Tulipmania!

Holland’s legendary tulip bubble burst on this day in 1637.

Many myths have grown up around this, but a few key facts are not in dispute: The tulip’s journey to Europe began in 1554 via the trade route with the Ottoman Empire. By 1593, Tulips did well in the Netherlands’ usually challenging climate. Their beautifully saturated colors made them unlike any other flowers in the Netherlands.

At the peak of the tulip boom in February 1637, a tulip bulb sold for 5,200 guilders — about 2X the annual earnings of a well-off merchant, and 20X the going price for eight fat pigs. Much of the Netherlands was caught up in buying and selling bulbs. Soon after, a futures market developed, sometimes using leverage (borrowing money) to buy bulbs. Prices inflated.  The crash left a few overleveraged speculators financially, but the impact on the broader Dutch economy was limited.

Over the 388 years since the Tulip bubble burst, we have learned much about how people behave when the potential gains are huge. What we have not learned over those centuries is how to manage our own behavior.

Dr. William J. Bernstein, Ph.D., M.D., a retired neurologist, and principal in the money management firm Efficient Frontier Advisors. He is also the author of several bestselling books on finance. In our podcast, he made this observation:

 “To the extent you succeed in finance, you succeed by suppressing the limbic system, your system 1, the very fast-moving emotional system. If you cannot suppress that, you are going to die poor.”

Think about what that means every time FOMO rears its head…

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Happy Tulip Day!

Previously:
No, It Is Not a Bubble (Yet) (February 27, 2020)

Not a Housing Bubble (March 30, 2021)

What is a Bubble? (February 20, 2020)

Trump: The Economy is in a Bubble (No, its not) (December 21, 2015)

See also:
Is This a Bubble? (Ben Carlson, January 31, 2025)

Tulipomania! (The Paris Review, February 3, 2014)

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