- Author: Charles MacKay
- Publisher: FB&C, 418 pages
In the early 2000s, one of my wife's cousins pressed Memoirs of Extraordinary Popular Delusions and the Madness of Crowds by Charles MacKay on me. His timing was a bit off. Had I read it a few years earlier, I might have made a bundle as a short-seller of internet stocks. The book's tale, you see, is about the history of collective manias, and financial ones in particular.
You may or may not have heard of the South Sea Bubble or the time that the generally sober Dutch lost their minds (and guilders) speculating on flower bulbs, but you'll come to recognize the similar elements of these episodes. Take a novel commodity, preferably one that's hard to value, such as land overseas, or the tulip, which was then somewhat new to Europe. Find some interesting charlatans to promote them. Corrupt whatever institutions regulate the sale of shares in these enterprises. Watch the price go nuts as a wide spectrum of society buys in to the latest "can't-lose" proposition. Wait for the inevitable reversal and collapse.
MackKay weaves wonderful anecdotes, with lots of lively detail (such as one precious tulip bulb that got eaten by mistake) around these sadly repetitive story lines. It's rather amazing to think that this book is more than 170 years old -- and is still in print. You'll see it cited by authors such as Andrew Tobias (he wrote the foreword to my edition) and Michael Lewis.
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