Tulip Mania
In the 1630s, the Dutch paid more for a single tulip bulb than for a house.
Tulip Mania in the Netherlands peaked in the winter of 1636–37. Prices for certain rare tulip bulbs skyrocketed as trading turned speculative, with bulbs changing hands multiple times without ever being dug up. At one point, a single bulb could cost as much as a well-built house in Amsterdam. The bubble burst suddenly in February 1637, when an auction in Haarlem received no bids. Historians have since nuanced the narrative—the scale was smaller than some 19th-century accounts claimed—but the underlying pattern of collective speculation followed by a crash is historically well-documented.
Everyone buys something not for its intrinsic value, but because everyone else is buying it. As long as new buyers keep coming in, it works. When the inflow stops, only the underlying value remains—which is sometimes very little.
Tulip Mania is perhaps the oldest well-documented speculative bubble and is frequently referenced in modern financial history.
Tulip Mania did not ruin the Dutch economy, as is sometimes claimed. The impact was concentrated within a relatively small group of speculators.
Think about whether there is anything you own or want to own where the price is driven more by others wanting it than by what it actually does for you.
Price and value are not the same thing—especially not in a bubble.
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