Memoirs of Extraordinary Popular Delusions and the Madness of Crowds (1852) | Hacker News Reader

Memoirs of Extraordinary Popular Delusions and the Madness of Crowds (1852)

gutenberg.org

196 pointslstodd65 comments

Excellent book. The high point for me was the enterprising fellow who set up a stall in London during the South Sea Bubble (the original bubble!), allowing people to invest in "An undertaking of great advantage, but nobody to know what it is." People lined up for a couple of days to give the fellow their money...after which the fellow disappeared, never to be seen again. No lies detected!

Well they did disrupt the market, albeit at the cost of looking over their shoulder for the rest of their life. lol =3

Wasn’t tbe Tulip Bubble the original bubble?

Yep, tulips 1630s, south sea 1720s.

Yes, but the term "Bubble" comes from the South Sea Bubble.

You all renember SPACs,Special Purpose Acquisition Companies. And all the "experts" who needed the money because they had some great investment that could not be financed any other way. That wave hit its peek less than 5 years ago. Yup, that was a great way to invest. I suspect it happens at every cycle.

Not sure why you're downvoted. Chamath Palihapitiya was a tome of SPAC heyday.

I guess some people didn't get that I was being facetious. Just to be clear, SPACs did not turned out to be great investments as a whole. There are definitely better ways to invest your hard earned money.

This is a fun book, but it famously embellishes, exaggerates, and sensationalizes the tulip bubble [1]. The efficient markets people obviously don't like the story, but there doesn't seem to be much evidence that it happened on the same scale that Mackay portrays it.

[1] https://en.wikipedia.org/wiki/Tulip_mania#Modern_views

Yes a lot of it was based on anti tulip propaganda pamphlets that circulated at the time, and survived more because they were more interesting due to the exaggerated stories.

>Peter Garber argues that the trade in common bulbs "was no more than a meaningless winter drinking game, played by a plague-ridden population that made use of the vibrant tulip market."

So basically, it was the GameStop of the 1630s. Humans never change.

Along similar lines, the economist John Kenneth Galbraith has a book on financial bubbles and irrational crowd mentalities in financial market over the centuries: A Short History of Financial Euphoria [1]. Short, approachable, and interesting.

[1] https://www.goodreads.com/en/book/show/270746.A_Short_Histor...

... and funny too. A great book!

My intro to psychology classes was one of the most valuable classes I ever took, just with the way it systematically shattered my own notion of how much I could trust my own notions of perception and thought to be a rational and accurate reflection of reality. I definitely had a notion of how irrational “people” could be before that, but of course I somehow thought I was above all that.

This is why my favorite book is Thinking, Fast & Slow. It blew my mind and totally made me think about almost everything differently.

https://en.wikipedia.org/wiki/Thinking,_Fast_and_Slow

The content on "priming" (significant pillar of the book) has collapsed as part of the reproducibility crisis in psychology. More here: https://replicationindex.com/2017/02/02/reconstruction-of-a-...

As someone who used priming heavily at Google, and its wide use in social networks to billions in revenue. I’m gonna go with the academics trying to take this down are BS.

Adam Curtis even suggests lightly that the takedown of priming in academia was paid for to bury its actual effectiveness (and liability by implication)

The reproducibility crisis reproducibility crisis?

It’s a paid research outcomes crisis as the root

Yes, there is a sort of blindness in science. The idea that if something hasn't been proven it's not true.

priming obviously works. it is inherent in the physical structure of the brain. nerve endings from various all over the body terminate in different physical locations in the brain, and then these are interlinked in an adaptive biological mesh network. nerve responses are triggered by cascades of correlated impulses across different nerve endings, so at a physical level a strongly correlated signal from any two major nerve groups will trigger a sympathetic response when one of them fires independently. the experiments that social scientists come up with may be flawed, but this is definitely how my brain works, so i don't need a study to prove it.

Right it’s like saying hammers don’t work because at the quantum level we haven’t proven matters core structure.

Who cares the hammer still works.

This is a common takeaway from Intro to Psychology but unfortunately it's just...not very true to life (or to psychological science).

It's a fault of us psychologists. The most interesting studies are those that are surprising, so that's what psychology classes are packed with. But we should know better, because that's just selection bias in action. Historically, this has led to intro courses consisting of 50%+ irreproducible studies.

But even after the reproducibility crisis cleanup, the selection bias still remains in place. There aren't a ton of fun studies about the typical accuracy of perception or how humans are often quite thinking and rational.

Thank you, we need more of you. Though, I don't think we will ever be "after the reproducibility crisis cleanup".

Human beings are rational animals as such, but our exercise of that rationality can be quite weak and subject to character flaws and bad habits, and requires cultivation to refine, purify, and actualize.

Of course, we also must be careful here because you're using your own faculties to judge the content of the psychology class (as were the psychologists who produces the content you were learning). Skepticism falls into special pleading, because in order to take a skeptical stance toward the human intellect as such, one must somehow transcend the human intellect to be able to make those sorts of judgements [0].

I would also not say that we are inherently and constitutionally irrational. I would say rather - to use the old cliche - that the intellect's facility is like a muscle that needs to develop, to grow, and to be conditioned to become strong. I would also say that some have greater capacity and potential on constitutional grounds.

Furthermore, the cultivation of virtue is essential, as errors of reasoning are shaped by our vices and not just cognitive limitations or whatever. Indeed, the more intellectual power someone has, the more essential virtue becomes, lest the intellect destroy itself with rationalizations and abuse [1].

[0] Of course, what constitutes correct reasoning is a teleological matter. Otherwise, there is no reason to favor one conclusion over another or any conclusion at all.

[1] A coward of high intelligence will the rationalize powerful. In Chomsky's view, for instance, the overwhelming majority of intellectuals have historically acted as servants of power, rationalizing the status quo, and manufacturing consent. Or as Adam Zamoyski said pithily when discussion Napoleon's relationship with French intelligentsia, intellectuals are mostly tarts for power.

I personally think of humans as some kind of rational machine. We get input from our thoughts, knowledge, and the world around us and generally get whatever the most rational outcome is. The problem with this is that our input is limited to what we know, our general thoughts, and the world around us

Good question would be: is it rational to act on known-to-be-incomplete data? Is it rational to rely on assumptions?

What readily follows is the question: is it even possible to be rational, or is it a delusion?

Hm, I think there’s more to it than that. It is often the case that someone will do something and regret it without having necessarily gained any new information, which is in a sense irrational, right? If you didn’t gain information, you could have known to just not done it to begin with. Something about experiences, perhaps?

I feel like regret would be an input to any decision as well. If you regretted doing something similar in the past, would that not be a reason someone would choose not to do something?

> Human beings are rational animals as such

Really? Explain the success of advertising, superstitions (including religion) then.

>In Chomsky's view, for instance, the overwhelming majority of intellectuals have historically acted as servants of power, rationalizing the status quo, and manufacturing consent.

Why Would You Say Something So Controversial Yet So Brave? dot gif

Yet prediction markets are incredibly accurate. It seems that with money on the line, humanity (at least as a whole) are ultra-rational

>trust my own notions of perception and thought to be a rational and accurate reflection of reality.

But why are you trusting the psychology class? Do you believe it was made by special people with rational and accurate perception of reality?

Supposedly investors are leveraging/borrowing money to buy into AI stocks right now...

Ruh roh. https://www.bbc.com/news/articles/cgrkd41n2v9o

That's not about LLMs.

No, but it is about the, very expected, shitshow caused by the AI hype. When companies think cramming AI in any random place is a magic bullet for replacing workers, shit breaks. Because AI is dumb af. LLMs are just the shittiest of the ways to do it.

Do you honestly think this particular "cram AI in everything" isn't related to the current AI hype? Or that AI applications and companies providing things like this won't crash right along with the general llm AI hype and leveraged investments?

Nah, the kind of AI they were using has been around for a long time (AlexNet is 13 years old), and before that they would have used classical computer vision.

The only thing that happened here is that they didn't check it worked before firing everyone. That can happen with any automated system, AI or not.

I am referring to the hype causing it to be adopted now instead of a decade ago, not the specific implementation. The hype causing people to adopt AI of all kinds hastily without proper validation.

Oh, yeah, that's cooking lol: https://fred.stlouisfed.org/series/BOGZ1FL663067003Q

Speaking of which, I noticed that the big market reversal during the beginning of the Iran war happened right around when ESLR requirements were due to relax. Is this a transmission mechanism for that? Did some of the big brokerages run a big promotion (0% APR on margin debt!) or something?

$600+ billion doesn't seem like much. I was expecting more tbh.

That chart (and many from FRED) is unfortunately not useful without viewing it on a logarithmic scale. Things can look quite parabolic in a linear space, but exponential growth is quite normal in many financial contexts.

Click "edit graph" and change units to "natural log". Now look again. You'll see that the growth in margin loans is absolutely normal, and actually has only recently recovered from the dip caused by the 2008 financial crisis.

> change units to "natural log"

Great tip, but I didn't see "natural log" specifically. Perhaps "Compounded rate of change" is most applicable? That's still mostly above 0 historically, indicating margin usage is ever-increasing. The helpful graph would be margin usage as a weighted percentage of market participation.

Natural log is in there - I just tried it myself. It's the second selection from the bottom in the "Units" dropdown.

Margin debt (debt used to leverage stock buying) Is near record highs, and most of it is flowing into AI stocks ...

Interestingly, Charles Mackay, the author of Extraordinary Popular Delusions and the Madness of Crowds, was himself one of the most ardent cheerleaders for the Railway Mania [0] "urging people to put their money into the railways and pooh-poohing those who were concerned." and "He had become famous by mocking the bubbles of the past - but had rather less to say about the far more serious bubble that he himself had helped to inflate."[1]

[0] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1927396

[1] https://www.bbc.com/news/business-51311368

I happened to read Trollope's The Way We Live Now, which is a fantastic take on the railway mania, at the height of the dot com bubble. Really increased the enjoyment to read about it and see it unfold in real time.

Helping to inflate a bubble is a valid strategy as long as you undestand the mechanics enough to organize a favourable exit.

I think we have lost a number of treatises on this exact subject since at least Egypt's old kingdom, 3000BC.

Aka ‘don’t be the biggest sucker’?

For a more recent and way more reliable book on economics mania I would suggest “Boom and Bust: A Global History of Financial Bubbles” by William Quinn and John D. Turner

https://www.goodreads.com/book/show/48989633-boom-and-bust

People have been people since there have been people.

Another great book in the same vein is; The Natural History of Nonsense by Bergen Evans (1946).

Author - https://en.wikipedia.org/wiki/Bergen_Evans

Reviews - https://www.goodreads.com/book/show/375107.The_Natural_Histo...

Pdf - https://tzmvirginia.wordpress.com/wp-content/uploads/2013/12...

Excerpt:

This book is a contribution to the natural history of nonsense. It is a study in the paleontology of delusion. It is an antibody for all who are allergic to Stardust. It is a manual of chiropody for feet of clay.

...

This book is intended as a sort of handbook for young recruits in the gay cause of common sense. It indicates where the main armies of ignorance are now encamped and tells in a secret code what garrisons are undermanned or mutinous. It tries to show the use of cover and camouflage and the techniques of infiltration and retreat. It maps road blocks and mine fields and shows how to rig a booby trap. It warns of counterespionage and gives— again in code—the five infallible signs to know a fool. When the recruit has finished with it he can toss it over the wall into the enemy's barracks. It may encourage desertion.

The visual design of this landing page reminds me of soulless pay to view journals. I don't like that.

The visual design of the actual online book/HTML is excellent.

Gutenberg might be ugly, but it was fast to load, had all the data I needed and I was downloading the ePub within 5 seconds. That's a winning formulla these days in my book (no pun intended)

I literally instinctively pressed the back button the first time.

I don't understand this instinct you're displaying here, to defend anything because it's open/free.

It can be made better. Can't we all agree that is a good thing?

>Gutenberg might be ugly, but it was fast to load, had all the data I needed and I was downloading the ePub within 5 seconds.

That wasn't a defense, that was me saying it worked well for me. Looking at it again in light of your comment, I might even not even use the "ugly", it is actually quite a clean layout, easy to use, doesn't waste screen space, and I would double-down on it being perfectly fit for purpose. each to his own I guess.

And then, along with economic bubbles you also get moral panics. Seen a bunch of those in my time as well. It's a similar thing.

I made a more stylized html version from the Gutenberg copy:

https://spinchange.github.io/memoirs-of-extraordinary-popula...

Thanks!

The book has aged, but humanity hasn't

A sucker is born every minute.

If you're interested in this type of stuff I strongly recommend "The True Believer" by Eric Hoffer. He describes the social psychology of mass movements, looking largely at religion and nationalism. He wrote it in 1951, but feels nearly perfectly applicable to today's global nationalistic trends. It's an incredibly compelling read.

[1]: https://en.wikipedia.org/wiki/The_True_Believer

This book is an interesting chronicle of financial bubble history, but a far more distilled and actionable understanding of crowd psychology is Gustav Le Bonn's "The Crowd - A Study of the popular Mind" (1895): https://www.gutenberg.org/ebooks/445

You have to be careful while studying Gustave Le Bon and his works. He was a product of his times and so there is an undercurrent of racism in this book due his being influenced by pseudo-scientific "Social Darwinism" theories - https://en.wikipedia.org/wiki/Social_Darwinism

Approach it as just a sociological/psychological case study of the 1800s and there is much to learn.

Book overview and excerpts - https://en.wikipedia.org/wiki/The_Crowd:_A_Study_of_the_Popu...

Author - https://en.wikipedia.org/wiki/Gustave_Le_Bon

The guy was horrified by Napoleon and the violence of the French Revolution, so he mainly spends the book criticizing his fellow white catholic people in France. Yes, he says racist things about other nations, but the parts about France which was all his exact same ethnic group / religion are more timeless.

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