Is it worth risking your TRUST? Know about the hidden cost of SPEED in the AI era.
| From the desk of Miles Everson: Hi! Welcome to “The Independent Investor!” Each Wednesday, I publish investing-related articles with hopes to help you achieve financial freedom in the long term. Today, allow me to share with you an important coaching comment by my friend and colleague, Professor Joel Litman, about the hidden dangers of this age’s cyber frenzy. Continue reading the article below to understand more of it. |
Is it worth risking your TRUST? Know about the hidden cost of SPEED in the AI era. The most dangerous moments in markets rarely announce themselves with alarms. Oftentimes, they arrive disguised as progress—wrapped in excitement, speed, and the promise of “the future.” New tools emerge, productivity skyrockets, and capital floods in. Everyone feels smarter for getting there early. … until the cracks start to show. According to Professor Joel Litman, Chairman and CEO of Valens Research and Chief Investment Officer of Altimetry Financial Research, this is precisely the kind of moment investors should slow down. That is because when innovation accelerates faster than discipline, risk doesn’t disappear; it multiplies. … and today, that risk is quietly embedding itself into the very code powering the modern economy. The Rise of “Vibe Coding” and the Illusion of Effortless Innovation
Professor Litman points to a growing phenomenon reshaping software development: The rapid rise of AI-driven coding tools. A new generation of builders—many without formal software engineering training—are now creating applications at unprecedented speed. This shift is often referred to as “vibe coding,” a term coined by computer scientist Andrej Karpathy. It describes a process where developers rely heavily on generative AI, “fully giving in to the vibes,” trusting AI to handle the complexity while humans focus on outcomes rather than underlying code. On the surface, it feels revolutionary. Development cycles shrink. Costs drop. Barriers to entry vanish. However, as Professor Litman emphasizes, markets care less about vibes and more about consequences. Low-code and AI-generated development environments have effectively turned casual users into software creators. While this democratization has fueled innovation, it has also stripped away critical layers of oversight, especially around security. Professor Litman highlights that many AI-generated applications are being deployed without rigorous testing, peer review, or embedded security frameworks. In traditional software engineering, these steps are non-negotiable. In vibe coding, they’re often optional or ignored altogether. The result? A dramatically expanded attack surface. One recent example involved “Tea,” a fast-growing social platform built using AI-driven development techniques. A breach exposed sensitive user data, including images, identification documents, and private messages. The speed that enabled its rise also enabled its downfall. As the saying goes: “Easy come, easy go.” More troubling, Professor Litman notes, is that even established tech ecosystems are not immune. Hackers recently infiltrated Amazon ’s AI-powered coding assistant by injecting malicious code into what appeared to be a routine GitHub update. The compromised plugin gave attackers access to users’ machines, allowing them to delete local files without warning. For investors, these incidents aren’t just technical failures; they’re also trust failures. AI is Expanding the Cyber Attack Surface—Exponentially Professor Litman frames the current environment as a structural shift, not a passing phase. Generative coding has become a foundational layer of the AI boom. Startups like Replit and Lovable, which rely heavily on AI-driven development, have surged to multibillion-dollar valuations in record time. Design platform Figma, which recently went public, has embedded its own AI code-generation tools into its ecosystem. Across industries, more than two-thirds of organizations now use AI in their development pipelines. Nearly half of developers using AI report that at least 50% of their codebases are AI-generated. Alarmingly, about one-third deploy that software without proper testing or review. From Professor Litman’s perspective, this is not just an operational issue but also a macro-level risk amplifier. Every AI tool introduced into production environments creates new vulnerabilities. Even small applications, when deployed at scale, can become systemic weak points. The data supports Professor Litman’s caution. Cyberattacks now occur roughly every 39 seconds. Global cybercrime costs, which totaled around USD 3 trillion in 2015, are projected to reach USD 24 trillion by 2027. Unsurprisingly, this has fueled explosive growth expectations for cybersecurity firms. The global cybersecurity market is forecast to expand from USD 243 billion today to USD 435 billion by 2029. To many investors, this looks like a clear-cut growth story. … but Professor Litman disagrees. He points to extreme valuation disconnects across the sector. The market is pricing in near-perfect execution, uninterrupted growth, and sustained trust simultaneously. That combination rarely ends well. At the core of Professor Litman’s thesis is a simple but powerful insight: Cybersecurity is not just a technology business; it is also a trust business. Enterprises trust these firms to protect their most sensitive data. Governments trust them to secure critical infrastructure. Investors trust them to grow steadily and predictably. Sadly, trust can evaporate overnight. A single breach, misconfiguration, or supply-chain attack can erase years of credibility AND billions in market value. When stocks are already priced for perfection, there is far more downside than upside. The Investor Takeaway: Caution over Comfort Professor Litman isn’t arguing that cybersecurity lacks opportunity. In fact, he acknowledges that select companies with disciplined economics and realistic valuations may offer long-term value. What he warns against is blind participation in a frenzy fueled by fear, hype, and extrapolated growth. In an environment where AI accelerates both innovation and vulnerability, investors must be more selective , not less. The combination of skyrocketing valuations, expanding attack surfaces, and fragile trust structures makes much of the cybersecurity sector a high-risk proposition, especially for those entering at today’s prices. As Professor Litman puts it, when everyone is rushing towards protection, the real risk may lie in what investors are choosing not to protect: Their capital. For now, proceeding with caution isn’t conservative; it’s strategic. Hope you’ve found this week’s insights interesting and helpful. Stay tuned for next Wednesday’s The Independent Investor! Software stocks have been in a rout over the past year. And much of that has to do with AI. Learn more about why investors are actively dumping tech stocks in next week’s article! |
Miles Everson
CEO of MBO Partners and former Global Advisory and Consulting CEO at PwC, Everson has worked with many of the world's largest and most prominent organizations, specializing in executive management. He helps companies balance growth, reduce risk, maximize return, and excel in strategic business priorities.
He is a sought-after public speaker and contributor and has been a case study for success from Harvard Business School.
Everson is a Certified Public Accountant, a member of the American Institute of Certified Public Accountants and Minnesota Society of Certified Public Accountants. He graduated from St. Cloud State University with a B.S. in Accounting.
