Globe editors have posted this research report with permission of Mawer Investment Management Ltd. This should not be construed as an endorsement of the report's recommendations. For more on The Globe's disclaimers please read here. The following is excerpted from the report:

In 1845, Scottish poet and author, William Aytoun, published his satire, How we got up the Glenmutchkin Railway, and how we got out of it. His story focused on the railway stock frenzy that gripped Great Britain, with the aim of bringing awareness to what he saw as madness, "if anyone ha[d] the sense to see it."

By the mid-1840s, British Railway Mania was nearing its zenith. In 1845, total railway revenues were £6 million (already about 1% of GDP and 10% of government spending) yet British investors were expecting them to grow to £60 million by 1852! Even prominent intellectuals such as Charles Darwin, John Stuart Mill and the Brontë sisters were enveloped in this collective delusion—they had invested heavily into railway stocks even though none of them knew much about rail. The ending of this story should not be surprising: the mania created a bubble, the bubble eventually burst, and railway investors suffered extensive losses.

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Readers may ask: why is this relevant today? The answer is that British Railway Mania is an excellent example of a pattern – the technology hype cycle – that has occurred repeatedly throughout history. This pattern is critical for investors to understand because, first, technology shapes so much of our economies and society, and, second, it is so timely: discussions of technology are seemingly everywhere these days. Indeed, it feels like a giant wave of change is rising beneath us! And it is this collective knowing that this time is different that makes this mood analogous to the 1840s and a review of the hype cycle so worthwhile.

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