Talk about timing the market. When William Bonner and Lila Rajiva decided to collaborate on a book about the behaviour of crowds in politics and economics, they did so with the understanding that Malcolm Gladwell’s The Tipping Point had generated a level of interest in the subject that they could capitalize on. What they didn’t know, even as the book went to press in 2007, was that the real estate bubble they were watching with such great interest was about to pop.

The best-selling result of their timely partnership, Mobs, Messiahs and Markets, was released in paperback last month.

“We look at the biological evidence behind human behaviour,” Rajiva told me. “People are basically driven by fear and libido. We want to consume. Why do we want to consume? Because we want status. Why do we want status? Because we want to mate well, we want to propagate.”

Behaviour, of course, isn’t all just fun and games. “People do make sacrifices,” said Rajiva. “They’re generous and kind, and they want to help each other. There’s no one explanation for crowd behaviour, at the biological level at any rate.”

The book is far from a Gladwell knock-off. Rajiva is a well-regarded political journalist. Bonner is a successful publisher of financial newsletters and a website called The Daily Reckoning.

To say they are contrarian is to put it mildly. Despite its light-hearted style, there is a strong anti-establishment tenor to the book. Too much so in my judgment, but there is good advice here.

A couple of examples:

• “[T]he less you know for sure, the more important it is to have rules and principles you can follow. So, as we become more ignorant about what is actually going on, we become more stubborn in our opinions about what should be.”
• “A real investor buys a stock as though it were a can of tuna fish. He knows what it is worth to him and buys it when it is a bargain. But how do you know what a business is worth? How do you know when the perfect market has slipped up? Traditionally and sensibly, the investment value of a business is measured by how much money it will return to the investor. This seems only self-evident, but few investors actually figure it out and invest accordingly.”
• “The more someone wants to sell you an investment, the more you don’t want to buy it … The owner of an investment usually knows the asset better than the buyer does. If it were such a good business, why would the owner want to sell it to complete strangers? If it could earn a decent return on equity, why share it?”