[World Bubble Encyclopedia Vol. 1] The Tulip Mania: Why We Still Dream of a Flower Worth a House

There was a time when a single house was traded for just three flowers.

It's hard to believe. But this is a recorded fact of history, which took place in Holland 400 years ago. People, as if seized by a divine revelation, went into a frenzy for a flower called the "tulip," pouring their entire fortunes—no, even their future incomes—into it.

Let's be brutally honest. We are in no position to laugh at the Dutch of that era. We who get worked up over lottery drops for limited-edition sneakers, who keep pulling the lever on gacha games until we get a rare character—we are living in the midst of the same frenzy, just in a different form.

This is the story of "Tulip Mania," known as the first economic bubble in history. And it is also a story of piercing self-analysis, exposing the nature of the "little bubbles" that lurk in all our hearts.

In a Nutshell

People went wild for "accidental patterns" created by a virus, turning uncertainty itself into value.
"Futures trading," the cutting-edge financial technology of the day, was born in taverns, where non-existent bulbs were traded with a single piece of paper.
One day, the buyers vanished and the frenzy collapsed. But this was also the dawn of a new financial system.

Act I: The Virus Rolls the Dice, Not God

Now, the story begins in the late 16th century, when an exotic flower was introduced to the Netherlands. Why tulips, out of all the flowers in the world?

The answer lies in "randomness."

When a specific virus infects a tulip bulb, it creates unpredictable "broken" patterns in the petals. No two are alike, and they cannot be artificially reproduced. They were, in essence, one-of-a-kind works of art created by nature. Does this sound familiar? It should. It is the very same philosophy behind the "generative art" of today's NFTs.

People found more value in uncontrollable "chance" than in stable beauty. This was the moment that uncertainty itself became an object of speculation.

The Invention of the Promissory Note

What poured gasoline on this fire was the advent of futures trading via "promissory notes."

It originally began as a humble means for farmers to earn a living during the winter while waiting for the bulbs they planted in the fall to bloom in the spring. But speculators saw the true potential of this system. You could trade the rights to an asset without ever touching the physical object. With a single piece of paper, you could trade future value with no ceiling.

This was a revolution in financial history. "Value," freed from physical constraints, soared ever lighter, ever higher, carried on the wings of human desire. And those wings were the promissory notes.

Act II: The World's First "Crypto Bros," Forged in a Tavern

The stage for these trades was not the grand Amsterdam stock exchange. It was the common tavern, where ordinary people gathered. Frenzy is always born from the chaotic din of the crowd, not the sterile meeting rooms of the elite.

A strange rule called "in het ootje" (in the pot) governed the trades. Whether a deal was made or not, the seller had to pay for the drinks. It's only human nature, then, to try and sell at the highest possible price. This small incentive structure is remarkably similar to the modern-day thirst for approval on social media, where the quest for "likes" escalates into ever more extreme posts. Everyone became an accomplice in driving up the price, with the sole objective of "selling to the next guy."

Prices reached ten times the annual income of a skilled craftsman, eventually equaling the price of a mansion in Amsterdam. Common sense became meaningless. The only reality was the fact that the price would be higher tomorrow than it was today.

Act III: When the Music Stops

There is no feast that lasts forever. In February 1637, at an auction in a Haarlem tavern, the music abruptly stopped.

A bulb was put up for auction, as usual. But no one raised their hand. The price was lowered. Still no buyers. The room was dominated not by frenzy, but by a cold silence.

The brutal fact that "there are no more buyers" meant the last chair in the game of musical chairs was gone. The news spread like wildfire across the Netherlands, and the promissory notes that were worth a mansion yesterday turned into worthless scraps of paper overnight.

What's fascinating is the aftermath. The courts merely suggested a settlement at 10% of the contract price, and most deals were left unresolved. There was no national bailout. Yet, the impact on the broader economy was said to be limited.

Why? Because this bubble was an experiment that occurred in a "sandbox," isolated from the existing financial system. Many individuals went bankrupt, but the nation itself was not wounded.

Conclusion: The Single, Crucial Lesson from This Folly

The story of the Tulip Bubble is far too rich in lessons to be dismissed as a simple tale of "foolish people from the past."

Of course, the lesson that "price" and "value" are two completely different things is critical. The habit of asking yourself, "Is the 'price' I believe in backed by real 'value'?" is a fundamental principle for protecting your assets in any era.

But I want to take it one step further.

Perhaps bubbles are an unavoidable "fever" necessary for society to implement new technologies and financial systems.

The Tulip Bubble created many tragedies, but it also introduced the concept of "futures trading" to society. The later dot-com bubble bankrupted countless companies, but from its ashes, the massive infrastructure of the internet was born. Without that frenetic overinvestment, social transformation might have been much slower.

If that's the case, what we need is not to summarily dismiss the frenzy. Isn't it wiser to understand the nature of that frenzy, and learn not to be swallowed by its waves, but to ride them intelligently?

History does not give us answers. It only teaches us to ask better questions.

And the question is, "What is the true nature of this frenzy?"