Active Stocks
Wed Jun 19 2024 15:54:35
  1. HDFC Bank share price
  2. 1,658.00 3.06%
  1. Tata Steel share price
  2. 180.05 -0.61%
  1. State Bank Of India share price
  2. 852.60 0.95%
  1. ITC share price
  2. 423.70 -1.19%
  1. ICICI Bank share price
  2. 1,144.75 1.93%
Business News/ Markets / Tulipomania: How a flower became a financial asset
BackBack

Tulipomania: How a flower became a financial asset

Tulips, initially from the Ottoman empire, caught the attention of Europeans in the 16th century, leading to a financial mania, where people of all social classes invested huge amounts of money in them, leading to a bust in 1636.

Tulipomania swept across Europe and changed the financial landscape (Photo by Loredana Filip on Unsplash )Premium
Tulipomania swept across Europe and changed the financial landscape (Photo by Loredana Filip on Unsplash )

Could you imagine that the humble tulip, a flower we know in India thanks to Yash Chopra introducing it to us through that beautiful song in the 1981 movie Silsila, having shot the song in the Keukenhof gardens, Netherlands, would be the cause of one of the greatest financial upheavals in the world back in 16th Century Europe?

It is not a flower, native to Europe. In fact, it has Turkish origins, it is even named from a Turkish word for turban because it was said to resemble the said headgear. Tulips were first grown in Central and East Asia from the 11th Century, from where it went on to Europe in the 16th Century when they caught the attention of the Western diplomats to the Ottoman empire.

According to reports, Conrad Gesner, a Swiss physician, naturalist, bibliographer, and philologist, brought this exotic flower to the attention of the world. He is said to have first seen the tulip, in the year 1559, in a garden at Augsburg, belonging to Counsellor Herwart famous for his collection of rare exotics.

A renowned naturalist, Beckmann in his book, ‘History of inventions,’ says this about the tulip, “There are few plants which acquire, through accident, weakness, or disease, so many varieties as the tulip. When uncultivated and in its natural state it is almost of one colour, has large leaves and an extraordinarily long stem. When it has been weakened by cultivation, it becomes more agreeable in the eyes of the florist. The petals are then paler, smaller and more diversified in hue and the leaves acquire a softer green colour. Thus, this masterpiece of culture the more beautiful it turns, grows so much the weaker so that with the greatest skill and most careful attention, it can scarcely be transplanted or even kept alive."

It took barely a decade for the tulip, transplanted from the realm of the Ottomans in Istanbul, then called Constantinople, to reach the homes of the wealthy in Holland and Germany. The wealthy high society in Amsterdam sent directly to Constantinople for tulip bulbs, paying exorbitant rates for the same.

The first roots planted in England were brought from Vienna in 1600. By the year 1634 the craze for tulips grew so widely that it was a mark of being from a higher stratum in society to have a collection of them. The rarity of these flowers made them a craze that soon spread from the elite, trickling down to the middle class, with merchants, shopkeepers and ordinary folks deeming it essential to have tulips in their possession, paying preposterous prices for the pleasure of owning them.

At the peak of the craze, amongst the craziest things people did for a tulip included a trader in Harlaem who paid half of his fortune for a single root, not to sell it again for profit but to keep it in his own conservatory for the admiration of his acquaintances.

In fact, in 1634, the entire Dutch population was so crazy about tulips, that ordinary people, not just the upper class, were giving up all their businesses to invest in the tulip trade.

It became a mania. By 1635, people were investing a princely amount of 100,000 florins merely to buy forty roots. They would then sell tulips by their weight in perits, a weight less than a grain. A tulip of the species called Admiral Liefken, which weighed 400 perits was being sold for 4400 florins at the time.

The most expensive of them all, the species called Semper Augustus which weighed 200 perits, was considered to be a bargain at 5500 florins. The most ordinary of these bulbs then commanded a price of 2,000 florins. The craze continued into 1636, where there were only two roots of this species available in all of Holland, one was with a dealer in Amsterdam and the other was in Harlaem.

The mania to buy these was so great that one potential buyer offered twelve acres of building ground for the Harlaem tulip and the Amsterdam tulip was sold for 4,600 florins, a new carriage, two grey horses and a complete set of harnesses.

By 1636, markets for the sale of tulips were set up in the stock exchanges of Amsterdam, Rotterdam, Haralem, Leyden, Alkmaar, Hoorn and other towns. People were now gambling on tulips. Stock jobbers dealing largely in tulips, began using all kinds of means, fair and foul to cause the prices to fluctuate wildly, using these fluctuations to their advantage. They made huge profits as the prices fell and rose, buying and selling accordingly.

The tulips were a golden bait, and people rushed to the markets like flies to a honey pot. Most folks imagined the craze for the tulips would last forever. The wealthy from other countries sent for tulips from Holland, willing to pay whatever extravagant price asked for. It wasn’t just the wealthy. The nobility down to the lowest strata of society all sold their property for liquid cash to invest in Tulips. Houses and lands were sold cheap, or sold in exchange for tulips. People from other countries caught onto the craze and money poured into Holland.

(To be continued in the next column.)

Reference: Extraordinary Popular Delusions by Charles Mackay

Kirit Manral is a professional trader, and has been running a mentorship program in trading since 2019, with mentees from around the globe. He can be found on Twitter at @KiritManral

These are the key lessons one can learn from the bestselling book.
View Full Image
These are the key lessons one can learn from the bestselling book.

3.6 Crore Indians visited in a single day choosing us as India's undisputed platform for General Election Results. Explore the latest updates here!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 31 Jan 2023, 12:55 PM IST
Next Story footLogo
Recommended For You
GENIE RECOMMENDS

Get the best recommendations on Stocks, Mutual Funds and more based on your Risk profile!

Let’s get started