Two of my colleagues and I went to see Austan Goolsbee—former economic adviser for the Obama administration—speak in San Mateo Wednesday night. He was incredibly animated and surprisingly hilarious. I really enjoyed his presentation. Here are some interesting tidbits he addressed that I think relate to whisky.
-Bubbles tend to form within sectors that show irregular growth. For example, if the housing market were to continue growing at a 13% gain per year that would be an incredible investment opportunity. It's such a great return on your money that you'd be insane not to invest in property! Except that growth like that tends to be followed by a sharp decline. He specifically mentioned that the greatest irregularities tend to involve things that rich people spend money on. The average price of collectable contemporary art, for example, which apparently doubled from 2013 to 2014. I think you could also include old and rare whiskies in this category.
-Austan Goolsbee does not think that Silicon Valley or the housing market in the Bay Area (which show this kind of unprecedented growth) constitute bubbles. One of the most interesting points he made contrasted the difference between Detroit and Silicon Valley. Detroit made American cars back in the past, and they still make American cars today. American car sales have plummeted, however, so that market is collapsing. In the early 1980s Silicon Valley manufactured microchips and computers. Today, however, it's mostly social media and cloud-type businesses. No one here actually makes the laptops and hard drives we use to do our business, like they did thirty years ago. His point was that successful markets and businesses adapt. If you keep selling the same thing and that thing goes out of fashion, then you've tied your fate to the current fad. Silicon Valley has continued to change as needed, constantly moving on to the next new technology, so he doesn't see the financial success of the tech industry as a bubble; rather as intelligent adaptation. If tech companies continue to succeed, then expect tech salaries to remain high. If Bay Area tech salaries continue to stay high, then expect housing prices to remain high as well.
-Recovery or return from either prosperity or recession (in other words, back to the way things used to be) can only happen if "the way things used to be" wasn't itself an anomaly. One of the jokes Austan made at the beginning of his speech was about recovery from the recession and a return to more prosperity. He said experts first claimed we would experience a V-shaped recovery—down, then back up like a V. Then, when it didn't happen, they said, "Well, it might turn into more of a U-shaped recovery with a longer period at the bottom." Then, when the following year didn't bring more gains, it turned into an L-shaped recovery, which doesn't really resemble any type of recovery whatsoever. In his opinion, the moment that economists are hoping to return to (in this case, 2005) was itself not a period of prosperity built on a solid foundation; therefore, he didn't think we would be going back anytime soon. He also added: the two predictions in the economic world that are most commonly false are forecasts for bubbles and recoveries.