Big Mistakes: The Best Investors and Their Worst Investments delves into the failures of some of the most celebrated investors, including Warren Buffett, Bill Ackman, Chris Sacca, Jack Bogle, Mark Twain, and John Maynard Keynes. The book illustrates that investing is inherently challenging, regardless of the amount managed, and that failures are an integral part of the process. It emphasizes the importance of learning from mistakes, both personal and those of others, to develop robust investment strategies. The stories shared in the book provide valuable insights into risk management, the dangers of overconfidence, and the necessity of adapting to changing market conditions. By examining these cautionary tales, readers can gain a deeper understanding of the complexities of investing and how even the most successful investors have learned from their worst mistakes.
In this book, John Kenneth Galbraith traces the history of significant speculative episodes in the economy, from the tulip craze of the seventeenth century to the recent plague of junk bonds. He exposes how normally sane people display reckless behavior in pursuit of profit, attributing these behaviors to a 'notoriously short' financial memory that leads to market collapses. Galbraith emphasizes that recognizing these patterns can help guard against future recessions and improve financial stability. The book underscores the cyclical nature of financial euphoria, driven by mass psychology and leverage, and warns against the illusion that wealth is a measure of intelligence.
This book, first published in 1841, is an early study of crowd psychology by Charles Mackay. It chronicles numerous instances of mass hysteria and popular delusions, including economic bubbles like the South Sea Bubble and Tulipomania, the Crusades, witch-hunts, and other peculiar follies. Mackay presents these examples to illustrate how easily the masses can be led astray by various delusions and how human folly remains a constant across different times and places. The book is divided into sections such as 'National Delusions,' 'Peculiar Follies,' and 'Philosophical Delusions,' and is known for its engaging and witty narrative style.
On today’s episode, Kyle Grieve discusses the anatomy of a speculative event, why it’s so easy for people to take part in them, and why these events are unlikely to stop in the future; a few major euphoric episodes from history outlined in the book, three more recent bubbles that most listeners lived though, why the rise in IPOs are often the result of mini bubbles, six primary takeaways from the book to help protect yourself from investing in bubbles, and a whole lot more!
IN THIS EPISODE YOU’LL LEARN:
00:00 - Intro
03:26 - The blueprint of a speculative event
04:10 - Why we fool ourselves into following people with money who don't deserve to be followed
10:04 - A contrast of risk tolerance between Benjamin Graham and Warren Buffet
15:13 - A detailed account of Tulipomania and the story of the $80,000 price tag for a Tulip
19:13 - How a convicted criminal helped mastermind one of the most giant bubbles in history
25:36 - The importance of due diligence in assisting investors to avoid bubbles
28:13 - How bubbles feed on themselves, opening pathways for other businesses to take advantage of the euphoria
34:56 - A few of the precipitating factors that caused the great depression and the damage it created
39:43 - Breaking down the "Dot-com" bubble, the Great Financial Crisis, and post Covid-19 euphoria
55:41 - Why investors should take responsibility for their wins and their losses
And so much more!
Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.
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