The Innovation Theater Trap: Burning Trillions, Dimming Progress
September 12, 2025 · Hugo Latapie
September 12, 2025 · Hugo Latapie
If venture capital had existed in Edison’s time, society would have bet everything on gas lamps. Trillions would have gone into gas pipelines and fixtures, locking us into dangerous, polluting technology long before the light bulb had a chance. By the time Edison flicked on his filament, the weight of capital behind gas would have been impossible to overcome.
That’s the essence of the innovation theater trap: resources poured into what looks inevitable, long before we know it’s the right path.
In the late 1800s, waste killed you quickly. Spend four dollars to make one, and you were done. Market discipline was ruthless.
Today, we ignore the burn multiple — how many dollars a company torches for every dollar of recurring revenue it adds. In AI, we celebrate headlines like “$500M ARR!” while glossing over that the same company spends $2B+ to get there. A 4x burn multiple should scream “danger.” Instead, it’s reframed as “growth.”
This isn’t capitalism correcting itself. It’s narrative convincing us that inefficiency is progress.
Parts of the VC world now brag: “We don’t back ideas, we back founders.”
That line tells you everything. Innovation has become a casting process. The younger and less experienced are often preferred — not that they lack talent (in fact, many are exceptionally talented), but because they can be more easily cast into symbolic roles within a larger narrative.
Many of these founders are brilliant, ambitious, and capable of real breakthroughs. The issue isn’t their merit — it’s that the system elevates them as symbols first, and innovators second.
This is innovation theater at societal scale. And here’s the deeper truth: once the play begins, even the actors and directors can forget it’s theater. Everyone starts to believe their own script.
The real danger isn’t just wasted capital — it’s wasted capital that locks in the wrong path early.
Gaslight distribution was “good enough” technology before Edison. If a modern-style VC ecosystem had existed, enormous sums might have poured into scaling it, making electrification politically and economically impossible.
That’s what we’re doing with AI: trillions locked into brute-force, resource-hungry models while other approaches risk being left unexplored. Misallocation doesn’t just waste money. It narrows optionality and delays discovery.
And just like in Edison’s day, society convinces itself: “This is inevitable.” That’s the self-gaslighting at work.
Some investors now warn that government is the real king-maker — picking winners through subsidies, regulation, and policy. But this is projection.
Parts of the VC ecosystem have been doing exactly that for decades, deciding who “wins” by flooding them with capital until victory looks inevitable. Others take a more measured approach — but the loudest signals often come from the biggest bets.
And here’s the deeper layer: often the gaslighting isn’t directed outward at all. It’s inward. Investors, founders, and even whole industries end up gaslighting themselves — believing their own narratives so fully that warning signs get reframed as proof of progress.
It’s also worth acknowledging that many VCs are under immense structural pressure. They can’t simply sit on capital. Funds are raised with the expectation of deployment, and the clock is always ticking. In that sense, investment theater is baked into the system: capital must be put to work, even if the opportunities are thin or the valuations inflated.
That doesn’t make VCs villains — it makes them human actors caught in a system that amplifies everyone’s tendency toward self-gaslighting. We all tell ourselves stories to justify our bets. The difference is scale: when an individual self-deludes, the cost is personal. When a VC does it with trillions, the consequences ripple across society. It isn’t fair to the investors themselves, and it certainly isn’t fair to society — but it is where we find ourselves.
The most extreme evidence of the innovation theater trap? The multi-billion-dollar raises at hundred-billion valuations with no product, no revenue — sometimes not even a prototype.
Here, fundraising itself risks becoming the product. Valuation turns into theater. The act of anointing a founder can matter more than the innovation itself — even when the founder and the idea have genuine merit.
The fallout is real:
This isn’t venture capital at its best. It’s ritual. And rituals can be powerful enough that even their practitioners believe in them.
Capitalism was never perfect. But it had a safety valve: inefficiency led to failure, and failure freed resources for better ideas.
Innovation theater breaks that loop. It sustains inefficiency long enough to entrench entire industries around the wrong horse. By the time the correction comes, the damage is already baked in — and society pays the bill.
And because the story feels so real, even the people writing the checks may not see it until it’s too late.
It’s worth noting that gaslighting isn’t confined to venture capital or large-scale AI. In the startup and innovation world — especially among those pursuing ambitious AGI claims — there’s a parallel pattern. Founders and teams sometimes present conceptual advances as if they were already practical breakthroughs, arguing it’s simply “too early to measure.”
Genuine research can and should live in the conceptual space with no requirement for immediate validation — history is full of breakthroughs, from Galois to Fourier, whose value only became clear centuries later. And society would benefit enormously from investing more not just in pure research, but also in the applied research arm represented by small, ambitious startups and independent innovators. In a field as complex as AGI, the path to proving real-world value may be long, difficult, and unpredictable — which is why letting a thousand flowers bloom is the wiser strategy.
The irony is that this work remains underfunded, even as trillions are funneled into king-making activity that elevates symbols over substance. The trap isn’t in research itself. It emerges when conceptual promise is packaged as a real-world proposition — when narrative leaps ahead of evidence and claims of progress stand in for actual results. In that applied context, illusions dissolve through real-world vetted value: systems that demonstrate sustained usefulness, robustness, or impact.
The difference, of course, is scale. These startup-level dynamics don’t command the same trillions as today’s frontier AI valuations. But they reveal the same human tendency: gaslighting is everywhere, and often we’re doing it to ourselves. I’ll return to this theme in a future piece.
This doesn’t mean the current wave of AI investment has no merit — gas lamps were useful in their time, and today’s large-scale models clearly provide value. But if most capital flows into the equivalent of gaslight distribution, other promising directions in AI — or entirely different fields — risk being overlooked or underfunded.
Across the world, there are researchers, entrepreneurs, and builders working on approaches that could prove just as transformative — more efficient, more sustainable, more aligned with real human needs. I’m fortunate to be part of that broader community, but this reflection is mine alone.
This is a call for everyone — investors, startups, policymakers, and the public — to recognize the situation we’re now facing. To see through the headlines and valuations — not to reject them outright, but to understand them more clearly. Because gaslighting isn’t just something done to us; it’s something we all do to ourselves.
The point isn’t to kill the gas lamps — they were useful, just as today’s frontier AI is useful. The point is to make sure the light bulb still has a chance.
We need less societal-scale innovation theater — and more real innovation.