How excitement can help and hinder entrepreneurs
chatbot, was made available to the public at the end of November, it has generated another wave of hype. Over 100m people have asked it to rewritefurniture instructions in iambic pentameter or something equally vital; venture-capital funds are pouring money intostartups; established firms are rushing to explain how they will use the technology to do everything from customer service to coding.
Hype need not end in disappointment. Some technologies are less speculative than others; the metaverse is still largely notional, for example, whereasis an established field. Even when bubbles burst, they can leave world-changing companies behind. The hype cycle, popularised by Gartner, a consultancy, is real. In essence, it describes a period of uncontrolled enthusiasm for a new idea followed by a backlash.
That makes hype bittersweet for entrepreneurs. Excitement can help unlock funding and attract users. Some think of hype as a public good, vital in enabling new technologies to get going. But it can also lead to problems. The question is how to manage hype for the best. An obvious temptation for entrepreneurs is to take advantage of the hype by making wild—even deceitful—promises. A paper from 2021 by Paul Momtaz ofAnderson School of Management looked at the once-faddish field of initial coin offerings , in which new cryptocurrencies are issued directly to the public. Mr Momtaz found that not only did issuers systematically overplay their tokens’ prospects but that investors fell for it. Exaggerated claims raised more money in less time than accurate ones.
So hype calls for care. A recent paper by Danielle Logue of University of Technology Sydney and Matthew Grimes of Judge Business School looked at the different paths taken by a number of social-investment stockmarkets that were set up in 2013 as the buzz over impact investing grew.
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