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Three centuries apart, two crowds of people made the same mistake in almost the same way. One wore powdered wigs. The other posted rocket emojis. The outcome was identical.
The South Sea Bubble of 1720 is usually taught as a cautionary tale about greed in a distant era. But if you strip away the costumes and the centuries, what you find is not a history lesson. It is a mirror. The mechanics of that mania map so precisely onto modern market frenzies that it raises an uncomfortable question: maybe financial bubbles are not failures of information. Maybe they are features of human psychology that no amount of technology will fix.
A Company That Sold Nothing
The South Sea Company was founded in 1711 with an impressive sounding purpose. It held a monopoly on British trade with South America. There was just one small problem. Spain controlled South America and had no intention of letting British merchants waltz in and set up shop. The actual trading rights amounted to one ship per year and the right to sell enslaved people to Spanish colonies. It was, by any honest measure, a mediocre business.
But mediocre businesses do not create bubbles. Stories do.
The company’s directors understood something that startup founders would rediscover three hundred years later. If you cannot sell a product, sell a narrative. The South Sea Company repositioned itself not as a trading operation but as a financial instrument. It offered to absorb the national debt in exchange for stock privileges. The details were deliberately complex. Complexity, it turns out, is not a bug in financial schemes. It is the feature that keeps people from asking too many questions.
This should sound familiar. The entire crypto boom of 2020 and 2021 ran on the same engine. Projects with no revenue, no product, sometimes no team, raised billions on the strength of a whitepaper and a Discord server. The less people understood about the actual mechanics, the more confident they became. Confusion was not an obstacle to investment. It was the investment thesis.
The Gravity of Social Proof
Isaac Newton bought South Sea stock. Let that sink in for a moment. The man who literally described the laws of gravity could not resist the gravitational pull of a crowd making money.
He actually bought in early, made a solid profit, and sold. A rational exit. Then he watched his friends and colleagues continue to get rich. So he bought back in, near the top, and lost what today would be roughly 20 million dollars. His famous response was that he could calculate the motions of heavenly bodies but not the madness of people.
Newton was not stupid. He was human. And this is the part that most financial commentary gets wrong. Bubbles are not populated by idiots. They are populated by intelligent people who are slowly poisoned by the most dangerous substance in finance: other people making money.
On Reddit in 2021, the dynamic was identical but faster. WallStreetBets users did not start buying GameStop because they had done deep fundamental analysis. They bought because other people were buying, and those people were posting screenshots of enormous gains. Each screenshot functioned exactly like a rumor in a 1720 London coffeehouse. It was social proof, rendered in numbers, and it was irresistible.
The Anatomy of a Feedback Loop
Here is where 1720 and 2021 become almost eerie in their similarity.
The South Sea Company’s directors did something clever and deeply cynical. They lent money to people so those people could buy South Sea stock. The purchases drove the price up. The rising price made the stock look like good collateral. So more money was lent. More stock was bought. The price rose further. Everyone smiled and nodded and pretended this was sustainable.
In 2021, the mechanism looked different on the surface but was structurally identical. Robinhood and similar platforms made buying stocks frictionless. Options trading, which multiplies both gains and losses, was gamified with confetti animations. Stimulus checks arrived. Crypto exchanges offered leverage. Money flowed in, prices rose, rising prices attracted more money. The confetti kept falling.
Both systems were feedback loops with no natural brake. And both systems had participants who genuinely believed they had found a new paradigm. In 1720, the new paradigm was that joint stock companies would create unlimited wealth. In 2021, it was that decentralized finance would replace the entire banking system. The confidence was not faked. That is what made it so dangerous.
There is a pattern in the language that recurs across centuries. In every bubble, the crowd develops a shared vocabulary that functions as tribal identity. In 1720, it was talk of subscriptions and projecting and the funds. In 2021, it was diamond hands and HODL and to the moon. The jargon does two things simultaneously. It creates belonging and it discourages critical thinking. If you question the thesis, you are not just wrong. You are outside the group. You do not get it.
This is not finance. This is anthropology.
The Copycat Bubble Within the Bubble
One of the strangest chapters of 1720 was the eruption of imitators. Once people saw how easily the South Sea Company raised money, dozens of new companies launched to cash in. These were called bubble companies, and their business plans ranged from optimistic to clinically insane. One company proposed to drain the Red Sea to recover gold supposedly lost when the Egyptian army drowned chasing Moses. Another famously listed its purpose as “an undertaking of great advantage, but nobody to know what it is.” It reportedly raised money before its founder disappeared.
Read that again. A company with no stated business model raised capital and vanished. In 1720.
Now think about the wave of meme coins in 2021 and beyond. Tokens named after dogs, named after other tokens, named after tweets. Projects whose entire value proposition was that they existed and had a community. The pattern is not similar. It is the same pattern wearing different clothes.
This is arguably the most counterintuitive part of any bubble. The copycats do not signal that the mania is peaking. To participants inside the bubble, copycats look like confirmation. If everyone is launching projects, the space must be real. The proliferation of nonsense feels like evidence of legitimacy. It is only afterward, in the wreckage, that people recognize the absurdity. At the time, it just feels like opportunity.
The Crash Is Also the Same
The South Sea Bubble collapsed in stages through the autumn of 1720. The stock price went from roughly 1,000 pounds to under 200. Fortunes disappeared. The directors were arrested. Parliament investigated. The public screamed for accountability.
The crypto crash of 2022 followed the same script. Prices fell. Then they fell more. Projects that had been worth billions evaporated. Celsius, FTX, Terra Luna. The names changed but the trajectory did not. Founders were investigated, arrested, or simply vanished. Governments talked about regulation.
But here is the part nobody wants to hear. After the South Sea Bubble, the British financial system did not die. It adapted. Some of the regulatory frameworks that emerged from the disaster laid groundwork for what eventually became the London Stock Exchange. The bubble was destructive, and it was also strangely productive. The mania attracted capital and attention to financial infrastructure that, once the garbage was cleared away, proved useful.
Crypto appears to be following this arc as well. The speculation was real. The losses were real. And some of the underlying technology may prove genuinely valuable once it is separated from the circus that surrounded it. Bubbles destroy wealth. They also, paradoxically, fund innovation by throwing absurd amounts of money at a space until something useful survives. It is an extraordinarily expensive way to make progress, but it keeps happening because humans keep being human.
What Never Changes
The real lesson of comparing 1720 to 2021 is not that people are greedy. Greed is too simple an explanation. People are social. They take cues from each other. They construct narratives that justify what they already want to do. They mistake complexity for sophistication. They confuse price movement with value creation. And they are spectacularly bad at recognizing these tendencies in themselves, even while easily spotting them in others.
Technology changes the speed and scale of bubbles but not their structure. A coffeehouse rumor in 1720 might take days to spread across London. A Reddit post in 2021 could move millions of dollars in minutes. But the underlying software, the human operating system of mimetic desire and social proof and narrative construction, has not received an update in three hundred years.
There is something almost comforting in this. Not because losing money is pleasant, but because it suggests that financial manias are not random. They are predictable in their shape if not their timing. They follow rules. And those rules are not written in economics textbooks. They are written in the psychology of groups, in the sociology of status, in the deep human need to not miss out on what everyone else seems to have.
The South Sea Bubble was not an aberration. It was a template. And every generation discovers this the same way: by living through it, losing money, and then explaining to the next generation why this time is completely different.
It never is.
