The world rich. And tonight hes joined by david dobbs. And bringing the authors to the community and find our schedule harvard. Com events where you can sign up for our email newsletter and shop our shelves from home. This evening will conclude with time for your questions. If you have questions for our speakers, go to the q a box to submit at any time during the discussion. Well come to those the end of the talk and well work on answering as many of your questions as time allows and in a minute ill put up the link to purchase money for nothing, and it makes this virtual author series possible more than ever the future of a landmark independent bookstore. Thank you. We sincerely appreciate your continued support now and always and finally, and if we have any tech issues tonight during the event of the we will do our best to resolve them quickly. Thanks for your patience and understanding. And now, im pleased to introduce our speakers. Thomas levenson is a professor of science writing at mit and author of several titles hunt for vulcan kwz einstein in berlin, and his future length documentary films, walter p can hesser laward and peabody award and the new york chapter. Hes joined by journalist and author, theyll be discussing money for nothing in kwi which the history of science meets the history of finance. And author james glick writes levenson is a brilliant synthesizer with a grand view of history at the modern finance amid can task catastrophe and fraud. And to our modern world. Now im pleased to turn things over to the tonights speakers. Digital podium is yours. Thanks much, alex. Tom, i was intrigued by this book from the getgo, which the title which obviously references a great song by dire straits, but some other things as well. What other things, or do you mean to convey bye that title . Well, you know, the great miracle of capitalism is captured by, in the immortal word of a cultural icon, first of all, if you recall the slogan, i will gladly pay you tuesday for a hamburger today. Wednesday and the reason thats so important, thats credit. What credit does, what borrowing does, it creates money in the here and now out of a promise that we make for the future and figuring out how to do that in a way that could be sustained, that wouldnt be prone to crisis or wouldnt be killed by crisis, because my whole book is about the crisis and thats exactly it. Figuring out how to make credit work not just for todays drink or hamburger, but for whole nations and whole economies and whole global systems. Figuring that out was one of the great innovations of the period that historians call the modern era. And those are the details that spurred a lot of other innovations, too. And with the title, theres two ways money for nothing, one is i gave money, i got nothing. Right. The other is im making money and didnt get anything. And theres a lot of both of these i think so this here. What led you to when did you start this book and what led you to write it . The book all of my books come out of something that bugs me and usually they come out of some thread i find in another project that i may not have time or be appropriate for a project. I want to figure it out. In this case i was doing some work on isaac newton and, you know, great crime story, chasing, counterfeiting and doing this cool stuff and in sort of reading up about newton and trying to dave into his life and character, i found that 20 years after the event i was chronicling in that project he had some troubles with money and he famously said, i can predict the motions of the heavens, but i cannot predict the madless of the folly of the people. And i said, thats weird. I want to know more about that and it ultimately led to this. That makes sense. Yes, he does play an extremely interesting role in this. One role he plays is actually, he suffers from i dont think its what i need to keep a secret about what happened in this. Look. This was about a bubble, sort of the bubble of all bubbles, and isaac got caught in it in a bad way. But he also laid the foundation in a way, yes . Well, i mean, that newton is an integral character in the entire book. Hes there at the beginning and there at the end. And the critical thing, the whole story hinges on this, you know, really, you know, just wonderful, delicious, horrifying financial crash that occurs in 1720. In fact, the actual moment that the socket tur stock market turns, releases april through the summer and at the beginning of september. And pretty much like today, 300 years ago. I mean, 300 years ago, it turned and the slide started and it all went to hell. So thats happening 300 years ago. So remind me how bad a bath newton took. The thing it made my heartbeat for him there was when you wrote that he traded i think an annuity worth every year more than his salary and he cashed that and he, you know, put that into cash and put it into the stock that then fell off a cliff. Thats right. You know, its hard to say what each transaction cost him, but overall, it looks like he lost 20,000 pounds. Thats a lot of money in 21st century money, but 20,000 pound in 1720 was equivalent of certainly the equivalent of some millions today. It would not be exaggeration, 3, 4 Million Pound and depending how you count it, could be much, much more. He took a bath and he was wrecked. Did he have any money left or yeah, he did. He was lucky in that he basically bet half his fortune on this and he still had the other half. And he still had a job that paid him okay. He wasnt out on the street. But he had been, you know, he built from being an ordinariry middle level of London Society to someone who was genuinely rich. For a few months. Well, yeah, hugely rich for a few months. But the real heart break for him he got out of the market with reasonable profit. 20,000 pound again. And most millions, and one of the telling parts of the story, i mean, were leaping ahead of the narrative. But one of the parts of the story, he got out. He, you know, figured hed made as much money as he needs. He was happy with his returns, but the stock kept rising in this sort of feed on itself frenzy that happens in money, that weve experienced in our own lives recently. The 2000s and then before that, you know, the tech bubble, the housing boom and then before that the tech bubble and about of that. Weve all experienced that and newton was sitting there with real profits cash in the bank and it was safe and couldnt stand watching the stocks. It was if, looking at it from the outside, its as if he felt he was losing money by not getting those gains. Right. And so, he sold for on average around 500 pounds a share or Something Like that and the share finally hit a peak six weeks to two months after he sold at a thousand. So it doubled again and this is starting at the end of the year around 100. So its a really big rapid boom. Almost tenfold. But he sold and then bought it again. He bought in again. It didnt go fast enough, right . He actually bought some of his not all of it. When he reenfuhred the market he brought some of it literally at just about the highest price anybody paid for it. So theres a we could all say youre not nearly as smart as isaac newton and look what he did, and theyre probably resonating here. Well, go back and how did he well, tell briefly what created this bubble. Right, so that there are two ways to look at what created this bubble. There was a proximate set of decisions in the late 17 teens and there was a huge intellectual cultural and political change that took place from the mid 17th century, through to right around the time of the bubble. So over 50 to 70 years, there were big changes going on in the way britain and europe in general thought about things that turned out to be important. Basically its the scientific revolution and some things that go along with it, along wienglad and britain and which makes the role of parliament and running the country and the role of the moneyed men in london in funding the country, much more important than theyd previously been. This is because they essentially, a new set of tools and a set of calibrating where money moves and how it works. Exactly. Made it for the first time appear, what, that it was possible to try to manage an economy, basically, is that right . Or a market . Well, no, i mean, there were people who were really thinking about running the whole sort of business of getting and spending for the nation in a way that would maximize national power. They thought this in france, thought it in london. There was a brief that theyd cracked it, figured this out. And this is a cartoon, right . But its a cartoon with some truth to it. You can almost reduce the scientific revolution to two core concepts. One is that you quantify and m mathm mathm mathmatsize, and especially newtons great invention the calculus, over time. The other thing that newton and many others did, its never just one person, but new top deserve a symbol in avatar, and the other thing is i mpercism. Trying things, you know, getting this information and turning it into numbers and performing math on it allows you not just to think about ab tract things, even just celestial things, where is jupiter going to be in six months time or what governs the behavior, the moon and the tide that they work on. The idea of math and r rigorous impericism, it could be you and me figuring out how to buy all of these things. One of the things that get worked out in this period is concept of present value. If i have a piece of land or maybe a business or a ship thats going to do things over time that makes money. Whats its value right now . How do i take the income stream growing on this acre of land for 20 years . How much predict the change over time. And calculus that you pointed out. And what you said earlier, newton said earlier he couldnt predict the dynamics. Human heart or something to that effect. Yeah. So, it is you know, were facing right now in trying to manage this pandemic because its knowing the virus is one thing and predicting people later is another. Right. So in a way, this is it, again, cartoonishly, is it accurate to say, hopeful to say that this book is a story of how modern finance was founded and then actually quickly foundered and also that sort of like the atomic science of this past century, when they thought they had the knowledge to control the predict markets and thereby control them so they keep them calm, but growing, they unleash some powerful forces and in some cases, they were to they were so powerful they couldnt control them . I think thats right. I mean, to me, one of the things ive found, actually fairly late in sort of trying to figure out how to make the book sing, a passage by daniel defoe. It shows up over and over in the book. Hes in some ways, sort of the first journalists, hes a propagandist and hes a moral thinker, but one of the things people know less about them because people think about Robert Toussaint so quick, he was a ferment of new ideas. His big book was an essay on projects. It was a catalog and celebration of all the things people were trying to do. New ways to form the land and you know, he just loved that stuff. And as he invented the tools of credit aggressively in the 1690s inventing what we now call the idea of a National Debt, thats a thing that has a birthday, right . Its birthday is in 1693 and the reason it has a birthday, up until then in the european system and certainly in england, the idea behind, you know, running a states finances was that ultimately it rested on the person of the monarch. The money, many, many removed by the time you get to those period. But still, its, you know, in theory its the kings purse or the queens purse. And what happened in the 1690s that changed. Parl Pt Parliament was this control and there was a different revenue stream they could create bypassing a test. And this was a radical change in something as seemingly dull and boring as borrowing money to pay the soldiers. So defoe watches this stuff. Im rambling on, there is a point, i have a point. Daniel defoe watches this and sees it works and england is able to do things with this borrowing, you know, fighting wars with frach and it really expand its reach in power, having access to credit the way that other european nations were not able to do and he says, this is our secret power, this is our super power and he writes this patent and talks about how of the government raises debt and manages them and creates a whole lot of metaphor that its clockwork, automaton, a machine. And he has a vision of it, to rationize and control it, but its explicitly a newtonian metaphor. Its as netness as curves, and again, was what figuring out whats going to happen to a curve, or the shape of a future curve is what calculus is about. And i think its interesting, too, that then he got mixed up in any other ways. Its so this is important at the time, i mean, theres these revelations in the book and i kind of wrote a general outline. And we talked about why this was so vital to britain and after it, at first they regrouped and you know, they figured how to have the cake and well, thats the wrong metaphor. How to do this in without fouling up the economy. In the manner that was wide written, could defeat countries with more riches and more soldiers because they could raise money quicker to on the way as you put it. The bubble itself emerges from, in some ways, the successes of the first attempts to use the idea about money, and credit. Because what happens is from the 1690 forward, well, actually britain gets involved in a series of wars that last until 1815. The period is sometimes referred to as the long 18th century and one of the things that defines it, you know, the first of william and marys wars against louis the 14th and france ending in 1815. And the first round, the National Debt is irresponsibly, the extraordinary cost of war and britain cant channel out of everyday receipts. There are taxes coming in now for the army in the field. Theyre raising vast sums starting in 1693. So the first war end, they kind of regroup a little and then another bar starts and they keep doing the same thing and they always borrow right at the point of crisis, the terms of the loan for decades and decades and high Interest Rates and by the mid 17 teens, over half of britains annual revenue, the money the government takes in from all of its sources are going to pay off interest on the debts accumulated over the previous 25 years. Right. So, the key here was that they thought theyd found a way to well, actually, this company at first was in a place to take the first shot and consolidating this debt and then selling it selling the right to receive the payment of the debt, you could attain that by buying a stock in theory. Right. Right . And so they packaged debt as an asset which in a sense it was, but only if you count an asset as something to come, right . No, absolutely, it was an asset. What they did, was they took britain borrowed everywhere they could, they sold lottery tickets and had payments for years. They sold annuities so people could buy guaranteed payment. And they sold straightup debt and they all had different terms and different constraints and one of the things about almost all of them is that the people who lent the money to the government and received these annuities or lottery tickets, in return, could keep the income stream, but they couldnt sell the underlying assets. And as far as the contract. Yes. So if they spent 100 pounds to buy something from the government, they would get their 5 pound or 8 pounds or whatever per year and never get the 100 pounds back. Right. So what the company did, lets get rid of this complete mess of the too complicated and nobody can get their money out. Well trade our stocks, you know, if you give us your debt, the government will allow us to create more stock and well give you the stock. The government will pay us interest at a reduced rate and well pass that on as dividends and well use anything we can to fund the trading operation that will make us all very rich and best of all, if you take stock instead of hold onto your debt and you ever want the money back, you can walk down to Exchange Alley, go to jonathans coffee house and say ive got a share to sell, who wants it . And the governments got, you know, better terms on their debt. Theyve got the ability to retire debt, all kinds of good things and the South Sea Company got the big tranche of business and it was supposed to be a win, win, win kind of deal. And the problem was that they didnt they were right this kind of debt for equity swap could work, it worked on a smale scale before this and its worked since, but they set it up if it had all hung together, it would have made the people who were inside the company before the deal happened insanely rich. I mean, richer than you can mantel. Richer than anybody previously had been. That sounds vaguely familiar. Oh, yeah. So there was the government agreed to this because they were so desperate, right . They really needed to solve this problem, but it was a great deal for the government. Yeah, it was good for them at the time and it was good seemed like it was good for everybody at the time. Right. But what ensued was well, tell me a little bit, i want to get into, in a minute, how the bubble was essentially it seems to me, from your description, as people some people, the people who ran the South Sea Company and others, who became allies, and so on, there were people who were deceiving others and also a lot of people who were deceiving themselves, including isaac newton. Tell me the role and the birth of what we now call the stock market, yes . The modern one, and this took this centered around places around jonathans coffee house, how did that get started . Well, the i mean, a di digression on and how he wanted his beans. But you know, the stock market, there had been joint Stock Companies for, you no, 150 years or more at that point. Until the 1680s there were few shares and almost never traded and the Royal African Company and all of these, they existed and they were, in fact, companies that shared that in theory could move between people and rarely did. They tend to be bought and sold by a very small group of people. It wasnt a public thing. No. You and i would not have gone out and bought it. In the 1680s that changed and in the 1690s that changed very, very rapidly and new companies, trying all kinds of things. Glass makers, mining companies, insurance. They called this period 1690s to roughly 1750, thats called the financial revolution, a term of art amongst historicalions of the period and one was that you could understand this as a part of the scientific revolution. There was large cultural change going on and people werent saying im a financial revolutionary and a and thats why youve got the likes of working out life . Insurance, and newton himself talking about and how things work. And people who had skills and interest, they were enormously broad at that time. So anyway the stock market existed and originally stockbrokers worked in the Royal Exchange and they got booted out for basically being too loud and obnoxious. And they moved a hundred yards to the alleyway called Exchange Alley will which had four or five coffee shops and they set up in the coffee rooms and started trading there and the most important of those was jonathans which sort of became the center of what was increasingly understoods at london stocks exchange. Theres nothing left of that now. The alley exists, but if you start to walk down it, theres like a horrible, you know, postblitz, you know, bland building with essentially no windows and one of those little blue oval plaques, this is where jonathans was. Nothing quaint there. No. But the thing about the bubble itself. The key thing was how do you design the deal. And this was the first time and the thing to remember about this, yes, this was a bubble. Yes, there was deception, yes, people both deceived others and deceived and were selfdeceived, sometimes the same people were actually conning others while they were fooling themselves. But this was the first time any of this had happened sot he deal was set up with a really fatal flaw in the middle of it. Nobody ever said how much, what the value of a piece of debt was in terms of the shares. So the company was able to say well, well give you three shares for this piece of debt today and tomorrow, maybe well give you two and we get to keep the difference and keep some of the shares that we would otherwise have traded. And in the market setting the price, they were adlibbing it. They were adlibbing it and playing a dance with the market. They started out being a debt for equity swap and they were creating what werent in the end effectively bonds. To leap ahead in the story, south sea is how the modern bond market first starts to form and people who are in finance will tell you, the stock market is where the headlines come, but bond market is where the action is, and the fate of nations hang on the bond market and the stock market reflects, but doesnt drive in the same way. Thats starting right here and they set up a really interesting deal. Its a deal that could have worked under certain circumstances, but the way they set it up, had a flaw in it that meant that first of all, the whole idea worked only if the stock stayed expensive. So sometime around. The moment it plunged. You were doomed. You were in you were supposedly buying these assets, but youre also just buying the rise. You were buying it because it was expected to go up. It went up 50 pounds yesterday, ill buy it today and go up 50 pound tomorrow and ill be rich. And which helped people buy stocks down, and ill buy it. Yeah, and just this email coming out from the wall street journal every day called for the Intelligent Investor and right now theres an amateur boom in options trading and im reading this, ive seen this before and it happened in june 1720. Yeah. And in fact, in 1720 they were using the some of the same options we use today. Call options, put options, buy options. Yeah. Theres very little new on the sun and behave stupidly around money the same way that we did 300 years ago. Theres a question i want to turn to here, but first, between this and 2008, you know, the collapse of the the fancy derivative that supposedly gathered and kept safe, you know, unexplodable, tons of mortgage debt moved to be not safe and it completely exploded partly because, as Michael Lewis writes about in his book, the big short, virtually no one understood the algorithm that supposedly explained how it was in that title. And you have to wonder things are going on like that now, but its amazing how closely that south sea bubble parallels that. The containment of debt and people dont understand and it explodes and the well, one big thing that changed, it was complicated then, it was complicated and not understood by people and today you have the same problem. I argue that it, you know, it stays roughly the same in terms of the level of complication. I mean, remember, the south sea bubble was the very first time that it happened. Calculus was, you know, 40 years old or 50 years old, right . And go ahead. I mean, people one of the things, and you know, i mean, basically i agree with you. I think that the 2008 crash and the south sea bubble are much, much more similar than they are different. So, yeah, thats my feeling, too. And many of the in some ways my book is the prequel to, you know, lewis book. Yes, this is amazing, like the parallels are i mean, the kind of slickness and its so much of the piece, yeah. And you know, the structure of the bubble, how it inflated, why it inflated, what was required for people po believe it. What happened to those who didnt. Just as, you know, lewis chronicled these handful of people who saw that this was unsustainable, could never work, that there was, you know, the critical thing in the 2000le thing was that these assets that were thought to be uncorrelated so that they were, you know, you couldnt have you know, you cant lose the value of a mortgagebacked security because you had thousands of houses and different types all over the country and this, that and the other thing and diversity of income streams, all of those houses and values were more correlated and got more so as they were inflated. Functioning the same thing happened in the bubble with the prices of stocks rising and everybodys availability and willingness to bid on new releases, new issues of the stock, turning on the fact that the stock was high, remained high and continued to grow. And the moment there was any reason to stop believing that, just as the moment there was any reason to suddenly realize that in fact the assets that were supposedly cure because they were diversified werent, the moment thats a psychological trigger. The moment that realization occurs, the bottom falls out and as Warren Buffett says you discover who is not wearing pants as the tide goes out. And its that moment where you realize, im not holding what i thought it was. So, good questions coming in here. And one is regards something i believe you addressed in the first half of the book roughly, which is, has to do with the history of government lottery and susanna, her ancestors who immigrated from germany to britain, earned a living by selling lottery tickets for the prince and its her familys Research Suggests that for what suzanna understands, they did they sometimes did this because jews in many countries, including britain at the time didnt have opportunities so that selling lotteries was a way to survive. You know, rabbis and thats right. I mean, this was the jewish story in all of this is actually quite interesting. I dont go to it in any great detail in the book, but jews were kicked out of england in the medieval period by i think add win the first. He was fighting wars he couldnt afford and he could seize their assets and the attempts to subdue scotland which failed and his attempts to conquer whales which succeeded and the jews werent let back officially into england until the middle of the 17th century, 16 you know. So so they come back and they dont have deep roots in society and they dont have, you know, a huge number of ways to make a living and when england starts trying to raise money to fight the wars in the 1690s, one of the things i think was invented in italy, but the idea of selling lottery sales actually to persuade people to use the thrill of gambling to persuade people to lend larger money. You sell a ticket, say 10 pounds a ticket and carries with it a chance of winning a prize of 100. And then even if you didnt win, you got an interest payment, 5 , 10 whatever it was per year. There are two reasons to buy. Right. Yeah, you win the lotto. You bought it for it and hung on for the income. And these started happening in 1693, 1694. Again, one of the innovations in england was to sell them cheaply enough so you werent just borrowing money from the gentry and aristocracy, that, you know, the seem stress, women were actually involved in the markets in a quite significant way in the 1690s and early 18th century, that the pastry maker. Right. And sometimes people, you know, really and by investing by buying and people would band together, five people would buy a 10 pound convict for a chance at the lottery and decide whether theyd keep it for the interest rate. Theres a huge expansion of the pool of people you could extract money from around the government and people had to sell those things. When you sell a Million Pounds worth in 10 pound tickets, thats a lot of tickets youve got to move. Well, you said well how the public frenzy, this dominated the news and everyone was in, it seems, not everyone, obviously, but mass it was a mass market in that sense. So i dont know if suzanna is still on, im dying to know when her parents, her ancestors moved to britain. Theres another question here that you do address kind of the other way around in the book, which is the important it corpse the importance of these new instruments they had. This new knowledge. Right. This new economic sight, if you will, seeing the success of the British Empire and the specific wording, this is from john meriweather, what is the connection between the Industrial Revolution that was starting not long after this period and the introduction of the use of credit that helped support, you know, new industries and so on . Right. The answer of course, is its complicated. You know. Weve got 15 minutes altogether. So this would be a simple answer. But the short answer is that version of the book. Its really what happens after the south sea bubble, you know, the market crashes. Thousands of people lose their shirts, including very important people, people who you would think of as having pull on the government and there was a lot of pressure from a lot of different places to sort of try and make it right again, bail people out. There was a proposal even just to reverse all the trades, you know . Giving the whether its the bank of england the duke of portland who was the richest man in england. Who was the shoemakers son. A different one. Starting 1720 the richest man in england and ended it so far broke, you couldnt see broke from where he was. He was so underwater. So much so he was forced to avoid imprisonment for debt and get out of dodge and he took the usually lucrative post as governor of jamaica to build his fortunes and avoid his creditors. The problem was a gambler, he gambled on the south sea and on horses and he gambled on his ability to make a second fortune in jamaica before jamaicas notorious ly dang dangers got him. He died of yellow fever there. Its interesting to read your account of where these features ran and one thing that also rings true today or parallel today. There was some accountability, but it was of a limited yeah. There were a few who were that were left alone or even bailed out. Thats right. They were nt fully bailed out. They were but they many fewer. The institutions were, correct. Yes. Many fewer people went to jail than should have, but to the question that was, you know, to the question that john was asking, so what happened after the bubble crashed, is, yeah, not everybody went to jail and, you know, the duke of portland could get a post to get him out of dodge and all that. And critically, Robert Walpole referred to as the first true minister, says were not going back on the deal. To turn all of principles debt into south sea stocks was to rationalize debt to run it. Were hanging onto that. Theyre not going back on the original deal that started. Yeah, so they did if you loan the government money, you wont get screwed, basically. Yeah, yeah. And the, you know, the interesting thing to me, in france theyd done something almost the same time and when they came back out and the mississippi bubble crash, they said, yes. Basically supervised the construction, turned southeast oculus southeast bonds in fact, and into a tradable bond, turned the rest the British Government debts into uniform easily tradable stuff, showed written could pay interest on a regular basis with very little risk of interruption and in general made the entire apparatus of credit into a simple, boring, useful, you know, there was never an occasion to give when people could pump the price of government paper in the same way. Tend to resemble would look so familiar to us. We know exactly was going to be worth when. It was boring. In 1720 its the wild west. In 1750 its, you can no longer carry their guns into town and by the early 19th century you have consuls and just this enormously stable and reliable credit financial system. What britain does with this is the really reserve this just for the government. They set up rules for private companies cant use this to apparatus of credit by the treasury camp. What britain gets out of it is the first real boost in their ability to exert our all across the globe. In him minute i want to ask you what the u. S. Did differently. A couple of quick questions. Hattie has a wonderful pair of questions. One not trivial but the other what is big. The first one is, brits and american addition of different titles. Is there a story there . Which to do you prefer . I love all my children equally. They have different covers and theyre very different in the copper style. I think theyre both gorgeous. The american what is more brash and high and i contrast the british what is lovely blue and subtle textures, is great. I think the difference is, in britain this more broad cultural memory of, this is a luncheon story but their subtitle reflects that. I dont have a a preference. I think there are both great. That makes sense. I havent seen the british one but it seems like they are both aimed at their audiences. Her the question is, your thought about when the current bubble will burst. Are you going short . Let me warn everyone, do not use this. This is not financial advice. Personally, i am happiest when i have more cash right now. The point i really hope comes through in the book is that one of the things you can see from the south sea bubble and the way that crises are extremely similar in structure and sequence have occurred again and again and again afterwards, is that, yes, financial capitalism is this extraordinarily powerfully effective tool. It makes us rich. It is made the world rich in ways that are really, the contrast in the way people can organize, using the prospects for the future to build an Economic Life now that secures that future. Its extraordinary. It was truly a radical change in a relationship to time, our lives, and how we can build a a future for ourselves and our children. Thats all great. The flipside though is it comes with a systemic failure systematic failure mode builtin because human beings are less rational than they think they are, and money manias seem to be an integral part of the way finance works. I can say with absolute certainty that we will have a major downturn. If i live a normal life span, certainly within my lifespan, i fear sooner than the full extent of how long i might live, and i couldnt possibly one of the things we see is we dont know what it is when the various sort of frailties that affect modern finance, leverage, contagion, unstable relations between parties. These things recur in different settings over and over again and theres always some trigger point that creates a sort of riffling the fact that goes through the system and causes instead of the minor correction, this time it the crash. Its impossible to predict what that is going to be and when it will happen but it seems to be it has been for the first 300 years of financial capitalism a regular recurring feature. We will hit hard times again soon. When . I dont know. The other question, money manias compared to are the essentially the same . They are similar. The tulip mania is fascinating and is great and really interesting, but on some level, i dont know if remember was a pet rocks. There were these dolls everybody had that one christmas. I cant either but that was a bubble. There are commodity bubbles and sometimes they are set up, theres an attempt to manipulate markets the sometimes theres just this human fancy gets engaged in something as a centrally important and things get priced out of whack and sometimes they deflate without great harm and sometimes if people mortgage their souls to buy the tulip bulb, they can have more serious consequences. They are like financial bubbles to the extent the get financial eyes. Do they borrow money to buy it to look bold . But financial bubbles are distinct because you can construct an ever larger amount of financial risk on a single asset by using different financial tools. Those options were talking about earlier are a classic example. Thats what makes it so hard. This goes to a couple of questions. One, Cabbage Patch dolls and or chia pets or beanie babies are the candidates for the things you described. One of them asked how is a mortgagebacked security indifference or more complex . One thing that stuck with me, seems to be on the same shelf of three maxims to invest my or not, one of them being never invest in something you dont understand, which almost big win in bubble did as well as the Mortgage Securities and so on. Is that people bailed when had this moment of revelation they realize what they were holding was not what they thought they bought, or they recognize that it had changed. First the south Sea Trading Company was supposed to be about moving goods from south america and cornering the market, yada, yada. But it literally never sailed almost. It became Something Else and when there was one investor, you pointed out, that when they saw that, they got out. If they may profit it wasnt huge but i mean, Something Like 100 , right . I think youre talking about thomas guy, some of the audience may have heard of guys hospital. That was founded out of his profits from the bubble and use bookseller who would become a fairly successful investor and about south seas start during the decade before the bubble when itd basically been a very slow moving company that basically paid interest on a certain amount of government securities that held and used just kind of an indirect way to hold government paper. Then the bubble took off and what had been a boring source of income for it became this enormous speculative profit. Some point is that ive had enough. Ive made all the money i need to make. I was rich before and now i am obscenely rich and i will sell all my shares. He had a large enough pilots years, it took him six weeks to share them because he is trying to avoid moving the market by bailing out. He got out at basically roughly half the value would attain at the peak. He made a net profit of 250,000 pounds. Remember i said earlier 20,000 pounds was millions. It many, many millions, right . He stayed out. He kept his money. Then he goes, you said a huge hospital in london. The medical center, which is a nice story, too. There were happy stories come happy endings, and i think this is a good story to tell particularly as bookstore readings because, or events, because he was a bookseller first. Who made good. Okay. That seems to me a good place to rap, unless you have one last thing you want to tell us. I want to say one thing, which is thanks to Harvard Bookstore at Harvard Bookstore is one of the great bookstores in the country. I had been buying books from them since 1976 and im so glad they are still around. Whether or not anybody still listen once to buy my book, please buy some books from them. By all means, by my book, but they are utterly deserving of being support anybody can give them. The other thing i i want to sas that so monday, wednesday, friday i look at the south sea bubble as this triumphant story where people discovered a new way to think about nature and human life, and the then make e terrible mistakes on the way that what came out of it are some of the abstract tools and intellectual engines that allow us to lead a life of vastly more comfortable than those who in the bubble did. Tuesday, thursday and saturday i think its a real sad story because in 1720 somebody even a smart as isaac newton can be forgiven for not having figured it out. Because it was brandnew. There was no experience, nobody of accumulated learning to recognize what was happening to them. This happen to us in 1929, it happened in the seventh and the 90s. That happened in 2007eight. There are signs that something is brewing that will happen sometime. I hope my kids get to college firstcome give me that much that but it will happen again. If newton and his peers and his contemporaries have an excuse for not fully grasping the predicament they were in, weve seen happen enough through history and in our own lives that we do not have that excuse. One of the things i hope people get out of the book is a sense that we have the great and the goods feed to the far so we dont get burned again in exactly the same way. So many lies were wrecked in the most recent great recession. Words for the wise. Well, thank you, everybody for coming. Thanks, indeed. Weeknights this month were previewing whats available for weeknights on cspan2. That starts at 8 p. M. Eastern. Intuit booktv this week and every weekend on cspan2. You are watching the tv on cspan2 every weekend with the latest nonfiction books and authors. Cspan2, created by americas cabletelevision companies as a Public Service and brought to you today by your television provider. Hello, everyone. Welcome back to our centennial Speakers Series for the 20 21 academic year. 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