who only by moving can balance

Posted by Tim Harford

https://timharford.com/2026/01/dont-trade-where-you-tweet/

https://timharford.com/?p=9769

In the 1630s, Adriaen Pauw was the closest thing Holland had to a prime minister; he was also fabulously wealthy. To display his wealth and good taste, Pauw commissioned a tulip garden filled with cleverly positioned mirrors. The heart of the garden was a sprinkling of the rarest tulips, multiplied by the mirrors into a bountiful array. The rarest bulbs cost as much as a house; even a plutocrat such as Pauw could not afford to fill his garden in the conventional manner.

The tulip mania of 1636-37 has become a touchstone whenever there is talk of a financial bubble. Perhaps that has given us a false sense of what bubbles really look like: frivolous, transparently silly, obvious to anyone with a brain. The tulip mania was frivolous, to be sure — it was built on the willingness of rich men such as Pauw to spend vast sums acquiring tulip flowers. But its foundational frivolity wasn’t the greed of speculators, but the whims of rich consumers. If Dutch high society was willing to pay so much for flowers, was it really absurd for investors to spend lavishly on a bulb that could produce more bulbs, each one also producing a rare flower?

And let’s not fool ourselves that we can do better. Many of the most notorious tales about the tulip mania come to us through the Victorian journalist Charles Mackay, and his vivid but overblown book Extraordinary Popular Delusions and the Madness of Crowds. 

Mackay wrote newspaper editorials during the railway bubble of the 1840s and reassured his readers, “We think the alarmists are in error, and that there is no reason whatsoever to fear for any legitimate railway speculation.” The bubble of the 1840s burst shortly after. Perhaps spotting a bubble is not as easy as Mackay’s book made it seem.

What we can say about financial markets today is that, whether or not they are in a bubble, they keep flirting with the surreal. Traditional financial assets such as bonds or shares come with the prospect of future cash attached. Traders buy and sell the asset because they have different views about how big those cash payments will be or how to value any particular stream of future cash. There is a sprinkle of magic here: an unknown sum tomorrow turns into a very specific sum today. That magic is the everyday stuff of finance. 

But that’s such an old-fashioned story. The surreal economy gives us cryptocurrencies such as Bitcoin, DogeCoin and the rest — along with meme stocks such as GameStop in 2021 and Krispy Kreme this summer. All are now so familiar that it is easy to lose sight of how surreal they really are.  Meme stocks have cash flows but few pretend that those cash flows are relevant; instead, the price of meme stocks is driven by retail investors encouraging each other on social media to buy the stock. People bought GameStop because they thought it would go up; it went up because people bought it. It’s as endlessly reflective as Pauw’s mirrors.

Bitcoin is an even stranger case. It was designed to facilitate digital transactions without the need to rely on institutions such as banks, and to preserve the anonymity of users. But Bitcoin is cumbersome, expensive to use, generally relies on large intermediaries and is pseudonymous rather than anonymous, meaning that not even criminals are particularly happy with the cryptocurrency’s usefulness. It has failed to achieve any of its purported objectives, yet it has succeeded wonderfully at being an asset the price of which tends to go up. 

So does the current price of Bitcoin represent a fair estimate of its fundamental value? The answer isn’t even “no”. The question contains a category error. 

As for the other currencies — DogeCoin, for example, or the Charlie Kirk crypto coins that were created in the wake of his death — they are stranger yet. As bubble historian Andrew Odlyzko recently noted, “Spending on endorsements, branding and the like dwarfs that on basic security, which is often laughably weak.” Attention-seeking is more important than technological progress.

This is finance’s equivalent of Dubai chocolate. Charles Spence, a professor of experimental psychology at Oxford university, recently opined on the sudden popularity of Dubai chocolate — you know, the stuff with the pistachios and the shredded filo pastry. Spence argues that Dubai chocolate benefits from three attributes: it seems exotic; the crunchy filling prompts TikTok influencers to make interesting facial expressions while eating it; above all, the contrast between the bright green filling and the chocolate brown coating looks great on camera.  What links all three? Superficiality. We’re living in a world of appearances. At least Dubai chocolate is a chocolate bar. I’m not sure DogeCoin is anything at all.

All of this raises the question of why such surreal financial assets are popular now. I think the answer is technological — but the technology is not blockchain, it’s social media and the trading app. It has never been easier for retail investors to egg each other on, and to trade in haste around the clock.

Hasty trading is famously a bad idea for retail investors. The economists Brad Barber and Terrance Odean have published several studies of trading behaviour in the 1990s, each of which adopted a slightly different perspective but reached much the same conclusion: the more frequent the trading, the lower the returns.

But the 1990s switch from telephone-based trading to web-based trading now seems quaint compared with the follies that investors can commit armed with an app such as Robinhood. The old joke is that coffee allows us to do stupid things faster with more energy. If you don’t like coffee but want the same effect, get yourself a trading app.

Social media conversations about the next hot meme stock or cryptocurrency are also a source of some very bad decisions. Studies of group decision-making find that these groups tend to self-polarise. A group of people with centre-left views will push each other further left as they reinforce each other’s biases; the same is true on the right. In general, being surrounded by people of like mind makes everyone in the group overconfident. If that is true for politics it is likely to be true for investment decisions too.

Some pockets of finance now make no distinction between illusion and reality; everyone in those pockets is looking for social approval, and finding it; and what matters above all is not substance but glittering appearance. These surreal corners of finance really have rediscovered the mirror garden of Adriaen Pauw.

Written for and first published in the Financial Times on 20 Nov 2025.

I’m running the London Marathon in April in support of a very good cause. If you felt able to contribute something, I’d be extremely grateful.

https://timharford.com/2026/01/dont-trade-where-you-tweet/

https://timharford.com/?p=9769