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on 23 December 2016
A very significant reminder, given the current economic and political climate we live in, of how the herd instinct and financial banking are a recipe for disaster, outdated in places but a disturbing reminder that those who ignore history are doomed to repeat it. A great read.
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on 21 May 2017
Entertaining, insightful, unputdownable.
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The stories in this book will have appeal as long as human beings exhibit great greed and fear in their investing. Those traits will encourage people to manipulate those emotions to their advantage, and these tales will recur with new investments every few years or so. Some few winners will garner long-term wealth while most will lose their seats in this game of financial musical chairs . . . known as speculating in endless opportunity. Fast success draws attention, which draws new investors, which creates more fast success. The price takes off like a rocket ship to eventually crash to earth when it runs out of the fuel of optimism and greed.
No one can hope to be a successful investor without absorbing the stories of these timeless follies.
You will find in this book three sections from Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay in 1841, and Confusion de Confusion by Joseph de la Vega from 1680. The Mackay material describes the almost simultaneous Mississippi Scheme in France and the South Sea Bubble in England, as well as the earlier speculation in tulips in the Netherlands. Confusion de Confusion is a translation from the Spanish about speculation in Amersterdam in the securities of the Dutch East and West India Companies.
The Mississippi scheme involved the use of private bank notes to improve the French debt and currency that were eventually tied into investments in a colony in Mississippi. John Law, a Scotsman, was the originator of the scheme, which grew out of control when the French printed too much money and the Mississippi colony foundered. You can read more about this in the recent book, The Millionaire. The basic facts are more easily absorbed, however, in this volume. Following along shortly thereafter, the English began to speculate in stock in a monopoly to develop trade with the Spanish, also tied to reducing public debt. That became the South Sea bubble and the speculation was encouraged by the early success of stock investors in the Mississippi scheme in France. Tulipomania is considered the best of the financial parts of this book, and recounts the amazing heights that a single tulip bulb could bring (with a famous table of the buying power of a florin at thta time) and the problems encountered, such as when a sailor mistook a rare bulb for an onion and had it for his lunch! These three essays are about psychology, and do not go into the market details too much. The descriptions about how the government dealt with these disasters provide relevant information for regulators.
In Confusion de Confusion, there are four dialogues about how bull and bear markets can be manipulated and the consequences, in the context of speculation in hopes of gain for the new colonies and trade. These dialogues are superb examinations of how markets actually work, and will be an illumination to the new investor of who she or he may be up against. The lesson: Be sure you know the rules and think about how they could be used against you.
This book is greatly improved by a series of essays. One is by Peter L. Bernstein in which he makes comparisons of the current markets to these early essays. Herman Kellenberg's introduction explains many of the details of the Amsterdam markets very well to make the de la Vega material more accessible. I especially liked the introduction by Martin S. Fridson in which he points out some of the errors and hyperbole in the Mackay material, and puts that work into a current context. Without these essays, I would simply encourage you to seek out the originals instead of this book. But these modern essays will add a great deal to your understanding.
Mackay's book was reportedly a favorite of Bernard Baruch's, which has helped its popularity enormously over the last 70 years. After you read this book, I do recommend that you read the entire book. Although it is a tough slog in places, you will come away with a much better understanding of crowd psychology than these three sections alone will give you.
The fundamental mechanism for each of these mania is that a new investment opportunity arises that seems to offer great potential. No one is quite sure what the future will hold, and optimism takes over. The price starts to rise, and that attracts attention. As more people invest, the market rises more. That draws more attention and investors. This continues until either pessimism starts to balance excess optimism, or the market simply runs out of new investors. It takes ever more money to create the same growth, so the market eventually has to fall. Along the way, a few are smart and take out their money. The rest lose.
This mechanism occurs about once a decade. Some of the recent examples are Internet stocks in the 90s, biotechnology stocks in the 80s, the Nifty Fifty in the 70s, the conglomerates in the 60s, electronics companies in the 50s, radio companies in the 20s, utility trusts around 1900, railroads in the 1880s, and so forth back in time. The key lesson: If you think a mania will form, do your buying and selling very early in the game or ignore the game altogether and go into safe securities. Either one will work. If you want to split your money in half with half for speculation and half for safety, that would give you the best and safest route. Most people do not have the emotional discipline to sell in time, so it is dangerous to play. The markets will fall many times faster than they rose, so the time to escape is on the way up.
I hope you will buy and read this book, and share it with your children when they start to invest.
When you are done with the book, I also hope you will also consider where else mania take over. These occur in consumption patterns (not unlike tulip bulbs), activities (remember disco?), businesses (franchised door-to-door selling), and entertainment (quiz shows will come and go many times). Be sure you watch out for your exposure to these mania as well. Avoiding wastes of time and resources are an important part of achieving true growth.
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on 14 May 2006
For a book so old, Extraordinary Popular Delusions is still a very easy read (untranslated French aside) and very relevant to the modern day. It traces the origins of "animal magnetism" for example, still around as magnet therapy bracelets and so on, and an excellent example of the conditions which lead people to believe the bizarre. The section on the Alchymists is a real highlight: a history of the field told through potted biographies of its practitioners, covering both the real and legendary aspects of their lives and characters.

The tone is dryly witty with a subtle sarcasm, and once you push through the unengaging subject matter of the opening three chapters (the first two covering fairly similar financial schemes, and the third the "Tulipomania") it's an amazingly compulsive read.
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on 28 August 2010
For those of a sceptical turn of mind,whose view of human affairs is even somewhat jaundiced,this book will appeal immensely.There,rolled out for our delectation is a register of some of the more ridiculous,absurd,insane,purblind and just plain stupid ideas and phantasies which have absorbed the human mind down the ages.Religion,financial schemes,alchemy-that perennial,the philosopher's stone is well treated,philosophy,altruism and philanthropy;very little escapes the eye or wit of the author.
Long before the term Political Correctness was invented men and women were doing their utmost to compel their fellowman to conform to what they considered to be the only way forward.And,if any one should flatter themselves that we,educated,broad-minded,tolerant and politically aware are any improvement on our predecessors then take a good,long look at the present situation.From climate change to multi-culturalism;from the belief in the UN as the harbinger of peace and tranquillity to wind farms;from islamic jihad as a means of securing entry into paradise to creation from design.All beliefs held by millions:whether they are true or not is of no matter;they are beliefs held just as sincerely as those of yesterday.
This book should be compulsory reading in all schools;it could blow away some of the cobwebs.I recommend it.
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on 15 November 2009
I wanted to read this book to learn more about our current financial crisis. And I learned that if you think that the current financial crisis is an extraordinary event and our government will place proper regulations to prevent this from happening again, then you can keep on dreaming, or read this book instead. You will learn that manias such as what we experienced in the housing market and during the internet bubble are nothing new.

In this book, the author takes readers through the history all types of manias such as The Mississippi Scheme, The South Sea Bubble, and The Tulipomania. I found it amazing that we are no different from people 300 years ago. We are greedy and irrational and looking for quick ways to get rich. And unfortunately, we do not learn very well from history. This book is fabulous and I found it very interesting.

- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market
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on 21 April 1997
Remember when you were in 8th grade and a cool saying was making its way around? Knowing the saying made you feel cool. How cool do you feel when you hear that in 18th century London, for four months the word "Coz!" would reduce bystanders to giggling lumps of jello? Why? "Coz!"
Feeling good about the stock market? Can't suffer more than a 20% correction, right? Because all the experts say so. You'll feel so much "better" after learning of the 17th century "tulip" market.
This book teaches you, in hilariously engaging fashion, with a voice speaking across the centuries, that fads are part of the human condition, not a 20th century phenomenon. Read it and learn.
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on 9 April 1999
This book is an entertaining review of a number of popular crazes that occupied the minds of the English during the eighteenth and nineteenth centuries. Some of its subjects are well known but others, like the passion for the catchphrase "What a shocking bad hat!", now long forgotten. Although around a hundred years old this book's continuing relevance is demonstrated almost daily by the proliferation of fads, crazes and popular delusions in our own time. It is pleasing to reflect that in another century such modern preoccupations as crop circles, alien abductions and satanic ritual abuse will appear as bizarre and absurd as duelling, tulipomania and the South Sea Bubble do now.
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on 18 April 2009
First, ignore the review that says 'This edition only contains extracts on John Law, the South Sea Bubble, and the Tulip mania in the Netherlands...'. That review relates to a different edition. This paperback edition contains all the sections referred to in the summary. The content is wide ranging, from financial manias to the Crusades, witch trials, poisonings and so on, so it's a fascinating selection. My only warning would be that the book was written nearly 200 years ago, so the language and style is a bit archaic nowadays. The author is prone to 19th century meandering thoughts on the nature of man and his behaviour, when you just want him to get on with telling the story! Well worth a try though.
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on 8 May 2016
Thank you
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