(which basically means that if the conditions mean that the optimal strategy in the market is to basically just run pump-and-dump 'greater-fool' scams on everyone else then that's what you'll see occur)
This is the right answer, some people think that the dot-com bubble and mortgage bubble is something for investors to regret, when in fact they made such a ridiculous amount of lo ey they're just searching for the next bubble. Not the next great product.
If that's your belief, then thinking it's risky and you may lose your shirt requires believing that you may not be smart. Which is a tough thing to accept for a lot of people, especially ones who think investment success is all about smarts and not luck.
We all know there is no 'sure thing' when investing, but if you're a large money manager, you generally want to maximise profits, looking through history, the 'quickest' earners are usually always those from OP, speculation, market share and IPO.. The 'bubble' of these seems to be loosing air but I'm purely speculating based on the tech job market so I could be completely wrong.
Depending on the stage, investors don't care about any of the details except for the founders ability to raise the next round and their probability to IPO at a later/advanced stage. The stock is the product and whether you are selling a real time machine or a crystal is irrelevant.
Which is not that "insane" really. If that's how money is being made, and investors are in the business of making money, then that's the path they are going to take.