There are two restaurants in a town, the Ritz and the Savoy. Albert does not much mind which one he goes to but chooses the Ritz. Ben, coming next, is leaning slightly towards the Savoy but, seeing that Albert is at the Ritz, decides that it must be better. Catherine is also persuaded by Albert and Ben’s choice that the Ritz must be the place, and so is David. By the time we get halfway through the alphabet, to Mary, everybody has chosen the Ritz and nobody the Savoy. But then Neville, who is next, has a very strong preference for the Savoy, partly because the Ritz is by now very crowded. Olivia, seeing Neville’s choice, follows him, so does Peter, and so do the rest, right through to Zak. And then something strange happens. Halfway through their meal, all those who chose the Ritz hear that everybody else is going to the Savoy. They leave, in a rush, to go from one to the other, to the Ritz’s chagrin. Think of all those who initially chose the Ritz as people who invested in dot.com shares during the late 1990s, or the rush by banks and other institutions into dodgy mortgage-backed securities in the 2000s, and then think of the rush to get out as they realised they had invested in worthless companies or securities, and you have a pretty good analogy for how bubbles build up and are burst.
