Here is a brief summary of what I learned from the Tulip Mania.

The term “tulip mania” is often used metaphorically to refer to any large economic bubble when asset prices deviate from intrinsic values.

(in English that basically means that an item is priced at something far beyond what it’s inherently worth)

To summarize the tulip mania was a phenomenon that occurred in February 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsworker.

Can you imagine buying a tulip for $100,000+?

Modern economists have proposed rational explanations, rather than a speculative mania, for the rise and fall in prices. For example, other flowers, such as the hyacinth, also had high initial prices at the time of their introduction, which immediately fell.

However, it’s possible that these prices can inflate as a result of groupthink and social pressures which is the opinion held by Charles Mackay a Scottish journalist who wrote the book Extraordinary Popular Delusions and the Madness of Crowds in 1841. He proposed that crowds of people often behave irrationally, and tulip mania was, along with the South Sea Bubble and the Mississippi Company scheme, one of his primary examples.

Just a note – the title of that book rivals the best I’ve heard.

There are a lot of insights in this example. History remains a great teacher. And I leave you with the question, what would pay for a tulip?