Tulipomania

The Dutch tulip craze of the 1630’s went far beyond a love of pretty flowers.  Tulipomania created a bizarre futures bubble in which some people literally sold their homes and businesses to bet on tulips that hadn’t even bloomed yet.  When the bubble burst, fortunes were lost.

Domesticated tulips, originally imported to Europe from the Turkish empire (who could trace them back to the wild tulips of eastern China), were originally beloved by botanists and gentlemen gardners.  Growers began to experiment with hundreds of different and bizarre color schemes, with names like “The General of Generals” and “Semper Augustus”.  At the time, the Netherlands were the richest country in the world, and tulips were a symbol of wealth and good taste.

From investing in flowers, people started buying shares of bulbs that had not yet bloomed.  People were trading shares of these bulbs without having ever seen their flower; nor would they ever, because they traded them on to the next person for even more money.  At a time when a carpenter made 250 guilders a year in income, bulbs were going for as much as 20,000 guilders.

And then the market crashed, of course, as tenuous futures markets tend to.  In many cases everyone just forgave each others’ debts and pretended the whole mania had never happened.  But some people lost their houses, their tools of employment (like weavers’ looms), or their livelihoods.

The kicker, though, is this: those bizarre color schemes?  Most of them were impossible to duplicate.  Because the Dutch tulips were diseased.  The mosaic virus “broke” the colors, so an offshoot of a mother bulb might look completely different than its parent.  So they were betting the farm — literally, in some cases — on completely worthless flowers.

There’s a lot to learn from the past.  Tulipomania: The Story of the World’s Most Coveted Flower & the Extraordinary Passions It Aroused by Mike Dash is a cautionary tale that should be required reading for Wall Street — not that they’d ever listen.

ETA: There is apparently some evidence that the mania was on a very small scale.  I intend to read the book mentioned in this article — sent in by reader K.P. — for more details!