Charles Mackay's Extraordinary Popular Delusions and the Madness of Crowds: A modern-day interpretation of a finance classic

by Tim Phillips

Overview

First published in 1841, Charles Mackay’s Extraordinary Popular Delusions and the Madness of Crowds, with its vivid descriptions of celebrated financial manias (‘bubbles’), is often cited as the most powerful book ever written about market psychology. Mackay chronicles many celebrated bubbles to demonstrate his assertion that “every age has its peculiar folly; some scheme, project, or fantasy into which it plunges, spurred on by the love of gain, the necessity of excitement, or the mere force of imitation.” Nobody can doubt that this still holds fast in the twenty-first century. Among the bubbles described by Mackay is the infamous Dutch tulip mania, the South Sea Company bubble and the Mississippi Company bubble. And what do bubbles do? Why they burst of course. Tim Phillips’ brilliant interpretation of Mackay’s pioneering book illustrates the enduring nature of crowd behaviour with twenty-first century examples. Inside this entertaining book you’ll discover: • The merits of differentiation versus imitation; • What ‘groupthink’ means, and how to avoid it; • The importance of following your own ideas and straying from ‘the pack’. The ‘burst bubbles’ Mackay described 170 years ago, and the the mass speculation and greed that fuels them, are with us as much today as they were then. This book is not a substitute for Mackay’s original. Its purpose is simply to illustrate the timeless nature of Mackay’s insights by bringing them to life with modern market and political examples. Phillips’ interpretation of Mackay’s book is an inspiring update of a pioneering work of market psychology.

Product Details

ISBN-13:	9781907755903
Publisher:	Infinite Ideas Ltd
Publication date:	01/31/2009
Series:	Infinite Success
Sold by:	Barnes & Noble
Format:	eBook
Pages:	120
File size:	1 MB

Table of Contents

Introduction 1. Too many repeats 2. Too good to be true 3. Be a contrarian 4. 20/20 hindsight 5. Fundamentally wrong 6. Investments can go down 7. Sell too soon 8. The king is in the altogether 9. Blame someone 10. A very british bubble 11. Don’t believe the hype 12. Past performance 13. All-in economics 14. Beware of imitation 15. Flower power 16. Escape the crowd 17. Going to abilene 18. Pump and dump 19. Survivor bias 20. The bubble that wasn’t 21. What don’t you know? 22. Forever blowing bubbles 23. Turning wasted time into gold 24. Ripley’s believe it or not 25. The need to believe 26. The big shill 27. Pure quackery 28. Not in the stars 29. Under a spell 30. It’s a sign 31. Future imperfect 32. Sugar pills 33. Hair today 34. An ordinary bloke 35. Telling tales 36. Count the cost 37. Be careful what you wish for 38. Kids do the funniest things 39. What goes on tour 40. Don’t panic 41. A witch (allegedly) 42. The hidden hand 43. From the top 44. The dead puppy statute 45. Slow poison 46. Simplest is best 47. We found that funny? 48. Chattin breeze 49. Ordinary decent criminals 50. Their own rules 51. Pistols at dawn 52. Especially for you Index

Preface

Extraordinary Popular Delusions and the Madness of Crowds isn’t a short book. As its title suggests, Charles Mackay didn’t favour three words where he thought eight would do the job. It’s definitely a Victorian book, but it’s a modern one too. As we will see, the popular delusions that he ridicules persist to this day – we just give them different names. Each time they recur through history, we are surprised and mortified that we were swept up in Ponzi schemes, conned by smooth hucksters, victims of mass hysteria, controlled by demagogues and seduced by investments that simply cannot lose. We’re living a global sitcom, one in which no one learns anything from episode to episode, and we make the same mistakes over and over again – while convincing ourselves that this time we’re right, and it’s different. Mackay’s catalogue of our own craziness, spanning about a millennium, was the first book to demonstrate what scientists now know: when we act in groups we’re often not very smart. The best-known bits of the book are about business, and about what we now call economic ‘bubbles’ where speculation increases a price out of all reason – before it crashes. Mackay’s history of the Mississippi Scheme, the South Sea Bubble and the ‘Tulipomania’ are commerce retold as farce. Other parts of the book deal with charlatans and con men: the fortune tellers and magnetisers, for example, who convince us they’ve got a secret talent to heal or reveal the future, and then hand us the bill. As you will see, they’re still with us today, and they are possibly more successful than ever. The sections on the witch mania and the Crusades show us that when we look for enemies, whether those enemies exist or not, we’re prepared to condemn or even kill thousands of innocent people on the flimsiest of pretexts. And the weird patterns of fashion and strange behaviour, popular beliefs and follies that we all share without thinking about it – admiring thieves, believing in ghosts – undermine our claims to be rational. Mackay was incredibly well-read and thorough, so almost all of the hard- to-believe stories stand up to scrutiny 150 years later. Indeed, much of the last 150 years has been a demonstration that we can be even madder than Mackay thought. The incredible histories, some of which have almost been lost to us, show how irrational and dangerous groups of people have always been. But this is not a history book. Anyone in Europe or the US who has opened a newspaper recently will agree with Mackay that ‘sober nations have all at once become desperate gamblers’. When we laugh at the stupidity of the people in his book, we’re laughing at ourselves. Your recovery starts here.