Extraordinary Popular Delusions and the Madness of Crowds (Book Review)

Extraordinary Popular Delusions and the Madness of Crowds

Read this book review to learn more about Extraordinary Popular Delusions and the Madness of Crowds.

Extraordinary Popular Delusions and The Madness of Crowds by Charles Mackay is a classic book about behavioural finance and crowd psychology.

And it’s a must-read for any trader or investor looking to understand the irrational dynamics of markets. Extraordinary Popular Delusions and the Madness of Crowds was published in 1841 and you can still by the original version on Amazon.

So…

In this book review we’ll comb through Mackay’s classic Extraordinary Popular Delusions and the Madness of Crowds. I’ll share with you what this book discusses, what I liked about it and what I could have done without. Sound good?

Extraordinary Popular Delusions and the Madness of Crowds Summary:

Extraordinary Popular Delusions and The Madness of Crowds is a great book that discusses some of the most common bubbles, fads and crazes that swept through society over the last 500 years. So basically…

This book is a series of historical case studies on crazy things that people did. Make sense?

Extraordinary Popular Delusions and the Madness of Crowds starts off talking about a number of important financial bubbles that rocked Europe, including Tulip Mania, the South Sea Company bubble and the Mississippi Company bubble.

And to be honest:

If you haven’t read about these bubbles in-detail before, it’s an incredibly eye-opening experience. Extraordinary Popular Delusions and the Madness of Crowds does a great job showing how the average person can easily get swept up into the mania based on a popular delusion.

The rest of the book goes on to talk about other popular delusions and crazy things that crowds of people did together. The topics are very diverse and cover everything from alchemy, to witchcraft and even the crusades. The book takes a sober second look at all of these delusions and helps to explain why they became so popular (despite defying all logic).

I really enjoy Extraordinary Popular Delusions and the Madness of Crowds because it did such a great job showing that over the last 500 years the same psychological patterns have repeated themselves.

While reading this book and applying the lessons are two different things, I think this book really helps paint a picture of popular delusion. And if you keep these ideas in mind (and always refer back to the facts) you can avoid getting swept up in the madness of crowds.

By the way, it’s rumored this book was also a favourite of John Templeton, so it must be good, right? Now you must be wondering…

What was the best part of Extraordinary Popular Delusions and the Madness of Crowds?

The Best Part of Extraordinary Popular Delusions and the Madness of Crowds:

The best part of Extraordinary Popular Delusions and The Madness of Crowds is definitely the first couple of chapters on the major historic bubbles.

That’s because…

Extraordinary Popular Delusions and the Madness of Crowds does an incredibly illustrative job  of showing how these bubbles developed over time. It shows how those speculative undertakings got started, how they gained momentum and why they eventually exploded (leaving whole countries in ruins).

The book also goes to great lengths to show that while these bubbles had a lot in common, they weren’t exactly the same either. For example the book explains that when the British government proactively stamped out the South Sea bubble, they avoided some of the pain their French brethren experienced in the Mississippi Meltdown that preceded the French revolution.

Of course it was also interesting to see how emotions and irrationality can influence people in all walks of life. But the financial applications were certainly the most interesting and I think are the main benefit to any readers of StockIdeas.org.

For the purpose of illustrating financial bubbles (and providing historical context around them), Extraordinary Popular Delusions and the Madness of Crowds is unmatched.

But there was one thing about this book I found a little difficult…

The Challenge with Extraordinary Popular Delusions and the Madness of Crowds:

Extraordinary Popular Delusions and the Madness of Crowds is an excellent book and despite being written in 1841 it is actually quite entertaining. But the fact remains…

The book was written over 150 years ago and the language is a little bit difficult to read. Plus the text is really small and packed quite densely on the page. You’ll notice I read a lot of investing books. But even this one was quite slow for me to get through. It’s not that I didn’t enjoy it, but  the book was physically a challenge to read.

So while I don’t think that’s reason to avoid Extraordinary Popular Delusions and the Madness of Crowds it is something you should be aware of before buying the book. So let’s wrap this book review up…

Extraordinary Popular Delusions and the Madness of Crowds – The Final Word:

Extraordinary Popular Delusions and the Madness of Crowds is a book like no other. It has really stood the test of time because of the timeless wisdom it shares. The lessons about how people due to “popular delusions” was incredibly eye opening for me. For that reason, I recommend you buy Extraordinary Popular Delusions and The Madness of Crowds on Amazon.

Just keep in mind the book is a tough read and you don’t need to rush your way through it. Even though the language used is a little out-dated, the lessons in the book are contemporary as ever. If you’re still looking for some more information on Charles Mackay’s book, check out the video book review below.

Extraordinary Popular Delusions and the Madness of Crowds Video Book Review:

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