South Sea Bubble
Version 1.0.0 · Updated 2026-07-30
CORE DEFINITION
In 18th-century Britain, the South Sea Company, through false propaganda and bribery, induced the public to frenziedly speculate on its stock, causing even Newton to lose a fortune ("I can calculate the motion of heavenly bodies, but not the madness of people").
SCAFFOLDING EFFECT
Reduce cognitive load
Celebrity endorsement trap. Do not follow the crowd just because a celebrity (or scientist) is buying. In the face of collective madness, intelligence is ineffective. When the bubble bursts, Newton suffers as much as the average investor.
Anchor fast decisions
Price detaches from intrinsic value, relying on storytelling and celebrity endorsements to attract followers, with positive feedback pushing prices up to form a bubble; when capital flow/confidence breaks, the bubble bursts, and both wise and foolish suffer losses (irrational exuberance).
MINIMUM ACTION
In progress 0/4Practice this model in one real situation:
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Source support: Explicit
- en.wikipedia.orghttps://en.wikipedia.org/wiki/South_Sea_Companyverified
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