The brief mention that the fallout wasn't as disastrous as myth would have it greatly understates just how exaggerated the popular account of tulip mania is.
So many of these articles get it completely wrong. Economically. People weren't going crazy for tulips just because, the government had incentivized investment in tulips. The government at the time basically told people that they could not lose money on investing tulips. It should be a story about governments misallocating resources. That's it, but people quit. Keep twisting it into a story of psychology and mania which it was not.
It is also worth pointing out how patchy the price data seems to be. Looking at Wikipedia [0] it seems like there isn't much actual evidence and the exciting part of the bubble was 6 months.
I expect the people involved cared a lot, but it looks like more of a cool curio than an event that could have had serious fallout. Paying $200k for a tulip looks quite tame compared to Blue Poles.
At least in the tulip case, they actually had some minor value. You owned a pretty flower. You could also make the case for crypto money, I guess.
Any person with common sense and basic technical understanding could tell you NFTs were an incredibly dumb and useless idea from the very start. All you “own” is an entry on some ledger, which doesn’t inherently give you ownership over anything else.
I teach the LSAT and one of the passages is famously about this mania and contends that it was actually rational. You paid a high price for a tulip bulb, planted it, and then sold the descendants which paid off the original price.
The narrative from this article seems to be largely based on Thackeray's book from 1841. Wikipedia suggests the LSAT passage is modern scholarly received wisdom at least in some quarters, but does anyone have better knowledge of the state of our understanding of the history of tulip prices?
Edit: the top comment provided what I had been thinking of. My account above about profits wasn't right, because the trades were never fulfilled. When prices went too high, people didn't honour their contracts and that was that. No one went bankrupt. And as the bulb owners had bought at lower prices they also were fine.
That logic has a glaring flaw, that while tulips might be in short supply, the price is driven by everyone else doing that too, so there'll be a glut of new blubs in the future, so the future price shouldn't be assumed to be the current price.
Anything self-replicating can't hold to "current price best predicts future price".
According to Copilot you can get one or two offspring per year from a tulip. So if you spent the price of a really nice house on one of those, it will take you quite some time to multiply the price down into reasonable territory. And even if you stay in unreasonable price territory, an average home, it is one thing to find a buyer for one tulip at that price, it is a very different thing to find a bunch of them. And you are still looking at three, four, five years of tulip growing to get the price down to a tenth of what you paid.
There are so many of these breeding ponzi schemes every few years. Guinea pigs, "rare" snakes, long distance pigeons, you name it. They are all ponzis regardless of the animal reproducing, with the added benefit that instead of just being part of a financial scam you can also be part of animal abuse, because most people don't give two shits about the animal, mess it up, abandon them later, etc.
If you want to learn about crowd insanity read Nietzsche, if you want to learn about bubbles read about 1998 to 2001 and the current AI bubble. Both were and will be worst than 1929.
until you find out that beanie babies weren't irrational either
there was a supply crunch with the manufacturer in China, it was rational to think it wouldn't be solved, creating a limited supply item that had more demand than the supply. the founder solved the issue and flooded the market with beanie babies, prices crashed at that point
When Quinn and Turner wrote their book Boom and Bust: A Global History of Financial Bubbles they concluded Tulipmania was not a bubble and so did't include it:
sadly the AI it produces despise the overhype is still way more useful than tulips. I don't think bubble burst would get us to RAM prices pre-boom for a while
It feels so much worse to me. You could at least hold a tulip bulb, plant it, look at it, smell it, and it was a real thing.
The closest you can get to that with bitcoin would be what? Print out your keypair? Maybe write it down on fancy stationary using fancy calligraphy? (Never do these things)
The brief mention that the fallout wasn't as disastrous as myth would have it greatly understates just how exaggerated the popular account of tulip mania is.
https://www.smithsonianmag.com/history/there-never-was-real-...
So many of these articles get it completely wrong. Economically. People weren't going crazy for tulips just because, the government had incentivized investment in tulips. The government at the time basically told people that they could not lose money on investing tulips. It should be a story about governments misallocating resources. That's it, but people quit. Keep twisting it into a story of psychology and mania which it was not.
It is also worth pointing out how patchy the price data seems to be. Looking at Wikipedia [0] it seems like there isn't much actual evidence and the exciting part of the bubble was 6 months.
I expect the people involved cared a lot, but it looks like more of a cool curio than an event that could have had serious fallout. Paying $200k for a tulip looks quite tame compared to Blue Poles.
[0] https://en.wikipedia.org/wiki/Tulip_mania
Really interesting article, thanks!
Maybe we should update our lexicon to "NFT mania" –– far more people lost money in that phenomenon.
At least in the tulip case, they actually had some minor value. You owned a pretty flower. You could also make the case for crypto money, I guess.
Any person with common sense and basic technical understanding could tell you NFTs were an incredibly dumb and useless idea from the very start. All you “own” is an entry on some ledger, which doesn’t inherently give you ownership over anything else.
I teach the LSAT and one of the passages is famously about this mania and contends that it was actually rational. You paid a high price for a tulip bulb, planted it, and then sold the descendants which paid off the original price.
The narrative from this article seems to be largely based on Thackeray's book from 1841. Wikipedia suggests the LSAT passage is modern scholarly received wisdom at least in some quarters, but does anyone have better knowledge of the state of our understanding of the history of tulip prices?
Edit: the top comment provided what I had been thinking of. My account above about profits wasn't right, because the trades were never fulfilled. When prices went too high, people didn't honour their contracts and that was that. No one went bankrupt. And as the bulb owners had bought at lower prices they also were fine.
https://news.ycombinator.com/item?id=48322546
https://www.smithsonianmag.com/history/there-never-was-real-...
That logic has a glaring flaw, that while tulips might be in short supply, the price is driven by everyone else doing that too, so there'll be a glut of new blubs in the future, so the future price shouldn't be assumed to be the current price.
Anything self-replicating can't hold to "current price best predicts future price".
According to Copilot you can get one or two offspring per year from a tulip. So if you spent the price of a really nice house on one of those, it will take you quite some time to multiply the price down into reasonable territory. And even if you stay in unreasonable price territory, an average home, it is one thing to find a buyer for one tulip at that price, it is a very different thing to find a bunch of them. And you are still looking at three, four, five years of tulip growing to get the price down to a tenth of what you paid.
By that definition every pyramid scheme is rational (of course only until you run out of greater fools).
Are you asking because you think the LSAT is at odds with the article's description of the mania? Because it is not.
There are so many of these breeding ponzi schemes every few years. Guinea pigs, "rare" snakes, long distance pigeons, you name it. They are all ponzis regardless of the animal reproducing, with the added benefit that instead of just being part of a financial scam you can also be part of animal abuse, because most people don't give two shits about the animal, mess it up, abandon them later, etc.
You know, we also have the tulips of our time...
We've had loads of tulips this century, from beanie babies to NFTs
Once OpenAI/Anthropic IPO, until then it's not a perfect analogy.
I didn't learn anything about tulips, markets, or the tulip market in this article.
If you want to learn about crowd insanity read Nietzsche, if you want to learn about bubbles read about 1998 to 2001 and the current AI bubble. Both were and will be worst than 1929.
Perhaps beanie babies is an example that we actually know about.
until you find out that beanie babies weren't irrational either
there was a supply crunch with the manufacturer in China, it was rational to think it wouldn't be solved, creating a limited supply item that had more demand than the supply. the founder solved the issue and flooded the market with beanie babies, prices crashed at that point
I wonder if there are more recent examples?
Bitcoin circa 2018-2019.
https://hn.algolia.com/?dateEnd=1574985600&dateRange=custom&...
When Quinn and Turner wrote their book Boom and Bust: A Global History of Financial Bubbles they concluded Tulipmania was not a bubble and so did't include it:
* https://www.goodreads.com/en/book/show/48989633-boom-and-bus...
Quinn did an AMA when the book was published (2020):
* https://old.reddit.com/r/AskHistorians/comments/i2wfsm/i_am_...
* Book talk: https://www.youtube.com/watch?v=YLl3Ijb01I0
Garber does have it though, along with Mississippi and South Sea:
* https://mitpress.mit.edu/9780262571531/famous-first-bubbles/
See also perhaps Perez's book on tech hype and bubbles (starting with Canalmania):
* https://en.wikipedia.org/wiki/Technological_Revolutions_and_...
In the AMA you link they say the tulip mania was probably a bubble just not a major one that impacted the economy meaningfully.
I better not show my beautiful, flower-loving wife this article. We already have enough flowers (and I would like to be able to keep our home)
> when a single flower was worth more than a house
Yeah but housing prices weren't as crazy as they are now.
Subject is very interesting but this article does a poor job exploring it
For a wider context, if needed: <https://en.wikipedia.org/wiki/Extraordinary_Popular_Delusion...>
Manias, Panics, and Crashes by Charles Kindleberger is a more modern book, which I'd recommend as well.
It's funny to me as a Dutch citizen that all of our cultural heritage comes from abroad. Even cheese was apparently invented on the Asian steppes.
ah there's a good term
so "AI" mania ("AI" derangement syndrome?)
when ram and storage starts to cost as much as rent or a car eventually
now we just wait for the bubble collapse and lots of cheap hardware even if slightly used
sadly the AI it produces despise the overhype is still way more useful than tulips. I don't think bubble burst would get us to RAM prices pre-boom for a while
Now we have startups that have 0 revenue, 0 product and 0 cash flow now somehow being worth over a billion which is more than mansions.
> we have startups that have 0 revenue, 0 product and 0 cash flow now somehow being worth over a billion
What is one such example?
We do this now with something even less intrinsically valuable than tulips: BTC.
It all just comes down to supply and demand.
Similar articles in the future. "Bitcoin mania: when a single bitcoin was worth more than a house"
Similar articles from the past: "Bitcoin mania: when a single bitcoin was worth more than a pizza"
Bored ape
It feels so much worse to me. You could at least hold a tulip bulb, plant it, look at it, smell it, and it was a real thing.
The closest you can get to that with bitcoin would be what? Print out your keypair? Maybe write it down on fancy stationary using fancy calligraphy? (Never do these things)