Jeremy Grantham on AI, Bubbles and Why Mean Reversion Lives On
Podcast: Excess ReturnsPublished On: Sat May 16 2026
Description: Jeremy Grantham joins Excess Returns to discuss The Making of a Permabear, mean reversion, market bubbles, AI, the Magnificent 7, and the long-term lessons investors can take from his career at GMO. We cover why he rejects the simple “permabear” label, how he thinks about valuation and bubbles, why AI may be both transformative and dangerous for investors, and why long-term thinking is so hard but so essential.The Making of a Permabear: The Perils of Long-term Investing in a Short-term Worldhttps://groveatlantic.com/book/the-making-of-a-permabear/GMOhttps://www.gmo.com/americas/Grantham Foundationhttps://granthamfoundation.org/Topics covered:Why Jeremy Grantham thinks the “permabear” label misses the pointThe difference between being generally bearish and making a true “abandon ship” callMean reversion, valuation cycles, and why history still matters for investorsWhy monopoly power helped reshape U.S. profit margins and market concentrationHow AI could turn today’s monopoly winners into brutal competitorsWhy new technology often becomes a cost of doing business rather than a permanent profit boostHow Grantham defines bubbles using two-sigma market eventsLessons from Japan, the dot-com bubble, the housing bubble, and the 2021 speculative peakWhy institutional investors struggle to stick with value strategies during bubblesThe role of purpose, climate risk, toxicity, and long-term thinking in Grantham’s later careerThe one lesson Grantham would teach ordinary investors about pessimism, realism, and time horizonsTimestamps:00:00 Jeremy Grantham on unpleasant news and long-term investing04:18 Reinvesting when terrified in 200908:43 Why Grantham told investors to abandon ship in 200810:28 Mean reversion and why history matters14:00 Monopoly power, the Mag 7, and rising market concentration17:14 Why AI is important but impossible to forecast20:21 AI as a cost of doing business21:24 From monopoly profits to brutal AI competition24:05 How investors should think about valuation mean reversion27:00 Why high returns on capital should eventually attract competition29:47 How Grantham defines a market bubble33:00 Japan’s extreme bubble and GMO’s zero weight decision34:19 The dot-com bubble and the pain of being early38:00 Grantham’s bubble warning signal in 202141:35 Whether today’s market is showing classic bubble behavior43:00 QuantumScape, meme stocks, and speculative excess46:35 How ChatGPT interrupted the 2022 bear market49:12 Investor behavior and the cost of underperforming in a bubble55:00 Purpose, philanthropy, climate risk, and useful work01:01:03 The one lesson Grantham would teach average investors
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