Was one of the most immortal scientists in history also one of the world’s most mortal investors?
In a recent column on the effort to predict stock-market behavior with principles from geophysics, I cited the losses — reputed to exceed $3.6 million in today’s money — that Sir Isaac Newton incurred speculating on London’s notorious South Sea bubble in 1720. I also cited the remark, often attributed to Newton, that he “could calculate the motions of the heavenly bodies, but not the madness of the people.”
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This article was originally published on The Wall Street Journal.
Further reading
Andrew Odlyzko’s research papers http://www.dtc.umn.edu/~odlyzko/doc/bubbles.html
Definitions of BEHAVIORAL FINANCE, BUBBLE, CRASH, FORECASTING, IRRATIONAL, OVERCONFIDENCE, PANIC, RISK, TACTICAL ASSET ALLOCATION, in Jason Zweig, The Devil’s Financial Dictionary
Chapter Four, “Prediction,” in Jason Zweig, Your Money and Your Brain
John Carswell, The South Sea Bubble
Richard Dale, The First Crash: Lessons from the South Sea Bubble
Thomas Levenson, Newton and the Counterfeiter: The Unknown Detective Career of the World’s Greatest Scientist
The Extraordinary Popular Delusion of Bubble Spotting
Escaping the Magnetic Pull of a Bubble
The Extraordinary Popular Delusion of Believing What You Read
The Museum of Art and Finance, Gallery 1: Tulipmania
A (Long) Chat with Peter L. Bernstein
A Short History of Folly
Searching for the First ‘Bubble’