Dutch tulip buyers in the 1630s and dot-com investors in 1999 shared almost nothing in common — different centuries, different assets, different cultures, different technology. And yet, according to a widely cited framework, both episodes followed strikingly similar stages. Economist Charles Kindleberger's "Manias, Panics, and Crashes" (first published in 1978, building explicitly on Hyman Minsky's theoretical framework covered elsewhere in this module) formalized this recurring pattern into roughly five stages that show up, in one form or another, across centuries of financial history: displacement, boom, euphoria, profit-taking (or distress), and panic.
Displacement is the genuine, real spark: some actual external change — a new technology, a newly opened market, a shift in policy — that creates legitimate, real grounds for optimism and investment. This matters because bubbles typically don't start from nothing; they start from something genuinely real, which is exactly what makes the early stages so hard to distinguish from ordinary, healthy growth. Boom follows, as growing awareness and initial success attract more capital and participants. Euphoria is where the pattern becomes recognizable in hindsight: prices become disconnected from any reasonable underlying valuation, speculation dominates, and previously cautious participants rush in specifically because prices are rising — not because of independent analysis of the underlying asset's actual worth.
Correct moves you up, wrong moves you down — reach 100 to master this lesson.