While Newton is best known for his groundbreaking work in physics, particularly his laws of motion and universal gravitation, he also had a lesser-known involvement in one of the most notorious financial bubbles in history: the South Sea Bubble.
The South Sea Bubble
Established in the early 18th century, the South Sea Company was granted a monopoly on trade with the South Seas. As speculation around the company’s potential profits grew, so did its share price. In 1720, the stock experienced a rapid and dramatic increase, leading to what we now recognize as a classic financial bubble.
Isaac Newton initially invested in the South Sea Company and made a tidy profit. However, as he watched the stock’s value continue to climb, he was tempted to reinvest a larger sum at a much higher price. Unfortunately for Newton, the bubble burst later that year, resulting in significant financial losses for many, including him. Reflecting on this experience, Newton is said to have remarked, “I can calculate the movement of the stars, but not the madness of men.”