New Business Boom and Bust: How Capitalism Experiments

Morgan Stanley

Michael Mauboussin, Dan Callahan

Research

12 Pages

Morgan Stanley frames industry booms and shakeouts as capitalism experimenting, then pruning what does not work, with investing outcomes skewed toward a few winners.

Date published: June 15, 2022

Key Takeaways

Experiment then prune: Rapid entry is normal early, then exits rise as markets select a few durable models.
Measure the phase: Tracking entries, exits, and firm counts helps investors judge where an industry sits.
Options like payoffs: Early investing is skewed, with many losers and a small set driving most gains.
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