From "The Big Short" to San Francisco: The Revelry and Dizziness Within the AI Bubble

Original Title: What's That Smell in San Francisco?

Original Author: Spencer Yen

Original Translation: Peggy, BlockBeats

Editor's Note: San Francisco is once again becoming the intersection of technological revolution and financial bubble. AI companies, research labs, venture capital, billboards, and a network of whispers collectively shape a highly charged urban atmosphere: some are propelled forward by valuations and equity packages, some are immersed in apocalyptic visions of AGI, while others see math prodigies as the gateway to the next wave of超额回报.

The author starts from the "I smell money" scene in *The Big Short*, documenting observations after moving from New York to San Francisco: the city's technology density, wealth creation, and information asymmetry are real, but so are the anxiety, comparison, and Big Bubble Behavior. When AI becomes the only status game in San Francisco, innovation, speculation, faith, and fear begin to blend, forming the most直观 on-site sample of this current AI boom.

The interesting part of this article isn't rushing to judge when the bubble will burst, but in presenting how the bubble happens: how people talk, compare, invest, and worry, and how they find their place in the narrative that 'the future is coming.' The music is still playing, the party isn't over yet, but the author reminds himself, and everyone in it: you can dance, but don't get drunk.

Below is the original text:

One of my favorite movie scenes is the Jenga tower scene from *The Big Short*: Ryan Gosling's character pitches the trade of shorting the US housing market to Steve Carell's hedge fund team.

In that conference room, he carries an aura of smug, arrogant confidence, with three props at his side: his sidekick Chris, his quant Jiang, and a Jenga tower printed with mortgage bond ratings. The opening line is also brilliant: Do you smell that? What is that smell? What smell? Perfume? No. Opportunity? No. It's money. I smell money.

https://www.youtube.com/watch?v=YgF98vyn2fY

A few months ago, I moved from New York to San Francisco to join a friend's startup. Before moving, everyone told me: 'You have to go to San Francisco,' that it's where everything happens. So, I've been grappling with a question for a while: Is San Francisco really that important? Was I really missing out while I was in New York?

My answer so far is: If you want to be at the center of this massive technological revolution and bubble, then this is indeed the place to be. The density is real, the whisper network is real, and because of that, the information asymmetry is real.

I've accumulated some observations and thoughts during my time in San Francisco. Here's what I'm 'smelling' in SF:

1. People are all shaking

2. There's only one status game here

3. A city that always cries 'wolf'

4. Obsession with math prodigies

What strikes me is how starkly different people's experiences can be in the same city – walking down certain streets, you feel unlucky enough to think you're in hell; turn a corner, and you see the bay, distant cypress trees, and beautiful scenery. The most tech-forward, futuristic moments are probably watching various autonomous vehicles roam the city streets. I can't help but smile every time I see those new, friendly-looking, light blue Waymo cars. Or, you might feel like you're being watched by Ava, the AI BDR. I hate that ad. But I have to admit, their 'rage bait' successfully got me to still mention it. Every morning, I step out of my apartment and see this monster:

Why do people graffiti friend.com but not this kind of garbage ad? Also, if you live nearby, we can go get ice cream together!

People in San Francisco are all shaking

A few weeks ago, I was hanging out with my friend Jared (@imjaredz). He lives in New York but recently joined Cognition. We had lunch and coffee at the Cognition office. The vibe was good, the coffee was great, and the rooftop was amazing. I asked him what he thought of the San Francisco vibe.

"Have you noticed that people in San Francisco are all shaking?" I laughed, thinking: what? Shaking? Then I realized I had drunk cold brew earlier, consumed 300mg of caffeine, and was also a bit shaky myself. "Yeah, literally shaking. I'm not against people maxing out their ADD tendencies, but next time you have a coffee chat, pay attention – see if they're shaking."

Bubbles and boom periods generate a restless energy, as if you have to 'make it' now, or you'll never have another chance. I'm not immune either – after Jared pointed it out, I noticed I might be shaking sometimes too. The meme about 'grinding hard to escape the permanent underclass' is worn out, but memes only become popular because they capture the zeitgeist. If nightlife is a city's heartbeat and the thermometer defining its culture, what does it say when a 'dog startup's' 24-hour café becomes the de facto nocturnal grind hub?

Shaking is part of the technological revolution and financial bubble process. I used AI for part of this writing, and I apologize in advance if it makes you want to kill me. But I was Googling Carlota Perez, trying to find some quotes, and I really liked Gemini's summary of the 'Frenzy Phase':

Frenzy Phase: The peak of the installation period, where market psychology abandons fundamentals. Financial participants no longer seek dividends but shift to capital gains, causing the 'paper economy' to decouple from the 'real economy.'

Source: https://stratechery.com/2021/the-death-and-birth-of-technological-revolutions/

A friend of mine coined the term 'Big Bubble Behavior.' It's a beautiful phrase, and I've been using it for the past two weeks to flag everything that fits the frenzy phase. Market euphoria sometimes makes people do irrational things. Shaking is Big Bubble Behavior. I've seen platters of lobster tails twice in my life: first at a crypto party in a Venetian Island mansion in Miami in 2021, and second at ClawCon in 2026.

Big Bubble Behavior

There is only one status game in San Francisco

David Foster Wallace, *This is Water*: https://fs.blog/david-foster-wallace-this-is-water/

In San Francisco, the water is AI. Outdoor ads are everywhere – billboards, buses, bus stops, shared bikes, even the blue sky seems conquered by it.

My problem with San Francisco is that there's only one dominant status game: tech. You go to dinner, or just hang out in the park, and you hear the same words. You also see various 'alpha farming' behaviors because those whisper networks are real. And I can't even be mad, because I'm that kind of person too. Don't hate the player, hate the game.

The problem is, when a city has only one dominant status game, it's too easy to compare yourself to others.

We increasingly measure and compare each other using vanity metrics, like how much money was raised, or what letter round your company is on. I really wish someone would raise a Series Z, because it would directly prove how absurd the private market has become. You hear all sorts of gossip: which hot startup is being chased by financial players to invest, and what's the fiery valuation. Then you can't help but start doing that disgusting, Blind-style reverse math: figuring out how much someone's equity package is worth now.

I told a friend, if you saw the reverse salary calculation and offer optimization math on Blind, you'd cringe so hard your toes would curl. Blind is that anonymous big-tech social network, famous for memes like: 'I'm having a life crisis, my wife might leave me, but do you think I should take the Meta L6 or the Google L9? TC: $969,000.' So why are we doing the same thing here? Go touch some grass. Or, maybe this is just my cope.

In New York, there are at least 7 status games simultaneously. Finance, big law, music, fashion, celebrity circles, old-money family offices, journalism, sports, entertainment. Because the range is so wide, some games are so distant they seem almost unattainable, making them interesting to talk about and learn. It disperses the attention of all the ambitious.

I enjoy asking my law school friends which top law firms are most prestigious, and understanding the subtle differences between them; I enjoy learning about the fashion and luxury world and what it takes to survive there; I also enjoy understanding the cushy lives of quant elites and their garden leave arrangements.

San Francisco is creating unprecedented wealth, which brings a strange energy. A friend in research mentioned that people around him are already looking into buying land and diversifying assets into scarce resources. There's this feeling: you're either someone who owns lab equity, or you're not. There's a joke that San Franciscans don't know how to spend money; this strange energy comes from a lot of new wealth being created, but people don't know what to do with it. First time being rich? Let the experienced rich kids teach you how to enjoy life.

*Super Rich Kids* – Frank Ocean: https://www.youtube.com/watch?v=0XCQNpjWmRE

A city that always cries 'wolf'

My first impression of San Francisco was a sense of apocalyptic doom. Maybe the researchers in the labs really do see some kind of 'Second Coming,' and if so, their calls for slowing down and emphasizing safety are certainly reasonable. But I can't truly know. All I know is how the doom-mongering makes me feel personally – not good!

I've already had quite a few nihilistic conversations, with a general vibe of: 'If Mythos can wipe this all out in one go, or break everything down, why are we even here making software?' and 'Will AI destroy our lives?' and 'AI will create massive inequality and bring a lot of pain to society.'

My one-sentence take here: Humans will always find other things to do, work will shift to higher levels of abstraction, and new things will become valuable.

We are very bad at predicting what future society will look like. I think the anti-capitalists I read in college were angry in the wrong direction – imagine their reaction if they saw that humans could derive joy from AI-generated fruit garbage videos or the 'Tung Tung Tung Sahur' from Italian brain rot.

"The problem isn't AI making content stupid, [sniffs], it's that we enjoy this stupidity, treat it like sacred garbage, a digital fetish object, [sniffs], isn't it?"

From my friend Samir. His bio: Not a researcher, but he has a 'Fish Guy.'

Anyone else have their own 'So-and-so Guy'? Let me know.

A friend working at a lab pointed out that within the same company, the GTM (go-to-market/sales/growth) team and the research team currently have completely different life experiences. That apocalyptic doom is balanced by something else: 'Come hang out with the GTM team, have a beer, touch some grass.' There's definitely something worth pondering in the pessimism of the model creators versus the optimism of the people closest to technology deployment. Time to go Forward Deployed!

Reality has a surprising amount of detail: https://johnsalvatier.org/blog/2017/reality-has-a-surprising-amount-of-detail

Six years ago, in college, I wrote about how AI might reshape social structures, with the title *Polanyi and the Second Great Transformation* (No need for a Pangram AI detector; Medium before 2023 was like an organic pasture of human writing).

Let me explain the reference: Karl Polanyi was an Austro-Hungarian economic sociologist, famous for his book *The Great Transformation*, written in 1944, critiquing the rise of modern market capitalism in 19th century England. So, the 'First Great Transformation' refers to the shift to capitalism, and my 21-year-old self thought I was clever by calling AI the 'Second' Great Transformation... you get it.

Polanyi's most famous concept is 'The Double Movement,' describing a historical push-and-pull: on one hand, the free market constantly expands; on the other, society generates counterforces, trying to protect itself through regulation. The first movement is capitalist elites trying to expand the free market and commodify society; translated today, it's commodifying intelligence. The second counter-movement is people reacting to market-driven destruction and trying to protect society; today, that's anti-AI, anti-data center rhetoric.

Here's my naive college student writing from age 21:

Polanyi explained that the development of machines for production led to the 'fictitious commodification' of labor (people) and land (nature). Although the Fourth Industrial Revolution has occurred within a market system, the arrival of the mechanical mind brings a different threat: taking over jobs. As computers can perform more 'human' cognitive tasks with greater efficiency, many ordinary people may lose their jobs.

Polanyi wrote: 'Nothing could save the common people of England from the impact of the Industrial Revolution. A blind faith in spontaneous progress had taken hold of people's minds...'

https://medium.com/@spenceryen/polanyi-and-the-second-great-transformation-6d6364b5d3c6

So, thinking about it now, maybe those who keep crying 'wolf' do have a point. Blind faith in spontaneous progress might not end well. Polanyi's critique of market capitalism was that for most of human history, economic activity was subordinate to social, cultural, and religious institutions. But later, market capitalism reversed this relationship, making society subordinate to the economy.

How do we ensure that society doesn't become subordinate to a nation-state of geniuses in data centers? As Ben Thompson accurately pointed out in his article about Anthropic's Mythos, the punchline of *The Boy Who Cried Wolf* is that the wolf eventually comes.

But what does the capitalist inside me think? Then invest in social, cultural, and religious institutions! If you have any good deal ideas, feel free to DM me your prospectus.

Obsession with math prodigies

Another one of my favorite gags in the Jenga scene from *The Big Short* is when Ryan Gosling points to the Chinese guy next to him and says: 'That's my quant.' This vibe has a strange similarity to the recent batch of hot founders being chased by investors – they are often the gifted kids who crushed math competitions in their childhood.

Still Ryan Gosling, responding to Steve Carell's skepticism:

"You're saying if defaults just get to 8%, these bonds go bust, and they're at 4% now? If they go to 8%, it's the end of the world?" "Yes, that's correct." "Why isn't anyone talking about this? Are you absolutely sure about this mathematical model?" "Look at him. That's my quant." "Your what?" "My quan-ti-ta-tive, my math expert. Look at him. Don't you notice something different about him? Look at his face." "That's kind of racist." "Look at his eyes. I'll give you a hint, his name is Yang! He was a national math champion in China, he doesn't even speak English! So yes, I am absolutely sure about this mathematical model."