Newton had the great good luck to get into the South Sea Bubble early. He made a really decent investment and a very quick killing, which mattered to him. It was enough to count. He then got out, and suffered the most painful experience that can happen in investing: he watched all of his friends getting disgustingly rich. He lost his cool and got back in, but to make up for lost time, he got back in with a whole lot more (some of it borrowed), nicely caught the decline, and was totally wiped out. And he is reported to have said something like, “I can calculate the movement of heavenly bodies but not the madness of men.”
Saturday, March 1, 2014
Isaac Newton and the South Sea Bubble
This story and chart from Jeremy Grantham's January 2011 Investment Letter, adapted from Marc Faber, is a classic. The tale of really smart people doing really stupid things is somehow very gratifying.