Book Review: 'Devil Take the Hindmost, A History of Speculation'

by: Wall St. Cheat Sheet

By Bob Morris

It is helpful to our understanding of financial speculation early in the 21st century to view it within an historical framework. In "Devil Take the Hindmost: A History of Financial Speculation" by Edward Chancellor, Chancellor provides such a framework and more … much more. In the initial chapter (The Bubble World), he explains the origins of financial speculation and then shifts his attention to a series of famous (sometimes infamous) situations throughout three centuries.

As Chancellor explains:

I concentrate on occurrences of speculation in the leading economic powers of the day, from the Dutch Republic in the seventeenth century to Japan in the 1980s, interspersed with the occasional look at speculation in the present day. I believe that speculation can only be understood within a social context and that a history of speculation cannot simply be a description of economic affairs but must also be something of a social history.

Joel Mokyr has a similar objective in "The Lever of Riches" (1990) in which he examines various interrelationships between technological creativity and economic progress since classical antiquity. Both he and Chancellor present information and develop their ideas within what could be called an “historical infrastructure.” They succeed admirably.

In Chapter 7, as Chancellor concludes his examination of The Gilded Age, he quotes the American economist H.C. Emory who wrote:

Whereas gambling consists in placing money on artificially created risks of some fortuitous event, speculation consists in assuming the inevitable risks of changes in value.

For Chancellor, speculation in the late-nineteenth century “brought more harm than good and transferred property from the hands of the many into the pockets of the few.” This is also a useful perspective on the subsequent “Crash” of 1929 and thereafter, a volatile period that Chancellor also analyzes with eloquence as well as insight.

It is an even more useful perspective on the economy of a country such as Russia in the early-21st century. As Chancellor correctly points out in the Epilogue, stating:

The issue of speculation in emerging markets and the unfettered trade in foreign currencies is the most immediate and vexing problem faced by policymakers.

For me, Devil Take the Hindmost is an absolutely indispensable guide to more than three centuries of stock market speculation. It is certainly a worthy companion to Charles Kindelberger’s classic, "Manias, Panics, and Crashes" (1978). Chancellor focuses on a broad range of speculators (e.g. Daniel Defoe, Benjamin Disraeli, Jay Gould, Ivan Boesky, Michael Milken, and Hilary Rodham Clinton); in process, he suggests that the primary motives which drive these and other speculators are far more complicated than many of us had assumed … and, as often as not, these motives reflect “the national character” of country at the given time when a speculator succeeds or fails.

In a review that appeared in BusinessWeek magazine (September 13, 1999), Gary Silverman observes:

Chancellor’s book is strongest where the literature is richest; he is more a reader than a reporter. As a result, chapters on recent events, and those outside Britain, are rendered with less flair. At times, he tends to simplify. The American is equipped with more than just a hopeful vision of the future and a drive for self-improvement. He is prepared to take enormous risks to attain his ends.

If that’s the case, why does Fidelity Investments still offer money-market funds?

In the end, however, Chancellor is effective. He leaves readers facing unavoidable if unanswerable questions. What lessons can we draw from past manias? Are we in a bubble? Is a crash about to come? Reading Devil Take the Hindmost may make you feel smarter than the other folks on the train. But it won’t make you feel more secure.

Pete Seeger wrote "Where Have All the Flowers Gone?" and the final line is, “When will we ever learn?” When indeed….

Disclosure: None