Extraordinary Popular Delusions — Mackay: COMPLETE

Mackay was no economist but a storyteller with a reporter's eye for the bizarre: a Scot, a poet, an appreciated singer of songs, and a journalist in Victorian London. The book came in three volumes in 1841 and was expanded in 1852; it treats the crusades (the crowd following Peter the Hermit), the witch mania, the alchemists, and the soothsayers — and, as the book's economic core, three money manias: Holland's tulips 1636–37, France's Mississippi 1719–20, and England's South Sea 1720.

Mackay called them all the same thing: national delusions. Our course keeps to the finance chapters plus the psychological frame they rest on.

The preface contains one of financial literature's most quoted sentences. Mackay writes in 1841: »We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit« — whole communities suddenly fixate on a single object and go mad in its pursuit. And further: »Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.« Men think in herds, go mad in herds, but recover their senses slowly and one by one.

Note the asymmetry — it is the whole course's clock: EUPHORIA is collective and fast, the recovery individual and slow. That is why bottoms are processes and tops are moments.

The three manias are not three random stories but three building blocks in the same pattern. Tulipomania is the pure asset mania: no state institutions, only bulbs, contracts, and story. Mississippi is the money mania: John Law built a central bank, a trading empire, and a stock exchange as a single machine of paper money.

South Sea is the debt mania: the English state's bonds were swapped for stocks in a trading company whose business was to print stocks. Chapters 3–5 read the tulip, 7–9 Mississippi, 10–11 South Sea — and chapter 12 assembles the tools into a checklist against the AKM1 factors.

The first engine: imitation. Mackay's examples are the crusades (a hermit sets it off, a village follows, a continent follows), the poison fashions at the courts, and the duels. But the purest financial demonstration stands in the South Sea chapter: it was the sight of Parisians making themselves rich on Mississippi that set London going. Mackay writes straight out that it was while the people crowded the rue Quincampoix that the English directors laid out their plan — the Mississippi system »inspired them with an idea that they could carry on the same game in England«.

The mania thus spreads between countries like a fashion, not like an argument: EUPHORIA in Paris 1719 was the direct cause of EUPHORIA in London 1720.

The second engine: authority belief. John Law's notes got value because the regent stood behind them; the South Sea price course was fed by royals and ministers accepting stocks; the tulip prices were confirmed by notaries and tavern listings. When the state or an institution blows on an asset, perceived risk falls faster than real risk — it is the most dangerous type of V18 catalyst, the regulatory one that is official on top of that.

Modern research on social proof gives the same picture: we listen to who says something almost as much as to what is said. The book's lesson: always check who stands as guarantor behind the price — the guarantor is also a party.

The third engine: the story. The tulips' story was that all of Europe's wealth would gather in Holland — Mackay renders it straight: »Every one imagined that the passion for tulips would last for ever, and that the wealthy from every part of the world would send to Holland, and pay whatever prices were asked for them.« Mississippi's story was the gold of Louisiana and a new kind of money; South Sea's story was the trading riches of South America — even though Mackay dryly notes that the trade itself gave the company »little or no augmentation of their revenues«.

The story is thus priced outside the cash flows. Precisely there AKM1 has its anchors: V04 P/S, V05 P/B, and V06 EV/EBITDA measure what the story costs in relation to the company that actually exists — and V01 revenue growth and V02 ARR growth are what the story must eventually show in numbers to survive.