Things Liaquat Ahamed Has Said on Podcasts

“What makes it particularly worrying is that much of this debt is quite opaque. We don't actually know how much debt there is. At the center is a company like NVIDIA, which is essentially lending to its customers. It doesn't call it lending, but it is a form of lending. And so we don't really know how much of the construction is being financed by debt.” — Liaquat Ahamed, Prof G Markets

Ahamed compares the AI data center boom with the railroad overbuilding that led to the crash of 1873. His first parallel is debt: hyperscalers used to fund construction out of earnings, but the buildout has grown past what their cash can cover.

Prof G Markets · 2026-10-16 Permalink → Listen →

Prof G Markets Around 12:27 into the episode

Speaker 1

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Ed Elson

…general level, do you think that this comparison makes sense? Yes, very much so, because the key risk in the data center boom is overbuilding and overbuilding finance by debt. Until recently, the bulk of the money going into data center construction was from hyperscalers, and it was being financed

Speaker 1

out of earnings. But the scale of the construction boom in data centers has been so large that the resources of the large tech companies has not been enough, and they've turned to financing through debt. And what makes it particularly worrying is that much of this debt is quite opaque. We don't actually know how much debt there is. At the center is a company like NVIDIA, which is essentially lending to its customers. It doesn't call it lending, but it is a form of lending. And so we don't really know how much of the construction is being financed by debt. So that's the first sort of comparison. The second is by 1873, it is clear that there has been overbuilding. And it shows up in the form of excess capacity on railroad lines and an erosion in profitability of railroad lines. So by the end of 1872, only a quarter of the railroad companies are able to pay dividends. And I suppose the analogy today is: you know, is all of this data center…

Ed Elson

Why was there such, what was this pervasive problem of overbuilding when it came to railroads? Why was it that the railroad companies couldn't accurately assess the demand for this new technology that was actually transformative and did change the world for the better? But still, we say that they…

Speaker 1

A few months ago, they asked Satya Nadella, who's the CEO of Microsoft, how are you going to prevent overbuilding? And very kindly, he referenced my book and said, you know, everyone's reading this book. And what we're going to do is be very careful. And I think he got the wrong end of the stick…

Ed Elson

Does that essentially mean that whenever a new technology comes along that is transformative, that there will inevitably be a crash at some point?

Speaker names from our own diarization · position estimated from where the line sits in the episode

“All of them led to a jump in private investment of 2% to 4% of GDP. All of them lasted two to four years. All of them ended up with excess capacity. And all of them, interestingly, ended up with a spike in interest rates as everyone was competing for capital in the final stages of the boom. And all of them ended up with a crash. Will this time be different? That's a rhetorical question.” — Liaquat Ahamed, Prof G Markets

Ahamed is going through the four or five private investment booms in U.S. history: the railroads of the 1870s to 1890s, the 1920s, the dot-com bubble and the mid-2000s housing boom. The question on the table is whether the AI data center buildout follows the same pattern.

Prof G Markets · 2026-10-16 Permalink → Listen →

Prof G Markets Around 16:17 into the episode

Speaker 1

…But the problem is you add all of their individual decisions up and you end up with an overbuilding boom. Is there a solution to this? Probably not. I mean, I think it's just inherent in the competitive situation that everyone wants to be one of the two or three companies that comes out on top.

Ed Elson

Does that essentially mean that whenever a new technology comes along that is transformative, that there will inevitably be a crash at some point?

Speaker 1

There have been four or five private investment booms in U.S. history. The 1870s, which, by the way, was actually three mini booms and busts. So there was one in the 1870s, there was another one in the 1880s, and there was another one in the 1890s. So the railroad boom was actually three booms and busts. The 1920s, when private investment jumped by 5% of GDP for a few years. The dot-com bubble of the late 1990s. The real estate bubble of the mid-2000s. All of them led to a jump in private investment of 2% to 4% of GDP. All of them lasted two to four years. All of them ended up with excess capacity. And all of them, interestingly, ended up with a spike in interest rates as everyone was competing for capital in the final stages of the boom. And all of them ended up with a crash. Will this time be different? You know, I'm answering, that's a rhetorical question.

Ed Elson

I guess the question then becomes timing. When would it all unfold if we believe that this is just what happens? You have technology booms and then suddenly there's overcapacity and we all look around and we suddenly lose confidence and it crashes. Just looking at what happened during the railroad…

Speaker 1

The data center boom has been going, let's say, for two years. We've had booms go on for four years. So we could be halfway through the process. So, you know, there is almost nothing in history that allows you to pinpoint the timing. I can't be any more precise than that. The size of the private…

Ed Elson

Why is it that we should be looking at percentage of GDP as a metric for whether we're at the top? Like, what is it about that measurement that makes it relevant and important in terms of predicting crashes?

Speaker names from our own diarization · position estimated from where the line sits in the episode

“We're definitely in the manic phase. 1871 was maybe the point at which you could have said this is perfectly rational and it's reasonable. By the end of 1872, we'd exceeded all bounds. So I'm sure that we have entered the manic phase.” — Liaquat Ahamed, Prof G Media

Ahamed, a financial historian, has written a book on the railroad boom that ended in the panic of 1873. Asked where today's AI and data-center buildout sits in that cycle, he puts it past the rational stage.

Prof G Media · 2026-10-16 Permalink → Listen →

Prof G Media

Ed Elson

When you look back at the railroad boom, presumably there was a moment where it made sense and then things started to get out of control. There was too much debt. There was too much speculation. Whereabouts in that cycle do you believe we are in this moment? Or is it too hard to tell?

Liaquat Ahamed

We're definitely in the manic phase. 1871 was maybe the point at which you could have said this is perfectly rational and it's reasonable. By the end of 1872, we'd exceeded all bounds. So I'm sure that we have entered the manic phase.

Ed Elson

Welcome to Profit Markets. Hey guys, if you haven't already, please be sure to subscribe to our channel for all things markets and hit the bell icon to get notifications for all of our latest episodes. We really appreciate it. Thank you so much. Another AI data center operator just shelved its IPO.…

Liaquat Ahamed

Let's turn the clock back to 1870. The world has been through a 20-year boom. And it's a boom that is the first era of globalization. GDP doubled in those 20 years. Trade went up five times. And fueling the boom was a new technology, the railroads. And that was a truly global phenomenon. There was…

Ed Elson

Just some of the players who feature in this story, two names that I'd like for you to tell us about. One, the Rothschilds, who feature prominently in your book, and also Jay Cook. Who were these people and what roles did they play in these investment booms?

Speaker names from our own diarization · position estimated from where the line sits in the episode

“When Britain invaded Egypt in the 1880s, Gladstone had put 40% of his net worth into Egyptian bonds… they were yielding probably 12 to 14%. And he thought this was a great buy. And it proved to be a fantastic investment because he invaded Egypt. Britain insisted that the Egyptian pay off their bonds at par.” — Liaquat Ahamed, Conversations with Tyler

Tyler Cowen asked the financial historian about William Gladstone's Egyptian bonds. Ahamed contrasts Egypt with Turkey, whose much larger debt was cut roughly in half and restructured, and leaves open whether Gladstone acted out of self-interest or principle.

Conversations with Tyler · 2026-10-14 Permalink → Listen →

Conversations with Tyler Around 10:02 into the episode

Liaquat Ahamed

You know, I don't think it's politically feasible.

Tyler Cowen

Neither do I, but I could do it. Could you? Tell me the story of William Gladstone buying so many Egyptian bonds.

Liaquat Ahamed

I don't know whether he was just doing it because... I mean, the story is that when Britain invaded Egypt in the 1880s, Gladstone had put 40%. of his net worth into Egyptian bonds. And he'd accumulated them over a few years, but he'd progressively put more and more money into Egyptian bonds until they were yielding at their peak. They were yielding probably 12 to 14%. And he thought this was a great buy. And it proved to be a fantastic investment because he invaded Egypt. Britain insisted that the Egyptian pay off their bonds at par. There was very little restructuring. So anyone who invested in Egyptian bonds at that point got 100 cents on the dollar or 90 cents on the dollar. The question is, did he take the decision to insist that Egypt pay back its debt because of his own personal stake? Or did he just believe in principle that that is what should happen? The interesting contrast is with Turkey. Egypt owed $500 billion…

Tyler Cowen

But could it be Gladstone thought that insisting on full repayment from Egypt was optimal? And he bought the bonds because he knew he would enforce it. But he wasn't doing it to be corrupt. He simply was trading on inside information the way you might find today, you know, inside parts of the Trump…

Liaquat Ahamed

Yeah, probably. I mean, I'm sure he thought that it was the moral thing for Egypt to pay its debts in full. If he could have insisted that Turkey pay its debts in full, he would have also insisted that Turkey pay its debts in full. He just didn't have the power. He wasn't going to invade Turkey. He…

Tyler Cowen

But given how Victorian the Victorians were, are you surprised that the Egyptian bonds were yielding 12 to 14 percent? They don't seem like that risky an investment. If you know Gladstone will back you up and insist on repayment, I would have bought some. Maybe you too, right? You've managed the…

Speaker names from our own diarization · position estimated from where the line sits in the episode

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