October 16, 2025

I spent some time yesterday reading through Howard Marks’ old memos. (He made a list of his favorites to mark the 35-year anniversary since he began writing them.) “bubble.com” is one I hadn’t read before.

The memo quotes Adam Anderson’s 1764 account of the South Sea Bubble: “Was there ever such a delusion from the beginning of the world ... according to this Way of Computing, no Person can Purchase at too high a Rate, since his Profit will increase in Proportion to the Price he gives.” This is the anti-logic of bubbles: price goes up, therefore price should go up more, therefore you should buy at any price.

We’ve seen this repeat across the centuries. Dutch tulips, the South Sea Company, British railways, Japanese real estate, dot-com stocks, housing bubbles, altcoins. The histories are there. It’s all documented. And yet reading Extraordinary Popular Delusions and the Madness of Crowds (great book) or Manias, Panics, and Crashes (great book) won’t make you bubble-proof. The knowledge itself doesn’t give immunity. You can understand intellectually that valuations are insane, that the narrative has detached from reality, that this has all happened before. But you’re still wired to respond to social proof, to fear of being left behind, etc.

I know I still feel drawn to participate. I think almost everyone does. When everyone around you is making money on something you’ve dismissed, there’s this persistent thought: what if you’re wrong? The fact is, humans love a) mesmerizing stories about the future and b) making money. So bubbles are a natural fit for our impulses. We are not wired for things that are actually helpful to the investor, like self-discipline, or moderation, or thinking in probabilities.