The Effects Of A Financial Bubble On The Market : Planet Money Investing during a bubble can leave you bust. But how to tell the difference between a bubble before it bursts and an investing rocket ship taking off? We'll run through a historical example and look inside our own thinking to find the mental biases that can contribute or exacerbate bad bubble thinking. | Subscribe to our weekly newsletter here.

Planet Money Summer School 5: Bubbles, Bikes & Biases

Planet Money Summer School 5: Bubbles, Bikes & Biases

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A profession nervously approaches a bike, while students experience the affects of a bubble. Suharu Ogawa for NPR hide caption

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Suharu Ogawa for NPR

A profession nervously approaches a bike, while students experience the affects of a bubble.

Suharu Ogawa for NPR

Find all episodes of Planet Money Summer School here.

Now that we've covered a couple investing strategies, we turn our attention to financial bubbles.

From a single stock to the entire stock market, Dutch tulips to American houses, Beanie Babies to crypto currency, a bubble can form around pretty much anything that can be bought and sold. It can be hard to spot a bubble from the inside, and devastating to be caught up in one.

In this week's class, we learn the causes of bubbles with an example from history — it's not tulips. We'll examine bubble thinking and the mental biases that can exacerbate them. And we look at the lasting effects crisis (like a financial bubble bursting) have on the market, as well as the people who live through them.

Vocab Words:

  • Greater Fool Theory
  • Herd Behavior
  • Confirmation Bias

Music: "Lost Situation," "Wibble Pop Punch," "Stinkbug Stardust" and "Croisette Balade."

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