The Bubble Hall of Fame

The most amazing bubble promoters of all time!

Read Daniel Gross’ essay in praise of bubbles, take a Bubble Quiz, and buy his new book, Pop! Why Bubbles Are Great for the Economy.

Macroeconomic conditions and paradigm-shifting inventions set the stage for bubbles. But ultimately, bubbles are made by humans. Every bubble is inspired by energetic promoters who provide the capital, the energy, and the intellectual justifications that persuade their fellow Americans to go a little bit crazy. Here are my nominees for the Bubble Hall of Fame:

The Telegraph

Henry O’Reilly (1806-1886)
Noteworthy bubble-blowing role: In late 1840s, the former postmaster of Rochester, N.Y., having failed with several telegraph lines, raised $660,000 from individual investors to build a line from Louisville to New Orleans. In 1850, the wire was washed away by flood and the system was leased to a new operator for $13,500.

Catchphrase: “The general prosperity of the lines constructed under the arrangements of the subscribers … render it needless to dwell even for a moment on the value of this great line.”

Ignominious end/debunking: Wound up as a customs-house clerk. Historian’s judgment: “He was a great man for starting something, and a poor man for finishing anything.”

The Railroad

Jay Gould (1836-1892)
Noteworthy bubble-blowing role: compulsive speculator, relentless buyer and seller of railroads, pioneered Enron-style financial gimmicks. Controlled the Erie and the Union Pacific, among others. Kicked off destructive cycle of network construction and assembling in the 1880s that led to widespread disaster.

Catchphrase: none

Ignominious end/debunking: Died rich, but despite fine recent biography by Edward Renehan, consigned to history as an arch robber baron by historian Matthew Josephson.

The Roaring ‘20s

John J. Raskob (1879-1950)
Noteworthy bubble-blowing role: former General Motors treasurer, financier wrote article in the August 1929 Ladies’ Home Journal, titled “Everybody Ought To Be Rich,” telling Americans that if they’d invest $15 a week in stocks, they’d have $80,000 at the end of 10 years. He also urged people to invest in leveraged mutual funds.

Catchphrase: “I am firm in my belief that anyone not only can be rich, but ought to be rich.”

Ignominious end/debunking: The Dow Jones Industrial Average would not reach its 1929 level for 25 years.

Irving Fisher (1867-1947)
Noteworthy bubble-blowing role: Brilliant economist, inventor of Rolodex-like device, believed economy had entered a new era in the 1920s.

Catchphrase: “Stock prices have reached what looks like a permanently high plateau.”

Ignominious end/debunking: In the 1930s, Fisher’s economic theories were overshadowed by those of John Maynard Keynes. (Although Keynes himself had proclaimed in 1927: “We will not have any more crashes in our time.”)

The Internet

George Gilder (1939-present)
Noteworthy bubble-blowing role: Newsletter writer and futurist foresaw a world of infinite wealth because of infinite bandwidth. Book published in 2000 promoted soon-to-be-worthless stocks like WorldCom and Global Crossing. 

Catchphrase: “The investor who never acts until the financials affirm his choice is doomed to mediocrity by trust in spurious rationality.”

Bonus catchphrase: Of WorldCom CEO Bernie Ebbers, he said: “He is a hero of the dimensions of Rockefeller and Milken.”

Ignominious end/debunking: Dot-com wipeout nearly forced him into bankruptcy (subscription required), according to the Wall Street Journal. Still touting stocks and trying to undermine Darwin.

Alan Greenspan: (1926-present)
Noteworthy bubble-blowing role: Throughout the 1990s, talked up the virtues of new technology, proclaimed a new era of low inflation and endless growth, provided liquidity to markets—thus encouraging investors to take the plunge.

Catchphrase: “It is safe to say that we are witnessing this decade in the United States, history’s most compelling demonstration of free peoples operating in free markets.”

Ingnominious end/debunking: One-time maestro, forcibly retired, now seeks to move markets by making high-paying speeches to financial services companies.

Real Estate

Robert Toll
Noteworthy bubble-blowing role: CEO of McMansion builder Toll Brothers boasted of a new era in which rich suburbanites would pay half their incomes on mortgages and average homes would sell for $4 million.

Catchphrase: “Why can’t real estate just have a boom like every other industry? Why do we have to have a bubble and then pop?

Ignominious end/debunking: Toll Brothers stock down almost 40 percent since Toll appeared on the cover of the New York Times Magazine in October 2005.

David Lereah
Noteworthy bubble-blowing role: National Association of Realtors economist, incorrigible optimist, published book in February 2005 titled: Are You Missing the Real Estate Boom? The Boom Will Not Bust and Why Property Values Will Continue To Climb Through the End of the Decade. Housing prices peaked a few months later.

Catchphrase: “This may be bottom.” (May 2006)

Ignominious End/debunking: Regarded as domestic Baghdad Bob. Left NAR in May 2007.

Alan Greenspan
Noteworthy bubble-blowing role: Cut interest rates manically in 2001 and 2002, held them at unsustainably low levels, and then urged homeowners to take on adjustable rate mortgages in 2004, setting themselves up for pain when rates readjusted higher.

Catchphrase: “This may be bottom.” (May 2006)

Ignominious end/debunking: see above.