People love to speculate. Polls have consistently shown that about 50% of American adults report buying a lottery ticket in the previous 12 months. The sports betting industry is growing rapidly, reaching a record $10.92 billion in revenue in 2023, up 44.5% from 2022. So too is the online trading market. Valued at approximately $3.1 billion in 2023, it’s expected to grow to more than $4.3 billion by 2028.
Behavioural psychologists have identified a whole host of reasons why humans are prone to engage in speculation. For example, we tend to be overconfident, we like to follow the herd, and we don’t want to miss out on lucrative opportunities.
Social media and smartphones have only exacerbated our tendency to speculate. We’re constantly seeing others trading and gambling, and it only takes a matter of seconds, and a few clicks or taps, to join in.
Even Isaac Newton succumbed
The frightening thing about speculation is that even the smartest people are tempted to try it. Take Sir Isaac Newton, for example. Few people, if any, in history have contributed as much as he did to our understanding of mathematics, optics and astronomy. And yet even he was caught out by the notorious South Sea Bubble in 1720.
When the South Sea Company stock price fell from £1,000 to £100, Newton lost an estimated £20,000, which was a very significant sum at the time. “I can calculate the motion of heavenly bodies,” he is reported to have said, “but not the madness of people.”
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