The term “paradigm shift” is a bit wanky, but every now and then we do genuinely come across something that offers a wholly new way of thinking about and interacting with the world. And when they come along, or even seem to be coming along, they are something worth paying attention to. <\/p>\n\n\n\n
That\u2019s because, by their very nature, they\u2019re going to shake things up. A new paradigm is both risk and opportunity, sometimes to very large degrees, and almost always in unexpected and counter-intuitive ways.<\/p>\n\n\n\n
It\u2019s just hard to see around corners when you\u2019re dealing with something fundamentally new and that doesn’t fit well into existing models. This, of course, is the dilemma du jour for investors everywhere. And while there\u2019s no shortage of opinions out there as to how to best navigate the eruption of digital intelligence (even if it is, ultimately, a false prophet), history can at least offer us a few lessons.<\/p>\n\n\n\n
Not that we\u2019ve ever seen anything like this. Having machines that literally think feels qualitatively very different to prior technological disruptions. But, nevertheless, past experience is better than inference alone. <\/p>\n\n\n\n
One thing you notice with technological paradigm shifts is that they are initially always met with great skepticism. Quite often from the most authoritative sources.<\/p>\n\n\n\n
That doesn’t mean every expert opinion is wrong. In fact, the experts tend to be right way more often than not. It\u2019s just that some non-consensus thinking is quite often necessary to see how a new breakthrough might evolve. And that\u2019s super hard because new paradigms just don’t tend to fit into existing mental models. The fact we measure engine power in units of horses is evidence of that.<\/p>\n\n\n\n
Yes, you can technically define the power of a typical horse and apply that to a car\u2019s engine, but it reveals a significant category error \u2013 one that risks missing the significance of what a car actually is compared to a horse. You might have one million horses and I just a humble Toyota Corolla, but only one of us is cruising down the road at 100km\/hr in an air-conditioned cabin while blasting Nirvana at full volume.<\/p>\n\n\n\n
The internet was exactly the same. When it first arrived on the scene, all we could imagine was a better way to send letters and produce message boards. But this wasn’t just a technology that enabled us to do things more efficiently; it was a platform upon which entirely new and unimagined things could be built. We\u2019re still building on it today. In fact, AI is essentially built on top of it.<\/p>\n\n\n\n
My point is that we are almost certainly making similar category errors with AI today. Even with the relentless focus AI has seen since the first ChatGPT was launched, very few people imagined that in 2026 we would have fully autonomous and networked agentic models running on personal Mac Minis, equipped with specialized tooling that enables them to do (almost) anything a human can do online.<\/p>\n\n\n\n
Like, chatbots are so last year, man.<\/p>\n\n\n\n
It\u2019s a complete mind-blow as to where this goes, but if history is any guide, it will likely be in a direction few anticipate. And maybe that direction is nowhere. Or nowhere good. But my point is that history suggests it will probably be unexpected. That\u2019s why you have to be careful not to get too carried away. (I say that as someone who is easily seduced by cool new tech.)<\/p>\n\n\n\n
The other thing past paradigm shifts teach you is that there are always lots of false starts. \u201cAI\u201d is a broad term, and under that umbrella, you can bet we\u2019ll see all kinds of enticing use cases. A lot of them will prove dead ends, at least in a commercial sense. <\/p>\n\n\n\n
You also need to put timelines in perspective. The world is moving super fast, more so than ever, and definitely in the domain of AI, but as investors, we have to be realistic in our expectations.<\/p>\n\n\n\n
As the CEO of Alcidion told us in a previous meeting, plenty of hospitals still use fax machines and paper charts. Edison opened the first electrical power plant in 1882, but it took almost another 50 years before even half of American homes had power. <\/p>\n\n\n\n
Nothing is more powerful than an idea whose time has come, but it still takes time to change the world. Which just means that, once again, there\u2019s usually no need for us as investors to rush.<\/p>\n\n\n\n
Even if you do manage to see, even vaguely, how the changing paradigm might play out at a broad scale, you still have to back the right horse. The brutal truth is that the vast majority of companies that ever tried to prosecute a fast-growing technology have failed.<\/p>\n\n\n\n
90% of the internet companies of the late 90s don\u2019t exist anymore. Almost all of the bicycle start-ups of the early 20th century lost their investors\u2019 money. <\/p>\n\n\n\n
None of this is to make it all seem hopeless. It\u2019s definitely not. But it\u2019s probably wise to try and avoid the FOMO. If you are looking at a genuine paradigm shift, it doesn\u2019t matter if you are a bit \u201clate.\u201d As I like to point out, Buffett only made his first big investment in tech nearly 20 years after the internet came into focus.<\/p>\n\n\n\n
It is a difficult concept for new investors to understand, but it is absolutely possible to pay a higher price and get better value on a risk-adjusted basis. The best time to buy Apple was at its inception, but at that point, without the benefit of hindsight, the statistics would suggest a near certain chance of failure. <\/p>\n\n\n\n
Waiting for an investment to be significantly de-risked might mean paying a much higher price than you could have, but you’re making a far less risky bet at that stage. And, importantly, the gains from there can still be eye-watering.<\/p>\n\n\n\n
And when you finally do take a position, past experience would suggest the best thing you can do is to get out of your own damn way. <\/p>\n\n\n\n
Resist the temptation to lock in profits. Don\u2019t get too cute with your discounted cash flow models. Forget about trying to trade in and out. Unless the broader thesis has changed, let compounding do its thing.<\/p>\n\n\n\n
This is one of the hardest things to do as an investor, which is why there are so few people who do it successfully. Enduring long periods of hyper-volatility and crushing drawdowns will test you in ways you did not think possible. It is not just wild price moves; the underlying thesis itself will be cast into doubt at many stages along the way as all companies (even the super successful ones) stumble, make mistakes, waste money, and spend years in the wilderness on their way to greatness. <\/p>\n\n\n\n
I know I always bang on about that, but it usually bears repeating (mainly for my own sake).<\/p>\n\n\n\n
Finally, it\u2019s always a good move to try and remain humble, even if you find great success in this area. Especially if you find great success. Nothing blinds you as an investor like arrogance. So if you find that you\u2019ve backed that hot new AI winner, it pays to remember that every great company in history has eventually been itself disrupted.<\/p>\n\n\n\n
Don\u2019t jump at every shadow, of course. But don’t think your baby is bulletproof. Especially in a space where the journey from hero to zero is often a vertical drop.<\/p>\n\n\n\n
So, all up, it is pretty easy, right? All you need to do is spot a genuine paradigm shift, ignore the FOMO while the early uncertainty fades, buy in at what will seem like an extremely elevated price, ignore all the FUD and volatility, and be able to spot the next disrupting force before it buries the previous cycle’s winners.<\/p>\n\n\n\n
Easy, right?<\/p>\n\n\n\n
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