Why Investors Keep Repeating the Same Financial Mistakes
Financial crises rarely repeat themselves in exactly the same form. Yet the human emotions that create them—greed, fear, overconfidence, and the fear of missing out—have remained remarkably constant throughout history.
When Turkey experienced the banker crisis of 1982, Turkey not only experienced a major financial crisis; it also left a deep wound in the nation’s collective memory. Thousands of families lost the savings they had accumulated over many years in just a few weeks. Newspapers ran the same headlines for days on end. Television stations showed the long lines forming in front of banks and bankers’ offices. People waited hopefully, thinking they might recover the money they had saved—perhaps over a lifetime.
Those who experienced the crisis remembered it above all as a story of disappointment.
In the wake of the crisis, almost everyone said the same thing:
“No one will believe such promises anymore.”
However, history did not unfold as people had expected.
Before the pain of the 1980s had fully faded, the Titan Ponzi scheme emerged. People continued to believe they would make high profits in a short time. Thousands handed over their savings to a system that relied on the money of new participants to stay afloat.
Then, in the late 1990s and early 2000s, Yimpaş, Kombassan, and Jetpa attracted vast sums from investors, particularly Turks living in Europe. Although their structures differed significantly from classic Ponzi schemes, many investors ultimately suffered substantial financial losses.
Not many years had passed.
This time, technology took center stage.
Çiftlik Bank had embedded the classic pyramid scheme into a digital game. Instead of real farms, virtual farms were set up, and people believed they would earn income from the animals on the screen. The technology was new, but the promise was old: high returns in a short time.
Once again, the collapse was inevitable.
Immediately afterward, the cryptocurrency markets began to attract extraordinary interest. Blockchain technology was truly a significant innovation. However, as with every major technological transformation, numerous fraudulent schemes emerged around this innovation. The Thodex incident was one of the most striking examples of this. Hundreds of thousands of investors were victimized.
At first glance, it seems as though all these incidents are unrelated.
The Banker Kastelli episode was different.
Titan was different.
Yimpaş, Kombassan, and Jetpa used different models.
Çiftlik Bank was entirely digital.
Thodex, on the other hand, operated through crypto assets.
The instruments had changed.
The technology had changed.
So what remained unchanged?
Human nature.
Behavioral finance seeks to answer precisely this question.
Benjamin Graham captured this idea decades ago:
“The investor’s primary problem—indeed, his greatest enemy—is most likely himself.”
People rarely make investment decisions based solely on careful financial analysis. Their perception of risk changes when they see others around them making money. If a neighbor is making money, a coworker has jumped on the bandwagon, or a relative is boasting about high returns, doubt begins to give way to confidence.
Daniel Kahneman’s research also demonstrates this. The human mind doesn’t always engage in lengthy calculations. More often than not, it takes mental shortcuts. Following the crowd is one such mental shortcut.
This is how herd mentality begins.
Robert Shiller describes this phenomenon as “irrational exuberance.” At a certain point, investors no longer question why prices are rising. The rise itself becomes the justification for the rise.
Charles Kindleberger, having examined over four hundred years of financial history, states that the common thread among bubbles is not the economy, but mass excitement. Tulip bulbs were different, as were railroads, internet companies, and cryptocurrencies… But the emotion that inflated them was always the same.
Hyman Minsky, however, makes an even more striking observation. According to him, prolonged periods of stability push people to take on more risk. As long as there is no crisis, people believe the risk has disappeared. Yet it is precisely during those periods that the system becomes most fragile.
Perhaps a simpler truth lies behind all of this.
An old Turkish proverb says, “Human memory is afflicted with forgetfulness.”
Financial history is one of the most striking examples of this.
Economist John Kenneth Galbraith expresses the same truth in different words:
“Financial memory is extremely short.”
Indeed, a 30-year-old investor today most likely doesn’t know Banker Kastelli. Titan is a distant past for him. He may never have heard of Yimpaş or Kombassan. He doesn’t know about the Jetpa victims. While Çiftlik Bank and Thodex may seem close to him now, in a few decades they, too, will be nothing more than old newspaper clippings for new generations.
Societies forget.
Yesterday’s financial scandals gradually fade into history. Yimpaş, Kombassan, and Jetpa are now little more than old newspaper headlines for many people. In time, Çiftlik Bank and Thodex will also become distant memories for a new generation of investors.
Human behavior, however, changes far more slowly than technology.
That is why new schemes will inevitably emerge. They may not be called “bankers.” They may take the form of AI-powered investment platforms, social media personalities with millions of followers, or highly sophisticated digital ecosystems that promise extraordinary returns with minimal risk.
The names will change.
The technology will change.
But the emotions that make these schemes possible will remain exactly the same.
The desire for easy gains…
Herd mentality…
Overconfidence…
The fear of missing out…
That is why studying financial history is not merely about learning about past crises.
It is about understanding human nature.
Perhaps the person who expressed this best was Isaac Newton, one of the world’s greatest scientists.
In 1720, after losing a significant fortune in the South Sea Bubble, he said:
“I can calculate the motions of celestial bodies, but I cannot calculate the madness of men.”
Three centuries have passed since Newton wrote those words. Markets have changed. Technologies have changed. Artificial intelligence is transforming finance. Yet one variable remains stubbornly constant: human nature.
History remembers every financial bubble. The tragedy is that each generation believes the next one will be different.
