4 ideas
Trading volume outran the brokerage industry's manual, paper-based clearing, so firms took orders they could not settle: certificates went missing, 'fails to deliver' piled into billions, and the exchange shortened trading days to let clerks catch up. Firms that looked most profitable on commissions were in fact insolvent in their own records. The binding constraint on a boom turned out to be unglamorous back-end capacity, not demand.
A cohort of young managers, Gerald Tsai being the emblem, marketed mutual funds on short-term performance, concentrated bets and rapid turnover in glamour stocks. Because investors chased last year's winners, money flowed to whoever had just taken the most risk, which rewarded more risk-taking until the market turned. Records built in one regime were sold as skill and then collapsed when that regime ended.
When major wire houses faced collapse around 1970, Texas computer magnate H. Ross Perot put in tens of millions to keep du Pont Glore Forgan afloat. He was pressed to do it by an establishment afraid of a public panic, and he expected his data-processing expertise to fix the firm. The episode shows an old clubby industry becoming dependent on outside capital that did not understand it.
The book explains the speculative cycle through characters such as conglomerateurs, fund managers, promoters and failing old-line partners, rather than through macroeconomic aggregates. Each boom calls up the kind of personality that suits it, and that personality's blind spots decide how the bust unfolds. To understand a bubble, study who is getting rich and famous and what they are careless about.