling theory of the business cycle including the extreme bubbles and depressions sometimes seen.
That's a supply chain specific example. If you're looking for something more fundamental, they're all examples of unstable systems with positive feedback loops.
have you ever read a good expanation of why Minsky Moments happen? it always occured to me if you can time them right you can make a ton of money on the way up and on the way down
