The South Sea Bubble & Isaach Newton
- The Value Investor
- Sep 12
- 2 min read
The South Sea Company promised wealth. In 1720, men and women poured their savings into it, believing they had found a new road to moolah. The stock soared, carrying with it the dreams of a nation. The story is old, but the lessons remain sharp.
Sir Isaac Newton, the great mind of his age, watched the madness unfold. He was cautious at first. Newton bought early, then sold, pocketing a fine profit. He thought himself wise, clear-eyed, immune to folly. But the stock kept climbing. Neighbors grew rich. Friends spoke of easy money. The urge was too strong. Newton went back in, this time with more cash, with more conviction in the crowd than in his own reason.
To put things in context over the course of about a year in 1720, shares of the South Sea Company rose from roughly £100–£128 in early 1720 to nearly £1,000 at their peak.
So that’s a ~700-900% increase in stock price in that span.
The bubble burst. As bubbles always do. The South Sea Company collapsed, leaving wreckage behind. Fortunes vanished in weeks. Newton himself lost what he had gained, & more. He is said to have remarked, bitterly: “I can calculate the motions of the heavenly bodies, but not the madness of men.”
That is the heart of the tale. Even the sharpest mind can be bent by greed, by envy, by the pull of the crowd. Rational thought weakens when others around us seem to grow rich without effort. Newton knew mathematics. He knew gravity. But he could not resist the weight of human folly.
The South Sea Bubble was not the first, nor the last. Tulips, railways, dot-com stocks, housing, each carried the same pattern. Exuberance, euphoria, collapse. The cycle repeats, dressed in new clothes each time. What changes is not the structure, but the victims. We are yet to what's to become of Bitcoin & AI.
The lesson is simple, yet hard. Caution is wisdom. Profit gained too fast may vanish just as quickly. When everyone rushes in, it may be time to step aside. Newton’s loss is our warning. The market will tempt us, mock us, draw us in. But the laws of human nature are as real as the laws of physics. They do not change.
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