This article is written by Judah Spinner, founder and chief investment officer of BlackBird Financial LP, an investment partnership serving family offices and ultra-high-net-worth individuals. Spinner is also a private pilot and has visited all 50 states. The newsrooms or editorial departments of Tribune Publishing Co. are not involved in the production of this content. Content oversight provided by Studio 1847.
“The United States is afflicted with new eras. Each generation believes it has discovered something unprecedented — and convinces itself that the old rules don’t apply.” — John Kenneth Galbraith
History offers a sobering lesson for investors caught in the grip of technological enthusiasm: Revolutionary technologies do not necessarily make great investments, even if they do go on to change the world.
As artificial intelligence dominates today’s investment conversation, it’s worth examining the parallels found in the early days of previous transformative technologies. The pattern is remarkably consistent.
Railroads
The railroad was the defining technology of the 19th century — and a graveyard for investor capital. From 9,021 miles of track in 1850 to 163,597 miles by 1890, the network expanded at breathtaking speed, shrinking a continent and enabling the industrial economy to flourish. Railroads succeeded beyond anyone’s imagination, yet the investors who backed them earned a disappointing return.
The fundamental problem was that railroads were too successful at attracting competition. By the mid-1880s, there were no fewer than 20 competitive railway routes between St. Louis and Atlanta. This relentless competition produced devastating price wars that destroyed profitability even as traffic soared. Real freight rates fell by more than 80% from their 1849 level by 1910. This was a boon for shippers but catastrophic for investors.
This is the great paradox of transformative technology: The very forces that make an innovation world-changing tend to destroy its investment returns. Revolutionary technologies attract enormous capital investment and fierce competition. Excess profits get competed away. Prices fall. The benefits flow overwhelmingly to consumers, not to shareholders.
The names that dominated the early railroad era — giants like the Pennsylvania Railroad, Erie and Northern Pacific — all became synonymous with investor losses before being absorbed into larger systems or liquidated entirely. The technology was indispensable, but the investments were often disastrous.
Automobiles
In January 1886, Karl Benz was granted a German patent for a “vehicle powered by a gas engine.” In the decades that followed, the automobile industry attracted capital and entrepreneurs with the same magnetic force that draws investors to AI today. Between 1900 and 1930, more than 2,000 companies entered the American automobile business.
The product was a spectacular success. Annual passenger car sales exploded from 181,000 in 1910 to 4.5 million by 1929. Vehicle registrations soared from 8 million in 1920 to over 23 million by decade’s end, and by 1948, half of all U.S. households owned at least one car.
Despite the industry’s extraordinary growth, investors got crushed. By the end of the Depression, most automakers had either failed outright or been absorbed. The Big Three — General Motors, Ford and Chrysler — controlled roughly 90% of the American market. And even an investment in General Motors, the most successful of the three, would not have been all sunshine and roses. The stock declined 89% from its 1929 peak to its 1932 nadir and did not breach its prior high until the 1950s.
Radio
Radio was the sensation of the 1920s. At the start of the decade, virtually no one owned a radio; by 1929, 12 million households — 4 in 10 — had one. The possibilities seemed limitless. Radio would revolutionize entertainment, commerce and communication. Investors called it “The New Era.” They believed that the wave of innovation sweeping the country had created a fundamentally different economy — one in which the old rules of valuation no longer applied.
No company better represented the revolution than the Radio Corporation of America. RCA stock rose from $1.50 in 1921 to a split-adjusted peak of $114 in September 1929 — a gain of over 7,500%. But while radio adoption continued to grow over the ensuing decades, RCA shareholders were not rewarded. The stock fell nearly 98% over the next three years and did not recover its 1929 high until 1964.
Here is an industry that had an enormous impact on America. Radio dominated the mass media for three decades, reshaping American culture and creating entirely new industries. Unfortunately for investors, the impact it had on them was far less pleasant.
Airlines
Commercial aviation represents perhaps the starkest example of transformative technology producing dismal investor returns. The airplane shrank the world, enabled global commerce and became essential to modern life.
Even so, since the Wright Brothers’ flight in 1903, the airline industry has collectively destroyed more capital than almost any other sector in American history. The parade of bankruptcies tells the story: American, Braniff, Continental, Delta, Eastern, Northwest, Pan Am, TWA, United, US Airways. Every major carrier, with the notable exception of Southwest, has filed for bankruptcy protection at least once.
Warren Buffett put it memorably: “If a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.”
The internet
The dot-com bubble of the late 1990s offers the most recent parallel to today’s AI enthusiasm.
One of the high flyers of the era was Cisco Systems. The company built the networking infrastructure underlying the digital revolution. The thesis seemed unassailable: Whoever won the browser or portal wars, Cisco would profit by selling routers and switches to everyone.
On March 27, 2000, Cisco became the most valuable company in the world with a market capitalization exceeding $500 billion. If you’d invested $1 million in the company on that date, you’d have barely $100,000 left by the fall of 2002. It took until December 2025 —more than 25 years — for Cisco to finally exceed its March 2000 high. During that quarter-century, the company’s revenue nearly quintupled from $12 billion to $57 billion. It remained profitable, paid dividends and was by any reasonable measure a successful business, but that offered no protection for investors who got caught up in the euphoria and ignored valuations.
The lesson
First, revolutionary technology, however transformative its impact on society, offers no guarantee of investment success. The key to superior returns lies not in forecasting an industry’s growth or its eventual significance to civilization, but in identifying the competitive advantages of individual enterprises — and, above all, in assessing the durability of those advantages. It is the businesses protected by wide, sustainable moats that ultimately reward their owners.
Second, while rapid innovation tends to benefit consumers, it is not helpful for an investor. As Ben Graham wrote in Chapter 4 of “Security Analysis,” “For investment, the future is essentially something to be guarded against rather than to be profited from.”
It is far easier to picture what a company like Tidewater or Builders FirstSource will look like in five years than it is for Nvidia. Can anyone confidently forecast how wide a lead Nvidia will hold over its competitors in 2030? And if that gap narrows — or vanishes — to what extent will margins erode? The key factors that will determine Nvidia’s profitability in five or 10 years are wholly unknowable. Therefore, I would postulate that a Nvidia shareholder may be more accurately described as a speculator than an investor. The same applies to any company operating in a rapidly shifting industry.
Third, history has shown time and again that human nature is prone to excess — in panic and euphoria alike. When sentiment reaches an extreme, skepticism is warranted.
As is so often the case, no one puts it better than Buffett: “Be fearful when others are greedy, and greedy when others are fearful.”
Where we stand today
For a sense of where we stand on the fear-greed spectrum today, consider two proclamations made 97 years apart:
Herbert Hoover (August 1928): “We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poorhouse is vanishing from among us.”
Elon Musk (December 2025): “There will be no poverty in the future, and so no need to save money. There will be universal high income — not universal basic income — universal high income. There’ll be no shortage of goods or services.”
Graham wrote in “The Intelligent Investor” that “No statement is truer and better applicable to Wall Street than the famous warning of Santayana: ‘Those who do not remember the past are condemned to repeat it.’”
