Magazine article Risk Management

Tulipomania

Magazine article Risk Management

Tulipomania

Article excerpt

Every Spring, my family kicks off our annual gardening season with a visit to the local greenhouse. Even though we go there intending to buy just a few things, we inevitably go home with a vehicle full to the roof with flowers of every kind, which makes our home look beautiful, but it also gives me cause to grumble. After all, these flowers are not cheap, and it grinds me that so few of them last. Having to buy them anew each season has me thinking that I am the target of some dire plot thought up by the botanists of the world.

Of course, my annual trip to the greenhouse really isn't much to complain about. As far as the cost of flowers go, the carloads I purchase are virtually free when compared to what people spent during the great Dutch tulip craze of 1593-1637. In 1593, the Flemish botanist Charles de L'Ecluse managed to breed Turkish tulips to withstand local climatic conditions in the Netherlands. At the time, tulips were a very popular luxury item because of their unusually vibrant color (compared to other European flowers) and they became status symbols among the upper class. Many began competing against each other for ever-more spectacular specimens, and this, coupled with the newly established practice of tulip breeding, touched off a period of speculation that made the flowers grossly over-valued.

By 1623, a single bulb could fetch up to 1,000 Dutch florins--nearly seven times the average worker's annual income at the time. Tulips virtually became a kind of currency, used to barter for livestock, land and real estate. Prominent tulip traders were bringing in up to 6,000 florins a month, and things had not even hit their peak yet. In 1635, a consortium of merchants bought 40 bulbs for the mind-boggling sum of 100,000 florins. To understand the extreme values being traded here, consider the documented trade of a bulb worth 2,500 florins for the following: six cubic meters of wheat, 12 cubic meters of rye, four oxen, eight pigs, 12 sheep, 128 gallons of wine, 1,000 gallons of beer, 500 gallons of butter, 1,000 pounds of cheese, a bed, a suit of clothes and a silver drinking cup. All for just one bulb.

Needless to say, such an overheated environment led to some interesting mix-ups. There is one story of an English botanist who, while visiting the conservatory of a wealthy Dutchman, mistook a 4,000-florin bulb for an onion and dissected it out of curiosity. Doing him one better was a sailor on a merchant ship who accidentally mistook a 6,000-florin bulb belonging to his employer for an onion and ate it with his breakfast of red herring. …

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