Roger Babson, the man who foresaw the collapse of the U.S. economy

Roger Babson is known as the man who predicted the Great Depression. However, he was not a psychic. His predictions were based on analysis, statistics and calculations. During his long life he achieved success in various fields, but his works are especially respected by investors and financiers.

Roger Babson: how a young man turned into an investment expert

The future stock market specialist was born in 1875 in a wealthy American family. His father sold textiles, and his grandfather owned his own farm. Young Roger Babson grew up in the circle of entrepreneurs, thanks to which he began to earn money in his childhood. First by carrying water to the laundry and then to a visiting circus. After his father sent his son to work on a farm, Babson took up selling fruit and vegetables there. He liked that much better than working in the fields. By the way, at the same time he realized that implementation brings more money and pleasure than production.
Roger Babson received his higher education at the Massachusetts Institute of Technology, after which he took a job as a clerk in a bank. He was rapidly advancing in his career and markedly succeeded in bond trading, but his path was undermined by illness. Tuberculosis forced the financier to move to work from home, where he ran the company Babson’s Statistical Organization he created.
Its sphere of activity was statistical compilations, which were used by financiers who dealt in securities. Babson’s analytics helped track asset movements, make asset forecasts and anticipate changes in market sentiment.
The financial calculations of the specialist turned out to be very effective. At the beginning of the XX century Roger, being by then an acknowledged consultant, declared that the collapse of the U.S. stock market was just around the corner. He recommended getting rid of stocks and investing funds in gold.
Babson’s arguments were based on indicators from areas that did not apply to the financial sector. For example, he used physical laws in his work. Because of this, many people regarded his words with neglect, while others considered him a crank.
But after the Great Depression plunged the U.S. economy into crisis, Babson’s methods found applications in financial forecasting. These included dividing the business cycle into four periods – improvement, prosperity, decline and depression.
Before his death in 1967, Roger Babson managed to found several more companies, run for president and write a dozen books on finance that are still on the shelves of traders and other market players.