Analogy between toilet paper and stock market — an unanswered question of why

Photo by Mick Haupt on Unsplash

At the beginning of the pandemic lockdown, people started piling up their storage with toilet papers lest they run out of it. To a certain degree, it was understandable but an entire aisle was emptied and the stores had trouble restocking it because people would grab them at an instant they get restocked. In the end, stores started restricting how many toilet papers each shopper could buy but even then the aisles were still empty.

I had trouble understanding this behaviour because logically (at least to me) if I am locked up at my house for weeks and months, running out of toilet paper isn’t the biggest worry I would have. The biggest worry for me would be literally survival and hence would consider reallocating my budget for toilet papers to items that would yield a higher marginal benefit such as food or emergency medical kit. After all, how essential is a toilet paper to our survival? Sure it would be a minor inconvenience but it is easily solvable by other things as well (such as tap water or other papers?). Many authorities seem to agree with my logic because when I looked up some pandemic preparedness grocery list, published by various governments around the world, toilet paper isn’t mentioned!

Anyways, fast forward a few months and now nobody seems to be hoarding toilet papers anymore. Below is Google trend data on ‘toilet paper’ search term since 1st Feb. 2020. Maybe people have realised that toilet papers aren’t essential to their survival or maybe they learned that the world has an abundant supply of toilet papers (WSJ, among other media, had an article about this). Whatever the reason is, the steamed has subsided.

Google trend on ‘Toilet Paper’ search term

Instead, the attention seems to have shifted to stock investing. As below graph shows, the stock market is seeing one of the strongest and the quickest recovery from a crisis, making the pandemic crisis the shortest-lived stock market crash since the Great Depression.

Price of NASDAQ Index for 2020. Source:

This surge reminds me of the toilet paper hoarding behaviour I observed a few months ago because that is essentially what is happening in the stock market. Obviously, we can’t see people lining up trying to buy stocks but had the stock market not been updated to an electronic system, the line up to buy the stocks would be longer than the line up we saw for toilet papers.

This too is odd to me and poked my curiosity because both events seem to reflect human behaviour that we may have something to learn from. Before making the analogy, let’s see how this recovery is unlike other recoveries we have seen in the past. First of all, the recovery is happening during, arguably, the largest economic recession since the Great Depression. Secondly, given this reality at the main street, retail investors, according to the Business Insider, accounts for as much as 25% of the stock market activity compared to 10% in 2019 was shocking.

So if I understand this correctly, at the time when the unemployment rate was hitting as high as 25.3% (May in Nevada) and economic indicators were showing possibly the worst recession since the Great Depression, people were buying stocks? Hmm… I am perplexed. Wait. Maybe the market is driven by the wealthy white-collar people who are redirecting their extra cash and fixed income investments into the stock market because the yield is hitting the bottom and the Fed is reassuring that it will stay that way for as long as it is necessary? It is a convincing argument but I am still perplexed because even the average people are attracted to investing in the stock market. Below graph shows a surge in Robinhood user activity, whose average account size is $2k and the average age of an account holder is 27!


Now going back to making the analogy, 1) at the time of one of the worst crisis in the recent history 2) a lot of people 3) hoarded or lined up for 4) things that are non-essential (i.e. water VS toilet paper and cash VS stocks) to their survival. Removing the inherent differences in the two, why was it toilet papers and why stocks (especially Tech stocks) and not water or cash? One thing for sure is that neither behaviour is pure speculation and probably can’t be explained solely by irrational exuberance because from the individual’s perspective who are participating to this ‘phenomena’ it is logical and there is some fundamental truth to it: toilet papers can be useful and not investing in stocks when it's giving you few percentage points of returns, almost daily, may seem crazy.

However, I still don’t understand why it had to be ‘toilet papers’ and ‘stocks’. Could it have been T-shirts and Bitcoins instead? After all, I could still make a similar argument to how those are not totally idiotic: T-shirts can be useful and investing Bitcoin at a time when governments are printing an unprecedented amount of cash seem logical. In fact, would it matter what the objects were? The more I contemplate on it, there was a good chance that the pandemic could have reincarnated the Tulipmania from the 17th century!


With my limited intelligence, knowledge and experience, the only logical conclusion that I can make by observing the two events is that 1) herding or group thinking leads people to justify their irrational behaviour (another example is Nazis), 2) such group thinking can be triggered by almost anything and can ratchet onto almost anything and 3) humans tend to act first and find plausible explanation after.




All views are mine. Book notes include my own interpretation.

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Seunghwan Son

Seunghwan Son

All views are mine. Book notes include my own interpretation.

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