Christmas Books For Investors: How a republished 1840s classic sheds light on the bitcoin bubble

Good news, then, that Charles Mackay’s classic history of manias, Extraordinary Popular Delusions and the Madness of Crowds, has just been reissued. The 1841 book has its fair share of fiction in it: Mackay might have embellished his actual knowledge of the tulip mania, witchcraft and alchemy.

But as stock market historian Russell Napier points out in his new introduction, the key point stands, and can never be repeated enough: we think we live in a rational world led by science and understanding. We do not. Instead we often think in crowds and “when we think in crowds we sometimes don’t think at all, or at least think very differently”, Mr Napier says.

Or as Mackay put it: “If two or three persons can only be found to take the leap in any absurdity however great there is sure to be plenty of imitators. Like sheep in a field if one clears the stile, the rest will follow.” This is how bitcoin got close to $20,000.

You might have Popular Delusions already. But it is still worth looking at the new edition if only for the warning it contains from Mr Napier. The growth of ever-larger governments and corporations, which “formalise crowd behaviour to an extent Mackay could not have imagined”, he says, along with our willingness to create new crowds on social media, means that we are “more engulfed by crowd thinking than ever before”. That sets the conditions for a future full of madness.