Extraordinary Popular Delusions and The Madness of Crowds

what do beanie babies, japanese luxury apartments, tulip bulbs, and pineapples all have in common? believe it or not, they've all sparked investment frenzies in which normal, sensible people paid outrageous prices for something that later became practically worthless. and these stories of mass delusion don't stop at failed investments, either.

in 1841, a scottish journalist named charles mackay looked back through history and discovered fascinating patterns in human behavior. he uncovered tales of witch hunts that swept through entire countries, ghost stories that emptied neighborhoods, and urban legends that spread faster than anyone could track them down. he found alchemists who convinced kings they could turn lead into gold, and doctors who claimed they could cure any illness with a wave of their hand.

which raises the question: what makes smart people believe strange things? the benefit to understanding historical patterns is that it helps reveal similar delusions today. so this chapter dives deep into some of history's most remarkable cases of mass hysteria and collective madness. while the stories might make you laugh, the insights could save you from being caught up in the next big delusion.

when tulips first arrived in holland from turkey in the 1600s, they were unlike any flower europeans had ever seen. their vibrant colors and unique patterns made them a must-have luxury item. as demand grew, prices soared. soon, people weren't just buying tulips to plant – they were trading bulbs like stocks. 

mackay discovered that at the height of this craze, a single rare bulb could sell for more than a grand house in amsterdam. merchants were trading their shops for tulips. farmers were selling their land for bulbs.

but then, in 1637, something changed. a few big buyers missed an auction. suddenly, everyone realized these flowers might not be worth quite so much. within days, prices crashed. people who had traded everything for tulips were left with nothing but pretty flowers worth a tiny fraction of what they had paid.

less than a century later, a similar mania gripped england. the south sea company claimed it would make a fortune trading with south america. it didn't matter that spain controlled those trade routes, or that the company had no real business plan. the stock price kept climbing as more people bought in, hoping to get rich quick. even brilliant scientists like isaac newton invested. when this bubble burst in 1720, thousands of families lost everything.

these stories might sound bizarre, but similar patterns keep repeating. in the 1990s, people hoarded beanie babies, convinced the plush toys would fund their retirement. in 2008, house prices crashed after years of speculation. more recently, cryptocurrencies and nfts have seen spectacular rises and falls.

mackay noticed something crucial about these manias. they all follow a predictable pattern where initial excitement turns into greed, then morphs into a kind of mass delusion. at first, a small group of insiders starts making genuine profits. then stories of their success spread, pulling in more investors. as prices rise, these success stories seem to validate themselves, creating a cycle where good news drives more buying, which creates more good news.

this is when the underlying psychology becomes evident. as more people get involved, the focus shifts from the actual value of the asset to stories about instant wealth. nobody asks basic questions anymore, like what makes tulips or tech stocks or crypto actually valuable. instead, conversations center on neighbors getting rich, colleagues quitting their jobs after making fortunes, or friends buying luxury cars from their profits. 

the fear of missing out becomes so powerful that it drowns out the inner voice of caution. even skeptics start to wonder if they're wrong, if they're the ones missing something obvious. this social pressure, combined with the apparent evidence that everyone else is getting rich, can overwhelm even the most logical minds. after all, if isaac newton himself could get caught up in the south sea bubble, anyone can fall for the next big thing.

in 1660, an italian alchemist named giuseppe francesco borri convinced sweden's queen christina that he could create a universal medicine that would cure all diseases. by 1670, he had talked his way into the court of denmark's frederick iii with promises of turning metal into gold. when frederick iii died, borri fled to vienna, then to amsterdam, leaving a trail of wealthy patrons with empty pockets and unfulfilled promises. like many successful alchemists, he combined scientific knowledge with showmanship, making his claims sound just plausible enough to keep the money flowing.

mackay found dozens of similar cases across europe spanning three centuries. court records showed that holy roman emperor rudolf ii spent a fortune supporting over 200 alchemists at his castle in prague. king philip ii of spain handed over massive sums to alchemists despite his country's mounting debts. fascinatingly, the same tricks worked repeatedly in different countries and contexts.

one of the most notorious cases mackay documented involved an alchemist who performed before the german duke of moravia in 1648. the alchemist arrived with an apparently ordinary piece of lead and a small vial of red liquid he called the philosopher's tincture. during a carefully staged demonstration, he heated the lead in a crucible while adding drops of his special tincture. through skillful manipulation, he managed to extract pure silver from the crucible. 

for his second trick, he added more of the tincture and produced what appeared to be pure gold. the duke was so impressed that he immediately funded a larger laboratory. only months later did his advisors discover that the alchemist had hollowed out the bottom of the crucible, concealing real silver and gold beneath a layer of lead.

this pattern of wishful thinking hasn't disappeared. today, we see similar dynamics in miracle diet pills and questionable alternative medicines. like the alchemists of old, modern pseudoscience often wraps itself in complex terminology and scientific-sounding theories. promoters point to anecdotal successes while explaining away failures. they appeal to ancient wisdom or claim to have secret knowledge that mainstream experts either don't understand or are actively suppressing.

mackay describes a popular seventeenth-century cure-all called mithridate, a concoction of 65 different ingredients including opium, ground vipers, and skink lizard parts. physicians prescribed it for everything from headaches to plague. the more bizarre and expensive the ingredients, the more people trusted its supposed healing powers.

the psychology at work here goes beyond simple greed or gullibility. mackay observed that people desperately want to believe in solutions to difficult problems like poverty, illness, or aging. when someone offers an answer that promises to bypass all the normal hard work and limitations of life, it's tempting to believe them. the more we want something to be true, the easier it becomes to ignore evidence that it isn't.

in 1730, a group of capuchin monks in orleans, france, began reporting terrifying disturbances in their monastery. they claimed the ghost of their recently deceased prior was haunting the halls. the spirit would knock on doors at midnight, drag chains through corridors, and enter the chapel at strange hours. when church authorities investigated, the monks produced letters allegedly written by the ghost itself, demanding they be moved to a grander monastery. 

the haunting became so severe that the monks insisted they couldn't possibly continue living there. their superiors eventually granted them a newer, larger monastery in a more desirable part of the city. soon after they moved, the hauntings mysteriously stopped. mackay discovered through local records that the monks had been complaining about their old building's poor condition for years before devising their ghostly solution.

but ghost stories impact more than real estate schemes. in 1762, a neighborhood in london emptied almost overnight after residents reported seeing a ghost in a local cemetery. the panic grew as more people claimed to have spotted the spirit, describing it in increasingly dramatic detail. parents kept children indoors. workers changed their routes home. house prices in the area plummeted. only months later did someone discover the ghost was actually a local prankster with a white sheet.

yet mackay noted something crucial about these tales – they revealed how powerfully stories can shape reality, even when they're completely false. the houses in that london neighborhood lost real value. businesses lost real money. people made life-changing decisions based on rumors and hearsay. the stories themselves, whether true or not, had concrete consequences.

the internet has had an outsized impact on the popularity of urban legends. the most famous example, slenderman, began as two edited photographs on an internet forum in 2009, showing a mysterious tall figure stalking children. the story spread rapidly across the internet, inspiring games, videos, and fan fiction. tragically, some people took the fiction too seriously, leading to real-world violence.

what makes these stories so powerful isn't just their entertainment value. they tap into deep human desires and fears, including our need to believe there's more to reality than what we can see, our fear of the unknown, our tendency to seek patterns even where none exist. when enough people share a belief, it creates its own kind of reality. a house that everyone believes is haunted becomes, in practical terms, haunted – regardless of whether ghosts actually exist.

most telling is how these stories resist rational explanation. people who experience something strange would rather believe in supernatural forces than admit to being fooled by a prankster or their own imagination. humans often prefer an exciting fiction to a mundane truth. as mackay observed, once a compelling story takes hold in the public mind, facts alone rarely dislodge it.

between 1563 and 1736, scotland executed nearly 4,000 people for witchcraft. in one notorious case from 1590, the town of north berwick accused dozens of local women and men of using magic to create storms to sink king james vi's ships. under torture, the accused confessed to impossible acts, including meetings with the devil. the king personally oversaw many trials, and wrote a book promoting witch hunting that spread these ideas across europe.

mackay documented how witch hunts typically began with a community facing problems like failed crops, sick livestock, or dying children. people desperately wanted someone to blame. usually, suspicion fell on social outcasts — elderly women living alone, healers using traditional remedies, or anyone who seemed different. one accusation would spiral into many as torture produced false confessions implicating others.

the legal system itself became a weapon. mackay found that judges accepted impossible evidence like dreams, rumors, and marks on the body as proof of witchcraft. if an accused person floated when thrown in water, they were guilty. if they sank, they were innocent, but often drowned. either way, the accused rarely survived. even respected community members could be condemned once accusations started flying.

what disturbed mackay most was how educated people supported these trials. doctors interpreted ordinary marks as witch's brands. lawyers wrote complex arguments justifying torture. priests gave biblical backing for executions. their participation made the hunts seem legitimate and encouraged more accusations.

mackay’s observations apply to similar patterns of persecution today. we see echoes of witch hunt psychology when communities face stress or fear. innocent people are branded as threats. rumors become facts. those who speak in defense of the accused risk becoming targets themselves.

the satanic panic which peaked in the 1980s and 1990s clearly demonstrates how witch hunt mentality can emerge even in modern societies. hundreds of daycare workers across america faced accusations of ritualistic child abuse, with no real evidence. parents and police became convinced that satanic cults were operating preschools. lives were destroyed by impossible claims that would have seemed familiar to witch hunters centuries earlier. 

witch hunts reveal how quickly a society can turn against its own members when fear combines with authority. the lesson isn't just historical. modern moral panics can still override legal protections and basic human empathy. social media can amplify accusations just as village gossip once did. most worrying is how these persecutions often happen not despite civilized institutions, but through them — using courts, experts, and community leaders to give hatred a mask of legitimacy.

in 1789, londoners became obsessed with a meaningless word: quoz. the slang term spread through every social class, from street vendors to aristocrats. people would shout it as an insult, use it as an answer to serious questions, or drop it into conversation to seem fashionable. 

nobody knew what it meant, but for several months, not knowing how to use quoz marked you as completely out of touch. mackay documented that, oddly,  the word vanished as quickly as it appeared, leaving no trace of its original meaning.

shouting the word walker! swept through the city streets shortly after quoz. mackay observed how this word, taken from a popular song, became an all-purpose response to any unwanted request or dubious claim. street vendors cried walter! to dismiss customers trying to haggle. young women used it to reject unwanted suitors. children shouted it at each other in playgrounds. for a few months, it was impossible to walk through london without hearing walker! called out dozens of times. then, just as suddenly, it vanished from common use.

another london phrase emerged overnight during the reform riots of 1831 and is still in use today: flare up. after bristol faced widespread fires during civil unrest, the term inflamed london’s imagination. it became an all-purpose phrase that could mean anything from getting angry to having a wild night out. 

people used flare up to describe lovers' quarrels, street fights, political speeches, and drunken mishaps. unlike many catchphrases that vanished quickly, it stayed in common use. mackay noted how it became one of the most versatile phrases in english, able to describe any situation that involved excitement, conflict, or chaos.

just as london society once obsessed over nonsense words, modern social media erupts with catchphrases and inside jokes that seem meaningless months later. false rumors about bank failures still cause panic, but now they spread globally within hours instead of staying confined to one city.

what fascinated mackay most was what these social manias revealed human nature: people fear being left out more than they fear looking foolish. the methods of spreading social contagions have evolved from coffee houses to smartphones, but the underlying psychology remains unchanged. 

whether it's a mysterious victorian catchphrase or a viral tweet, we still desperately want to be in on the joke.

the main takeaway of this chapter to extraordinary popular delusions and the madness of crowds by charles mackay is that… 

mass delusions follow strikingly similar patterns whether they involve financial bubbles, witch hunts, or viral trends. people ignore evidence that contradicts their beliefs while eagerly spreading stories that confirm them. the fear of missing out often overrides common sense, especially when respected figures support the delusion. when enough people believe something, it creates real consequences regardless of whether the belief is true. understanding these patterns helps us recognize and resist them in modern forms.

okay, that’s it for this chapter. we hope you enjoyed it. if you can, please take the time to leave us a rating – we always appreciate your feedback. see you in the next chapter.