Devil Take the Hindmost: A History of Financial Speculation
by Edward Chancellor
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Book Summary Information
Author: Edward ChancellorEdition: Paperback
Published: 2000-06-01
ISBN: 0452281806
Number of pages: 400
Publisher: Plume
Book Reviews of Devil Take the Hindmost: A History of Financial Speculation
Book Review: Excellent Economic History
Summary: 5 Stars
I first read "Devil Take the Hindmost" a year or so after it came out and enjoyed it at the time. Now, almost 10 years and two burst bubbles later--tech stocks and housing--I thought I would take a 2nd read of it. This is a very impressive book. Chancellor covers the psychology of speculative manias in a very informative and entertaining fashion. It is true that you need to know some economic theory and stock finance parlance to wade through the book, but the reward is well worth the effort.
What's telling about all of the manias that the author describes is how similar they are to each other. The puffing of tulips, railroads, gold mines, "new era" technology, new "fail-safe scientific" methods of investment, etc. all appear to have similar story lines. First, you have the smiling salesman with his most appealing script crafted to the product. The product is perhaps less relevant. If the product is legitimate, such as railroads, it will be oversold to the point of illegitimacy. If the product is illegitimate, such as salted gold mines, it will be sold as being legitimate. The customer, one of whom is reputed by P.T. Barnum to be born every minute, is the ever present object of the stockjobber's attention. The result is usually disaster for the poor customer--especially if he or she is on the hindmost end of these typically Ponzi style schemes.
Chancellor seems to have a rather wryly ironic, yet gentle, take on the victims of these schemes. Greed, fear, naivete, the psychology of the crowd, etc. all conspire to make the greatest fool out of the investor. Time and time again, reasonably intelligent and some less than intelligent investors get roped into these money making and bankrupting schemes. It says something for the timelessness of human nature and our complete inability to remember anything that history has taught us. John K. Gailbraith used to make the observation that recessions and depressions were necessary to remind people that there is a downside to the business cycle--lest we forget. The downside can be delayed or even moderated by intelligent regulation and fiscal/monetary policy--but never fully ended.
The author takes exception to the rational markets school of economics. The line of thought that markets are "all knowing" in terms of including the exact and correct pricing of financial instruments. Sometimes markets behave in thoroughly irrational and mad manners. Very much like people for some inexplicable reason. Also, sometimes markets are cornered or gamed by powerful players. Chancellor appears to put himself very much in the camp of Keynes in believing that there is a place for sane, well thought out, and sensible government regulation. However, he doesn't appear to think that wild and excessive speculation can ever be fully suppressed and controlled. Rather, the best that can be hoped for is to curb the worst abuses by creating lawful financial markets with appropriate consequences for those who perpetuate such frauds.
Hopefully, this book has found its way into some college courses. Highly recommended for any investor. It may save you a great deal of money and grief. At the very least, it will give a very entertaining and informative view of past financial follies and a warning about the inevitable ones that will come....
Summary of Devil Take the Hindmost: A History of Financial Speculation
"The longest bull market in history" is a term that gets used a lot these days. Since 1990, the Dow Jones Industrial Average has risen some 8,000 points, from around 2,700 in January 1990 to nearly 11,000 today--a boom by anyone's standards, including Edward Chancellor's. In Devil Take the Hindmost, Chancellor takes an entertaining, albeit sobering, look at the history of speculative manias and the mass delusion that surrounds them.Beginning with the "tulipomania" that gripped Holland in the 1630s, Chancellor chronicles the formations and irrational euphoria that can inflate markets, from shares of South Sea stock in England in the 1720s to real estate in Japan in the late 1980s. He characterizes the speculative spirit as one that
loves freedom, detests cant, and abhors restrictions. From the tulip Colleges of the seventeenth century to the Internet investment clubs of the late twentieth century, speculation has established itself as the most demotic of economic activities. Although profoundly secular, speculation is not simply about greed. The essence of speculation remains a Utopian yearning for freedom and equality which counterbalances the drab rationalistic materialism of the modern economic system with its inevitable inequalities of wealth.But it's precisely such inevitability that always seems to win out, when "sharply rising prices followed by sudden panic without cause" bring speculative excess to an abrupt end.
Chancellor makes Devil Take the Hindmost especially relevant to today's U.S. investors by using his analysis of past speculative manias as a lens through which to view the current bull-market binge. No matter what his or her current investment outlook is--bull or bear--anyone with capital to invest would do well to spend a thoughtful weekend with this book. Highly recommended. --Harry C. Edwards
Is your investment in that new Internet stock a sign of stock market savvy or an act of peculiarly American speculative folly? How has the psychology of investing changed--and not changed--over the last five hundred years? Edward Chancellor examines the nature of speculation--from medieval Europe to the Tulip mania of the 1630s to today's Internet stock craze. A contributing writer to The Financial Times and The Economist, Chancellor looks at both the psychological and economic forces that drive people to "bet" their money in markets; how markets are made, unmade, and manipulated; and who wins when speculation runs rampant. Drawing colorfully on the words of such speculators as Sir Isaac Newton, Daniel Defoe, Ivan Boesky, and Hillary Rodham Clinton, Devil Take the Hindmost is part history, part social science, and purely illuminating: an erudite and hugely entertaining book that is more timely today than ever before.
"Entertaining, useful, admirable scholarship . . . Chancellor seems to have read everything." --Adam Smith, The New York Times Book Review
"Anyone contemplating a stock market venture and certainly anyone now involved should read this book."--John Kenneth Gailbraith
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