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even isaac newton couldn't beat the market

amith

@amith

isaac newton (1643–1727)

“i can calculate the motion of heavenly bodies, but not the madness of people.”
— isaac newton

When people talk about intelligence, genius, or brainpower, one name almost always comes up: isaac newton. he was one of the greatest scientists who ever lived. he helped invent calculus, explained gravity, and changed the way humans understand the universe. his laws of motion still form the foundation of physics today.

So it might surprise you to learn that this same man — arguably one of the smartest humans in history — once lost a large amount of money in the stock market. not because he was careless. not because he was foolish. but because markets do not care how smart you are.

This is the story of how isaac newton got caught in one of the world's earliest stock market bubbles, why it happened, and what modern investors — especially beginners — can learn from it.

the world newton lived in

To understand newton’s mistake, we first need to understand the time he lived in. isaac newton was born in 1643 in england. this was a period of massive change. science, trade, and finance were evolving rapidly. england was becoming a global power, and overseas trade was booming.

During this time, joint-stock companies were becoming popular. these companies allowed multiple people to invest money together and share profits. instead of funding dangerous overseas expeditions alone, investors could now spread risk.

One of the most famous of these companies was the south sea company.

what was the south sea company?

The south sea company was founded in 1711. its main promise was exciting: it claimed it would control trade between britain and south america (often called the "south seas"). this included gold, silver, spices, and other valuable goods.

In reality, britain did not actually have free access to most south american trade. spain controlled much of the region, and trade was limited. but the promise alone was powerful enough to attract attention.

Even more importantly, the south sea company was involved in managing british government debt. investors could exchange government bonds for shares in the company. this gave the company an air of legitimacy and safety.

Slowly, excitement started to build.

the birth of a bubble

By 1720, speculation around the south sea company reached extreme levels. the company’s stock price started rising rapidly. people saw others getting rich and didn’t want to miss out.

This is something we still see today. when prices go up quickly, people assume they will continue to go up. fear of missing out — often called fomo — takes over rational thinking.

New companies started appearing almost daily, many with ridiculous promises. some offered profits from inventions that didn’t exist. one famous example advertised:

"a company for carrying out an undertaking of great advantage, but nobody to know what it is."

and people still invested.

newton enters the market

Isaac newton was not poor. by this time, he was the master of the royal mint — a very prestigious and well-paid government position. he understood money, metals, and economics better than most people.

Initially, newton invested in the south sea company early. when the stock price rose, he sold his shares and made a healthy profit. this was a smart move.

Many historians estimate that newton earned around £7,000 from this early investment. adjusted for today’s money, that would be millions.

At this point, newton did exactly what textbooks recommend: buy early, sell at a profit, and step away.

the mistake that changed everything

After newton sold his shares, the stock price kept rising. and rising. and rising.

Everywhere newton looked, people were getting rich. friends, colleagues, even people with far less education were making huge profits. this created psychological pressure.

Eventually, newton couldn’t resist. he re-entered the market — but this time at much higher prices.

This is a classic investing mistake: selling early, then buying back later because prices keep going up. emotion replaces logic.

the crash

In late 1720, reality finally caught up with the hype. the south sea company’s promises could not be fulfilled. confidence vanished. panic selling began.

The stock price collapsed. fortunes disappeared almost overnight. thousands of investors were ruined.

Isaac newton lost an estimated £20,000 — a massive amount of money at the time. this loss haunted him deeply.

"i can calculate the motion of heavenly bodies, but not the madness of people."

This quote is often attributed to newton, and while historians debate its exact wording, the message is clear: human behavior is unpredictable, especially in markets.

why even geniuses fail at investing

Newton’s story shows us something important: investing is not just about intelligence. it is about emotions, psychology, and discipline.

The stock market is driven by fear and greed. when prices rise, greed takes over. when prices fall, fear dominates. even the smartest people are not immune.

Newton understood mathematics better than almost anyone. but markets are not equations. they are social systems made of humans reacting to each other.

lessons for beginner investors

If isaac newton could lose money in the stock market, what does that mean for the rest of us? a lot — but not in a depressing way. his failure offers valuable lessons.

1. intelligence does not equal investing success

Being smart, educated, or technically skilled does not guarantee profits. emotional control matters just as much — if not more.

2. avoid chasing prices

Newton’s biggest mistake was buying again after prices had already risen sharply. chasing hot stocks is dangerous, especially when driven by envy or regret.

3. markets can stay irrational

Markets can behave irrationally longer than you expect. just because something seems overpriced does not mean it will crash immediately.

4. have a plan — and stick to it

Newton initially had a plan and executed it well. his downfall came when he abandoned that plan due to emotional pressure.

5. diversification matters

Many investors during the south sea bubble put everything into one stock. when it collapsed, they lost everything. spreading risk is essential.

modern parallels

The south sea bubble may sound ancient, but similar events happen again and again. the dot-com bubble of the late 1990s. the housing bubble of 2008. crypto manias. meme stocks.

Technology changes. human behavior does not.

Each generation believes, "this time is different." and each time, bubbles eventually burst.

final thoughts

Isaac newton changed the world with his ideas. his failure in the stock market does not diminish his genius. instead, it reminds us that investing is hard — even for the best minds.

The market is not a math problem. it is a psychological battlefield. respect it. stay humble. and never assume intelligence alone will protect you.

Because in the end, even isaac newton couldn’t beat the market.

frequently asked questions (FAQ)

did isaac newton really lose money in the stock market?

Yes. Isaac newton invested in the south sea company. although he made profits initially, he later re-entered at much higher prices and lost a large sum when the bubble collapsed.

how much money did isaac newton lose?

Historians estimate that isaac newton lost around £20,000, which would be worth millions in today’s terms.

what was the south sea bubble?

The south sea bubble was one of the first major stock market bubbles in history, caused by excessive speculation in the south sea company and unrealistic expectations of trade profits.

what can modern investors learn from isaac newton’s mistake?

The key lesson is that emotional discipline matters more than intelligence. avoid hype, stick to a plan, and remember that markets are driven by human behavior.

is this story still relevant to today’s markets?

Yes. Despite modern technology, fear and greed still dominate markets. bubbles and crashes continue to happen for the same psychological reasons.