Tulips Went Viral: The First Speculative Bubble

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Although tulips are typically associated with European countries, especially the Netherlands, the origin of this beautiful flower is located in West and Central Asia where it was cultivated probably as early as the 10th century. Tulips were brought to what is now known as Turkey by nomadic tribes. In the late sixteenth century, Suleiman the Magnificent of the Ottoman Empire presented Roman German Embassador Busbecq Oghier Ghislain with a series of bulbs of these plants. Back in Europe these bulbs were delivered as a gift to the Roman Emperor Ferdinand I and to the botanist Carolus Clusio who took them to the Netherlands when he was appointed Professor of Botany at the University of Leiden in 1593. Thereafter the tulips have been associated with the Netherlands, a country that poses the most important production of this plant. Currently there are about 3,000 varieties of tulips in organized in 15 classes.

Between 1634 and 1637, a period that coincides with the Dutch Golden Age named for the flourishing of trade, science, arts and Dutch military power, this beautiful flower of deep color not comparable to any other flower of the time and which only lasts 3 to 7 days, gave origin to the first speculative follies of history. The tulip bulbs and flowers, with their great variety of color, quickly became an element of luxury and economic status especially with the appearance of flowers of exotic colors with white or yellow betas in forms of flames and other arabesque figures which, highlighting the red or purple original flower varieties, became highly sought after. Majestic names were given as “General General” or “Admiral” although the more expensive of all and of course highly coveted was called “Semper Augustus”.


                                                                               The Viceroy

                                                                               The Viceroy


What was not known at the time, was that the reason why some plants had these betas of colors, was a virus: tulip mosaic virus. The tulip mosaic virus belongs to the genus Potiyvirus (whose name derives from the more typical virus of the group: Potato virus Y) and the family Potyviridae. They are non-enveloped viruses with a single positive-sense RNA molecule. It is believed that these viruses evolved between 6,000 to 7,000 years ago. The tulip mosaic virus (known in English as Tulip Breaking Virus or TBV) also affects the lilies. The virus causes a redistribution of epidermal anthocyanin pigments and their segregation in irregular stripes, bars, thick stripes, spots, or “flames.” Between the lines and stretch marks appear pure white or yellow spots. Both sepals and petals are affected. Often this interruption of color (color “broken” or “break”) is restricted to strokes in the margins and tips of the petals and sepals. Flowers of pink, red and purple colors develop striking changes. Those with dark streaks develop even darker colors. White and yellow tulips, however, do not break because they do not have anthocyanin pigments. The tulip plant can reproduce from seed (a process that takes 7-12 years) or from bulbs. The bulb in turn can lead to two or three seeds and secondary buds. These secondary buds plants will flower in a variable period of time of one to three years while the original bulb last only a few years. The mosaic virus affects the bulb but not the seeds. The resulting color variation will be random (beautiful or not), only reproducible by growing a plant from a bulb or its secondary buds. But the beauty of the tulip flower enhanced by the infection of this virus has its biological price: the bulb and plant life will be shorter and once dead the variety in particular will also disappear. The reproducibility rate of the bulb will also be reduced.

By 1636 all the conditions for the development of a speculative bubble were present: high demand for the product, short product availability, a group of individuals willing to pay good money for something that will offer so degree of social status and a dream of great economic return. To complete the scenario, plague affected the Netherlands between 1635 and 1636 and decimated the population (with a loss of approximately 20% of the population) and significantly decreased labor availability.

Until 1634, professional growers conducted tulips trade, but speculators enter into action later that year. Tulips trade had two faces: flowers were traded between April and May and tulip bulbs between July and September. What about the rest of the year? It was future market time! Notarized contracts were made for the bulbs and their offspring that would be delivered in the future. That way it came to produce a true financial speculation using credit notes with promises for the future. It’s what came to be called “windhandel” or “wind trade”. Some individual bulbs could be resold up to 5 to 10 times in a day for up to ten to twenty folds higher its initial purchase value. Everyone, regardless of social class to which he belonged, wanted to take the advantage of the opportunity hoping to score big in a market driven by fashion and promises of great sales to France and the rest of Europe. Trade was so broad that traders met in taverns in groups called “college” (schools) where the negotiation was made only subject to minimal regulation. Buyers had to pay a 2.5 % (up to three guilders per trade) and all contracts were between individuals (not the Exchange). By 1636 the tulip bulb had become the fourth major export of the Netherlands – after gin, herring and cheese.

(A Satire of Tulip Mania by Brueghel the Younger (ca. 1640) depicts speculators as brainless monkeys in contemporary upper-class dress. In a commentary on the economic folly, one monkey urinates on the previously valuable plants, others appear in debtor’s court and one is carried to the grave)

 Wagon of Fools by Hendrik Gerritsz Pot, 1637

 Wagon of Fools by Hendrik Gerritsz Pot, 1637


To get an idea of the magnitude of this economic bubble notice this: in the seventeenth century a worker could expect to earn 150 florins a year. In 1636, 40 bulbs were reportedly sold for 100,000 florins. A tulip bulb came to be sold for a price equivalent to 24 tons of wheat. The sales record was for a Semper Augustus tulip (only one owner had this variety: close to 6,000 guilders for a single bulb!

The bubble exploded quickly (February, 1637). The prices fell dramatically as expectation of sells were not met. The agreements were not enforced, and as often happen in these cases, some people won and many others lost.

Virus … divine treasure.

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