Reborn in America, I am a legendary short seller on Wall Street.

Chapter 168 Madness

"The Great Madness" is a major work of economic history written by Charles McKee, a famous 19th-century Scottish scholar.

When Mr. Potter gave him this book last time, Larry just flipped through it casually and thought it was very worth reading, but he never really read it properly.

Larry only truly began to value the book after the old shop owner brought it out and emphasized that it could resolve his confusion.

Seeing Larry's blank expression as he flipped through the pages, the old shopkeeper ignored Larry's claim that someone else had given him the book before, and instead smiled and explained...
"Oh, my friend, if you would allow me to recount the economics book that has been most enlightening to me, I must recommend this sobering work to you. It is a remarkable book that allows one to see the true nature of humanity. It often makes me put down my pipe... and my Coke, and then keep thinking about the wisdom contained within its pages."

As he spoke, the old shopkeeper gestured for Larry and Dunbar to sit down, then poured them Cokes while saying,

"As you know, our era is experiencing unprecedented prosperity and change. Railways are traversing the continent, factories are belching smoke, and stock exchanges are bustling with activity, as if everyone could become rich overnight through speculation. However, when I opened this book, 'The Great Madness,' I suddenly realized that history always repeats itself. In the book's South Sea Bubble, how similar are those British people who went mad for illusory wealth to the people making noise on Wall Street today? Driven by greed, humanity always falls into a kind of collective blindness, a common ailment that transcends time and national boundaries."

Larry nodded; he knew a little about the South Sea Bubble speculation from his past life.

The great scientist Newton invested £5000 in the South Sea Company when it was first established. When the stock began to rise, the price quickly soared. Newton sold at the high point and made £7000, including his principal and profit.

However, after Newton sold his shares, the stock price continued to rise. Newton witnessed many people around him whose assets had increased dramatically because of holding stocks. Under the anxiety of missing out and the jealousy of "everyone else is making money", he could not resist the temptation to use almost all of his wealth, £2, to buy more South Sea Company shares when the stock price reached a peak of £1000 per share.

As a result, the British Parliament subsequently passed the Financial Fraud and Speculation Act, which caused the South Sea Company's share price to plummet, quickly falling back to its initial price of £100.

Newton lost £2 in the stock market crash, which was equivalent to his salary as Master of the Royal Mint for ten years.

Then came the poignant statement, "I can calculate the trajectories of celestial bodies, but I can hardly predict the madness of human nature."

The old shop owner then explained that, in addition to the South Sea Company stock bubble, the book also mentions the bursting of the Dutch tulip mania, the collapse of the nationwide speculative frenzy in the Mississippi River region of France, and how the Crusades, which were supposed to be a "reconquest of the Holy Land," eventually turned into unrestricted plunder and massacre, resulting in the deaths of millions.

The old shop owner, stroking his mustache, pointed to the "Crusades" section in the catalog and said...

"What struck me most was Mr. McKee's analysis of the Crusades. Those devout believers, who originally harbored the lofty ideal of saving the Holy Land, ultimately degenerated into thugs who burned, killed, and looted. This inevitably reminds me of the current westward expansion, where acts of plunder are carried out in the name of civilization. The book states, 'When the masses gather together, fantasies easily inflate, and people become uncontrollably obedient to certain guidance and suggestions.' Doesn't this explain why rational individuals can become so frenzied in a group?"

The old shopkeeper's words resonated with Mr. Dunbar, who glanced sideways at the book in Larry's hands and sighed.
“Yes, even though everyone knows they are committing murderous, robbery-like wrongdoings. But most people will excuse themselves by saying things like ‘the indigenous people stole a cow from me’ or ‘God will forgive my actions.’ My superiors and pastors said that back then, and I retorted, ‘Don’t blame your evil deeds on God. God does not vouch for your evil deeds.’”

The old shop owner nodded and sighed deeply.

At that time, in the United States and even Europe, every adult white person knew what "colonization" was and what "westward expansion" was. But caught up in the interests of various groups, who dared to truly tell the truth about what happened at that time?

Isn't this just another form of "mass madness"?
Larry raised an eyebrow and asked, “Uncle Dunbar, you just said that most people will find excuses to seek inner balance, what about the minority?” Dunbar’s eyes were cold as he said indifferently, “A minority enjoy it. They take pleasure in killing and conquering without any psychological burden.”

Larry noticed that Mr. Dunbar used "them" to refer to livestock, shrugged, and said nothing more.

The old shopkeeper ran his fingers over the book cover and continued...

"While Mr. McKee's language carries a subtle British humor, his insights are as sharp as a scalpel. He not only documented the madness in the financial world but also revealed various irrational behaviors of human beings in religion, science, and even daily life. These cases made me realize that the pragmatism that we Americans are so proud of can also be swept up by the fanaticism of the masses."

Mr. Dunbar chuckled coldly, “Yes! The idea of ​​getting rich overnight without hard work is the common human foundation of all madness. Those Western pioneers, they may have started as honest, kind, and respectable people, but what became of them in the end? Without plundering, where would the land come from? And if you can plunder, who would want to cultivate it?”

This was the first time Larry had heard such profound reflection from Americans of this era, and this reflection was not merely about money and plunder, but stemmed from a cold-blooded analysis of human nature.

But that wasn't important to Larry. What was important was that Larry actually found a path to wealth that didn't rely on insider information from their discussions.

That is—short selling!
A collective frenzy of short selling!
Perhaps true wisdom lies not in chasing trends, but in maintaining independent judgment—as Mr. McKee has shown, I must learn to remain clear-headed amidst the revelry of the crowd, recognizing the power of progress while also being wary of the temptations of collective illusion.

Larry understood that he was part of the crowd and would move forward with the trend, but obeying the trend did not mean ignoring the collective frenzy.

Insider information, and the figures behind it such as Morgan, Rockefeller, and Kennedy who can stir up huge waves, may dominate for a time on a small scale, but they can never go against the real trend.

No matter how much society progresses, people will always repeat similar mistakes driven by greed, fear, and faith. When the bubble bursts, no one will be able to withstand the surging tide of this collective frenzy and collapse.

When the bubble bursts, pop it. Only then can you truly break free from the constraints of others and earn wealth that others cannot attain.

Larry stroked the book, and suddenly an idea struck him: perhaps everything he was doing now could fuel that bubble, watch it inflate, watch the frenzy, and then short it when it finally burst. That way, he would become the most legendary short seller on Wall Street.

The key is that having the career goal of becoming a "big short seller" allows you to stay calm.

With this true goal in mind, one will not be swept away by fanaticism, but will be able to maintain a true sense of awe towards the market and ultimately have the last laugh.

Yes, be a big short seller, the ultimate short seller of all bubbles and frenzy!

That should be the ultimate goal of my speculative career.

(End of this chapter)