The Infected Petal: The History of Tulip Mania - Episode 6

Aleksandra Ganeva Peiry: I want to tell you a story about a flower. Not a particularly useful flower. It doesn't have a scent worth speaking of. It blooms for about two weeks a year, it can't be eaten. It does nothing, practically speaking, except be beautiful in a specific, fleeting way that made a particular group of people in a particular time and place completely lose their minds. In the winter of sixteen thirty six to sixteen thirty seven, in the Dutch Republic, one of the most sophisticated and commercially advanced societies on earth, the price of certain tulip bulbs rose to extraordinary heights. A single bulb of the most coveted variety reportedly changed hands for sums equivalent to a skilled craftsman's yearly salary. Contracts for bulbs that hadn't even been dug up yet were being traded at dizzying speed. And then, in the space of a few days in february sixteen thirty seven, it stopped. prices collapsed, the contracts became worthless, and the story that followed of mass hysteria of bakers and cobblers betting their houses on flowers of a nation brought to its knees by a bulb became perhaps the most famous financial cautionary tale in history. Here's what I find most fascinating about Tulip Mania. The popular story is only partly true, and the real story, the more complicated one, the more human one, is in some ways even more interesting than the legend. I'm Alexandra, welcome to the hidden life of things, everyday history for anyone who's ever looked at something ordinary and wondered. How did this actually get here? Tulips are not Dutch. This feels worth stating clearly because the association is now so strong that it's easy to forget. the tulip originated in the mountains of Central the regions we now call Kazakhstan, Kyrgyzstan and northwestern China. While tulips still grow there today, They were cultivated and beloved in the Ottoman Empire centuries before Europeans ever saw one. the Ottoman court was deeply devoted to the tulip. It appears constantly in Islamic art, tile work, textiles and poetry of the period. The reign of Sultan Ahmed III in the early eighteenth century is actually called the tulip era in Turkish history, a period of relative peace and cultural flourishing in which the flower became a central symbol of beauty and imperial refinement. The word tulip itself comes from the Turkish because of the flower's shape when in bloom. arrived in the Dutch Republic in the late sixteenth century, brought back by traders and diplomats and were first cultivated seriously by a botanist named Carolus Clusius at the University of Leiden around fifteen ninety four. The Dutch, being excellent horticulturalists with a deep interest in unusual and exotic plants, immediately took to them. within a few decades, tulips had become fashionable among the wealthy as a symbol of taste, prosperity and connection to the wider world. not all tulips were equal, and the inequality at the heart of the tulip crazed was biological, not social. Certain tulips displayed an extraordinary feature, their petals broke into complex patterns of contrasting colours, stripes and flames of red or purple on white or yellow. broken tulips were extraordinary looking things, intricate, seemingly painted, unlike anything else in the garden. The most famous was the Semper Augustus, white petals with vivid red streaks, perfectly symmetrical, but considered by those who saw it as possibly the most beautiful flower in existence. We now know that this colour breaking was caused by a virus, breaking virus, transmitted by aphids. An infected tulip was, in a botanical sense, a sick tulip. The very quality that made it so stunning was the symptom of a disease. nobody in the seventeenth century knew this. They only knew that broken tulips were rare, That they were beautiful and that reproducing them reliably was nearly impossible. Scarcity plus beauty plus mystery is a formula for value, and once tulips became genuinely valuable, something new entered the picture. The most important thing to understand about tulip mania is that it was primarily a futures market. In the Dutch Republic of the 1630s, the bulb trading season was short. could only be physically handled and transported during the summer months when they were dormant. the rest of the year, if you wanted to buy or sell tulips, you bought or sold contracts, promises to deliver specific bulbs at a future date, at an agreed price. This is a futures contract. It's a financial instrument that exists in commodities markets to this day. Futures trading is not inherently irrational. Farmers use it to lock in prices before harvest. Merchants use it to manage risk, but futures markets can also attract purely speculative activity. People buying contrac because they want the tulip bulbs, but because they expect the contract to be worth more later when they can sell it to someone else. By the winter of sixteen thirty six this is what was happening in the tulip market. Contracts were changing hands rapidly, prices were rising, and critically the people trading them were not predominantly bakers and cobblers and ordinary citizens of popular legend. Modern historical research, particularly the work of historian Anne Goldgar at King's College London, has substantially revised the popular story. Goldgar spent years tracing the actual participants in the tulip trade through Dutch notorial records contracts, disputes, wills. What she found was that the trade was largely confined to a network of merchants, skilled craftsmen and prosperous artisans in specific towns, primarily Harlem and Amsterdam. It was a significant community, perhaps a few thousand people. It was not a national craze involving every class of Dutch society. The catastrophic ruination of ordinary families, the cobbler who lost his house, the baker who bet his savings while not impossible appears mostly in the satirical pamphlets that followed the crush, Written by Calvinist moralists who saw the whole affair as a parable about greed and the corruption of commercial society. These pamphlets were not journalism, they were sermons in disguise. The actual crash began in early february sixteen thirty seven, probably in Harlem, when an auction failed to attract buyers at expected prices. Confidence evaporated overnight, became insellable, prices collapsed, and The dispute that followed over whether contracts made at peak prices were legally enforceable was eventually settled by the Dutch government, which ruled that futures contracts signed during the Mania could be voided for a modest penalty fee. Most contracts were cancelled rather than honored. The economic damage was real but contained. Dutch Republic's broader economy, which was at this point the most sophisticated in the world, was not ruined. Trade continued, the golden age went on, within a few years you'd have been hard pressed to find evidence of a national economic catastrophe. So why do we tell the story the way we do? The popular version, mass hysteria, everyone from servant to nobleman caught up in a flower fever, a nation brought low by botanical irrationality, primarily from one Extraordinary Popular Delusions and the Madness of Crowds, written by a Scottish journalist named Charles McKay and published in eighteen forty one. McKay had a gift for narrative and a clear thesis that crowds are irrational, That history is full of collective madness and that Tulip Mania was the perfect opening example. His account was vivid, dramatic, and deeply satisfying as a cautionary tale. It was also, as Goldgar and other historians have documented, drawn largely from the satirical pamphlets of sixteen thirty seven, those Calvinist moral fables, rather than from the actual notary records. was repeating a myth that had been circulating for two centuries his telling was so compelling that it became the definitive version for the next two centuries after him. The story has been repeated and embellished ever since and Every financial crisis generates a new wave of tulip mania references. it appears in economics textbooks, in investment advice, in journalism about cryptocurrency and housing bubbles. It has become the universal shorthand for irrational market behavior for the folly of human greed. fact that the actual event was more limited, more complex, more confined to a specific social network of sophisticated traders Then the popular story admits this doesn't make it a boring story. If anything, it's more interesting. Because what the tulip menia actually shows us is not that crowds go mad, it shows us something more specific and more applicable that in the new unregulated financial instrument, the futures contract, traders can lose connection between the price of something and its underlying reality. That when a market is driven by what people expect other people to pay rather than by the intrinsic value of the thing being traded, it becomes unstable. That the crash came not because people were irrational, because they were all doing the same rational thing, expecting the next person to pay more until suddenly the next person didn't. That mechanism has appeared in every financial bubble since. tulip was just the first time we wrote it down carefully enough to study it. and there is one more detail about the Semper Augustus, most beautiful, most coveted, broken tulip, one that commanded the highest prices of all that I can't stop thinking about. After the crash, it disappeared. The variety died out. Whether from the viral disease that created its beauty or neglect or the simple echoes of the collapse, no one knows. most valuable flower in the world for a few extraordinary months no longer exists. Somewhere there are seventeenth century Dutch paintings of it, and that's about all that's left. Let me tell you something about the tulip that is completely true and which the popular story never mentions. the broken tulip, the one with the streaked flamed petals, was genuinely objectively extraordinary to look at. accounts from people who had no financial stake in the market describe its beauty in terms that make it clear this was not just hype. These flowers were remarkable. The collar breaking virus in creating something biologically unusual had also created something visually stunning. In other words, the tulip was valuable partly because it was actually beautiful. The market inflated that value to absurd heights. But it started with something real. matters because the easy moral of the tulip story value is just a story we agree to believe is not quite complete. Value is never purely imagined. It always has a substrate. The tulip had beauty and rarity. Bitcoin has scarcity and cryptographic security. The dot com companies had real technology, even if their valuations were fantasy. the problem in a bubble is not that the underlying thing has no value, it's that the price detaches from the value and starts responding only to itself. The philosopher and economist John Maynard Keynes described a certain kind of market as being like a beauty contest where the judges are not trying to pick the most beautiful contestant. But trying to pick whichever contestant the other judges are going to pick. Once a market gets there, once the question is not what is this worth, but what will someone else pay, it becomes self referential. And self referential systems are inherently unstable. tulip traders in Harlem in 1636 were not stupid. were participating in a market that was behaving rationally by its own internal logic up until the moment it stopped. question of when to get out of such a market is genuinely hard. Most of the people who lost money in tulip mania were not fools who believed in flowers. were traders who correctly identified a rising market and incorrectly estimated how long it would keep rising. We're still making exactly the same mistake. In every generation, in every market, the flower changes, the mechanism does not. tulip is not a story about the Dutch, it's a story about us. About the very specific way human beings price things when those things are scarce, beautiful, and being watched by other people who also want them. The next time you see a price that seems impossible for a piece of digital art, a rare sneaker, a property in a city where no one can afford to live, remember the Semper Augustus. Remember that the most coveted flower in the world once commanded the price of a craftsman's yearly salary. Remember that it also no longer remember that at the time the price made perfect sense to everyone involved. So the next time someone tells you the story of Tulip Mania, the bakers, the cobblers, the entire nation grippled by flower fever, can nod and appreciate the story, The mania was real, the crash was real, the human mechanism at the heart of it, the moment when a price starts feeding only on itself was absolutely verifiably real. But the popular story is a myth, and the myth is popular because it's satisfying. Because we want history to be a morality play, and the tulip delivers one. The Semper Augustus is gone. The bricked up windows of the previous episode are still standing. leaves truly the strangest monuments. If you'd like to keep pulling at the threads of the stories everyone thinks they know, is the place to do it. The hidden life of things is on Spotify, Apple Podcasts, and all the usual platforms. Follow so you never miss an episode and if something here surprised you, tell someone about it. Good stories deserve to travel. Next time on the hidden life of things, here's something to sit with until then. It is everywhere and nowhere at once. It has no weight, no smell, no texture you can hold. And yet it travels right now as you listen to this through the walls of the room you're in, through your body, across oceans at the speed of light. most of human history, if you wanted to see someone's face, they had to be standing in front of you. One invention changed that. And the story of how it happened stretched from a darkened room in eleventh century Cairo to a Christmas day in a Japanese laboratory to a physicist in Manila who was fifty years ahead of his time. What is it that we built and why did we want it so badly? Stay curious, I'm Alexandra and I'll talk to you next week.