The Madness of Crowds

Published on
October 20th, 2020
45 minutes

The Madness of Crowds

The Interview ·
Featuring William Quinn, John Turner, and Joe Walker

Published on: October 20th, 2020 • Duration: 45 minutes

Joe Walker is joined by John D. Turner and William Quinn, authors of "Boom and Bust: A Global History of Financial Crises", for a journey through the history of financial bubbles. Turner and Quinn explain their thinking on why financial manias occur using their theory on "the bubble triangle". They then share with Walker their in-depth analysis of particular manias such as the British Bicycle Mania and the Melbourne land bubble of the 1880s, using these and other examples to explore why bubbles have such profound economic, social, and political consequences. Filmed on October 9, 2020.



  • CX
    Cindy X.
    25 October 2020 @ 13:10
    It is unfortunate that the recording was so choppy.
  • KD
    Kelley D.
    21 October 2020 @ 03:16
    Very nice interview..but I have to remind myself, sadly the best definition of a bubble is something that goes up and up....that I don't own...
    • MC
      Mathieu C.
      24 October 2020 @ 17:27
      haha so true.
  • KI
    Kevin I.
    22 October 2020 @ 10:41
    I had a question in mind for a while regarding "Bubbles'. I wondered if they studied what happened to the asset after a bubble burst. How long does it take for society to forget about the pain from the burst so the asset can be valued accordingly without any fear/negative biases? What I am trying to say is whether crypto assets will underperform Gold due to the burst of the bubble in 2016-2017.
    • MC
      Mathieu C.
      24 October 2020 @ 17:21
      That's an excellent question. What I would think is that bubbles (let's focus on the non destructive ie non financial one, without banks involved resulting in deep depression) usually formed through a narrative which is rational and that people can easily identified to, there is rational in the irrational, put it this way. If you take the internet bubble as an example, indeed it was great but it went just far too ahead of itself, company were not making any sort of income in 2000, to the contrary they needed huge investments but I remember that time when everything was so great and new and with a lot of potential for everything. The "predicted" growth trend was still very real. Look 15 years later, all these monopolistic companies are huge cash cow. The bubble some sort of predicted that specific time we are living now, so to answer your question I would say that bubbles always gets ahead of themselves and reach an unsustainable growth in price valuation, however once it burst the normal rate of growth continue. You can look at the price of Nasdaq between 2002 and 2007. It kept growing in a sustainable way from the pre bubble trend. Then what happened after 2007 it's another story with rate down to zero, quantitative easing and the exponential acceleration of growth in that sector and fastest income growth resulting. The same apply to bitcoin, it definitely had the rational narrative if you look at a monthly chart you will see bubbles indeed, however change it to yearly and you will only see a sustainable growth of that particular asset which might not lead to 1,000,000 USD but simply 20,000 USD and then fade away as the cycle change and fear dissipate. Bitcoin versus gold seems like a sustainable and healthy growth in prices for some reasons. I won't be able to explain why as I am not a bitcoin bug but I supposed it is just easier to buy physical bitcoin than physical gold, especially in small quantities. Now take all of that and apply it to Tesla. The narrative is great and will probably become greater in a couple of years as they are building a network of private supercharger all over the world which will take petrol station market share and boy, they are many petrol station all over the place and it will transform the company from car manufacturer to potential conglomerate between energy producer, IA software development but also grid regulator with battery or whatever energy storage which will be used. You can see right away the growth of the stock price is clearly not sustainable, they will never get income growth other than making cars in the present despite low interest rate the growth also the market is simply too big and the competition has caught up very quickly. In my opinion it is very likely that particular stock will be trading $150 rather than $500 in the couple of years ahead. (which is still a very generous valuation) but in 15 years that might very well become such a great company to own which will trade $500 again and perhaps even pays dividends to its shareholder.
  • DB
    Donna B.
    22 October 2020 @ 23:35
    At the end, I was disappointed Quinn was wishy-washy on whether what we're experiencing now is a bubble. If he can't, who can? What good is the triangle if one can only make a determination in the rear view? A good interviewer would have tried to get Quinn to commit to an opinion. Then Quinn and Turner both think there are good and bad bubbles. I would have wanted to hear more about this preposterous opinion. They also admit there's been more bubbles in the last 20 - 30 years than ever before. Why was this part of the discussion at the end with little discussion? I would have wanted to hear more about this and a shorter discussion of the Melbourne and British bicycle bubbles. So perhaps this a bad editing and/or poor producing.
  • MO
    Master O.
    22 October 2020 @ 06:30
    Can we have Joe Walker full time at RV?
    • RA
      Robert A.
      22 October 2020 @ 19:57
      Yes, the Jolly Swagman. Perhaps he could do some of the “dissection/explainer Videos—I think he would be excellent!
  • Nv
    Nick v.
    22 October 2020 @ 16:47
    If you are interested in bubbles, watch Didier Sornette's Dragon Kings Ted talk, and read the devil takes hindmost by Edward Chancellor. Tesla fits the bubble model perfectly. Trades $35 BILLION a day = most liquid stock on earth (marketability), well owned by Robinhood & top on GS VIP hedge fund list (Speculation) and Money-credit is as loose as it has ever been (Liquidity). 3/3, at ultra scale
  • KI
    Kevin I.
    22 October 2020 @ 10:41
    I had a question in mind for a while regarding "Bubbles'. I wondered if they studied what happened to the asset after a bubble burst. How long does it take for society to forget about the pain from the burst so the asset can be valued accordingly without any fear/negative biases? What I am trying to say is whether crypto assets will underperform Gold due to the burst of the bubble in 2016-2017.
  • SV
    Santiago V. | Contributor
    21 October 2020 @ 20:04
    We the people are responsible for political economy problems because we do not hold our elected officials to proper account and instead devolved into partisanship, tribalism, and cults of personality. We need Liquid Democracy to ameliorate these problems and create real-time power signals to officials when the solutions being offered are not sustainable. With respect to the uncertainty of technology I would have to disagree a little. Technology is always a solution to a problem using a new method, therefore we should strive to identify what our problems really are and how any proposed solution, technological or otherwise, could have unintended consequences. This is a role for both citizen and leadership. The alternative is that we allow ourselves to be ruled by machine learning algorithms. I for one sometimes welcome our robotic overlords, sometimes.
    • DG
      David G.
      21 October 2020 @ 20:44
      I agree that it's is our responsibility, but it may be an unrealistic ask. I have never played musical chairs, in which someone volunteered to lose by quitting mid song, so that everyone else may have a seat. They play until there is one chair and one winner. We as a society would have to accept the loss today, for a more controlled out come tomorrow. I don't see that happening. As soon as word gets out that we as a society get word that those in power are ending the party, everyone will rush to be the first out of the door. Unfortunately, Based on everything you said about partisanship, tribalism, etc., when the party comes to a sudden and painful end, a vulnerable, and typically less responsible group is going to be scapegoated, and the mobs will then come looking for their pound of flesh. Presently we have individuals engaging recklessly with identity politics, at the potential expense of the vulnerable groups they claim to advocate for, while the other side stokes the flames of the mobs ignorance as to who the true perpetrators of our problems are.
  • DG
    David G.
    21 October 2020 @ 20:17
    Kind of feels like the bubble to end all bubbles in our lifetime. Sometimes its hard to see the forest, for the trees. Once you have the triangle, and the fuel, It seems to be that you just need to look at price action. Is parabolic on long term charts? Once the market gets so high and drunk from speculation, all it will take for the carnage of weak handed FOMOs, going all in with a flush draw and a set showing, is for a little wind of doubt, followed by a down pouring of reality. It's gonna be what it's gonna be, when Mr. Market says so! There will be great trading opportunities throughout, and legacy changing opportunities on the other side. That is why I am here, so that I do not perish for lack of Vision.
  • LK
    Lance K.
    21 October 2020 @ 12:54
    Does this interview contain massive amounts of uptalk?
  • GH
    Gavin H.
    21 October 2020 @ 11:39
    Name their boy band. Wrong answers only.
  • SS
    Steven S.
    21 October 2020 @ 06:26
    I found this extremely interesting and well-done. The study of bubbles can not be underestimated in it's importance and Turner and Quinn do an excellent job elucidating their findings and views. Thank you!
  • AW
    Andrew W.
    21 October 2020 @ 03:54
    "What has changed in that 20, 30 years that has made bubbles more prevalent?" Not even a mention that perhaps, just perhaps, the delinking from gold is enabling big gov, market intervention and hyper-Keynesianism going back to 1971. It's obvious that credit expansion is more readily pursued when the central bank is enabling you.
  • TK
    Tyler K.
    20 October 2020 @ 22:09
    This was an interesting look at economic history but those of us who live in the Vancouver or Toronto area have been waiting for a housing burst for nearly 20 years now. It's become clear that much like the US will do everything it takes to prevent a stock market collapse, Canada will do everything it takes to prevent a housing market collapse. In which case, are we looking at a housing bubble that can continue for years? decades? generations?
    • VN
      Vitali N.
      21 October 2020 @ 01:57
      i wonder outloud what impact Chinese money flight and immigration had on supporting these developments
    • RS
      Robert S.
      21 October 2020 @ 03:30
      To respond to vitali How can the prices stay stable even when the chinese stopped investing?
  • GF
    Gordon F.
    21 October 2020 @ 03:20
    Bubbles are very hard to discern from within. I don't remember where I read that, but it's true. In the latter stages, investors start to feel that they are in a bubble, but when things are rising so fast, no one feels like they can afford to get out early. And finally, everyone hopes/wishes/believes that they will be able to time it and get out just before it pops. Of course, hardly anyone does, especially because there are any number of false tops which are shortly exceeded, which induces the "buy the dip" mentality, which works great until it doesn't. I have no clear answers, so I just try to do the best I can, and learn as much as I can from others. Great interview!
  • GB
    Gert B.
    20 October 2020 @ 13:18
    If bitcoin ever becomes a bubble it is going to be the grandest and most beautiful of them all. Price can never be too high to participate, rich and poor can afford no matter the price, no regional borders as other bubbles had, can be sold on the black market if needs be - every cellphone on the planet will participate.
    • HC
      Hao C.
      20 October 2020 @ 16:25
      It was a bubble in 2017. It will probably be a bubble in 2022 and 2027, etc. Dot Com was a bubble in 2001 and Tech is a bubble now. Bubbles don’t mean there is no value or use case.
    • sc
      sung c.
      20 October 2020 @ 23:57
      Bitcoin does not go through bubbles, it goes through cycles. Even though the drawdowns are extreme, like a bubble, it is part of the bitcoin 4-year cycle and understanding this will open up huge opportunities for those in the know. I've increased my bitcoin holdings, without adding a single penny, 12 fold since 2017 till now. That is an increase of 1200% in about 2.5 years. As a result, BTC has grown from 0.5% of my trading position to 33% in that period; again, without adding any additional funds.
  • JT
    Jayne T.
    20 October 2020 @ 14:17
    The US has become a socialist government for the upper class in that the Fed will not let any bank or major company fail (people yes, companies, no). Therefore, predicting when (not if) the monetary and fiscal stimulus will stop, and thus the asset bubbles will burst, is unpredictable.
    • JT
      Jake T.
      20 October 2020 @ 15:39
      I agree. One caveat I recently thought of is that a good deal of working class/older folks also rely on asset price appreciation since the pension and social security system relies on higher asset prices to meet their commitments. Our whole system in the US is built in such a way that a correction in asset prices cannot happen, it's a total mess.
    • TB
      Tobin B.
      20 October 2020 @ 16:50
      Yes, the reason is that companies provide jobs for workers (slaves), which perpetuates the status quo.
  • LB
    Leanne B.
    20 October 2020 @ 13:50
    Relevant, timely wisdom. Much appreciated - thanks.
  • SB
    Stewart B.
    20 October 2020 @ 10:38
    Great interview. I wasn't aware of bicycle bubble, or Victorian property bubble. I enjoy Joe Walker's interview style too.
    • JF
      Jack F. | Real Vision
      20 October 2020 @ 12:28
      Me neither, before this interview. I read chapters of the book to get charts - would recommend if you want to learn more
  • LS
    Lewis S.
    20 October 2020 @ 09:03
  • DS
    David S.
    20 October 2020 @ 08:17
    Most interesting. Thanks. Nice to link up several historic bubbles with recent ones we know about. Also connects well with the explanations of bubbles from Dr. Soros and Mr. Parrilla's bubbles and anti-bubbles. I agree many bubbles start with money/politics. Bubbles are a human thing. DLS