On March 24, 2000, the New England Patriots broke ground on their new stadium home in Foxborough, Massachusetts. The internet company CMGI won naming rights, agreeing to pay $114 million over 15 years for the privilege. The 2002 season opened on September 9 in the Patriots’ new home, with tickets bearing the name, CMGI Stadium.
Except by that time, the “Dot-Com bubble”, had burst. CMGI had ceased to exist. The stadium itself would open, bearing the name of a razor and shaving cream manufacturer.
The first and perhaps the oddest of such speculative bubbles may be the “Tulpenwoede” (tulip madness) gripping Holland in the 17th century.
The first European tulip bulbs came to Vienna from the Ottoman Empire in 1554, introduced by Ogier de Busbecq, ambassador from the Holy Roman Emperor Ferdinand I to the Sultan of Turkey. The tulip was different from anything in Europe, the intense, saturated colors soon turning the flower into a status symbol.
By the 17th century, Holland had embarked on a Golden Age. The East Indies trade produced single voyage profits of 400% and more, as merchants built grand estates surrounded by flower gardens. The hyacinth enjoyed early popularity, but the sensational plant at the center of it all, was the tulip.
For much of this period, tulip bulbs were primarily of interest to the wealthy. The craze began to catch on with the middle and poorer classes by the mid-1630s. The Scottish poet, journalist and author Charles Mackay, best remembered for his book, Extraordinary Popular Delusions and the Madness of Crowds, wrote “The population, even to its lowest dregs, embarked in the tulip trade”.
Soon, increasing demand drove prices to unsupportable levels. The market soared in late 1636, as prices bid up for bulbs planted to bloom the following spring. People mortgaged homes and businesses, hoping to buy bulbs for resale at higher prices.
At one point, “one single root of the rare species called the Viceroy”, sold for “two lasts of wheat, four lasts of rye, four fat oxen, eight fat swine, twelve fat sheep, two hogsheads of wine, four tuns (barrels) of beer, two tuns of butter, One thousands lbs. of cheese, one complete bed, a suit of clothes, and a silver drinking-cup”.
12,000 guilders were offered for only 10 bulbs of the extremely rare Semper Augustus tulip, more than the cost of an Amsterdam townhouse. Even that wasn’t enough to clinch the deal.
In early 1637, single “Viceroy” bulbs bid between 3,000 and 4,200 guilders, at a time when skilled craftsmen earned 300-350 guilders a year.
“Couleren” bulbs were most commonly traded, single hued flowers of yellow, red or white, followed by the multi-colored “Rosen” and “Violettin”. Rarest and most sought after were the vivid streaks of yellow or white on the red, brown or purple backgrounds of the “Bizarden” (Bizarres). Ironically, these were the most sickly specimens, victims of a “Tulip breaking virus” which “broke” petals into two or more hues.
Confidence evaporated in 1637 and the market collapsed. The last recorded market data were reported on February 5, as 98 sales were recorded at wildly varying prices.
Those who had taken possession of bulbs found their worth to be a fraction of the prices paid. Others were locked into futures contracts, obliged to pay ruinous sums for comparatively worthless flower bulbs.
From the “South Sea Bubble” of the 18th century to the “Bull Market” of the “Roaring Twenties and the “Sub-Prime Mortgage Crisis” of the 2000s”, economic forces had combined with irrational expectations to bid prices up to the point of collapse.
The Tulip Mania of the 1630s was the first such speculative bubble. Perhaps ‘Bitcoin’ will be next. The laws of economics, are not to be denied.