The history of the tulip, their impact on Wall Street, and how the telephone game ripples into modern economics.

The history of flowers is not one generally teeming with gossipy speculation, economic scandal or international intrigue. This is a bit of a shame, as ‘spicy dish’ and ‘hot tea’ are both synonymous with gossip and the products of flowering plants. Be that as it may, one of the most notorious and well known bits of mercantile scuttlebutt came to us (400 years too late) from the Dutch tulip market. Thanks in large part to the sub-prime/housing and dot-com bubble bursts of the last 25 years, the story of the 17th century tulip bulb exchange resurfaced as a cautionary tale of market exuberance. Christened “Tulip Mania”, the financial debacle became so seductively dubious that it inspired textbooks, novels, and most recently a widely panned 2017 production of historical cinematic fiction starring Alicia Vikander: Tulip Fever.

Viceroy tulip displayed in a 1637 Dutch catalogue offered for 3000 florin

The story goes that tulips were coming into fashion at the same time the Dutch Golden Age was creating spectacularly wealthy people. In fact, the Netherlands was a leading economic and financial power of the age and enjoyed the highest per capita income in the world from about 1600 to 1720. As riches grew, so did the pursuit of rare and glamorous things. The tulip was brought to Europe in the 16th century from Persia (the name is thought to be derived from a Persian word for turban) where it had been cultivated as early as 1055. It was recognized immediately as different from other flowers known to Europe at that time—the intensely saturated petals seem to have been a draw. The flowers became inextricably linked to status and were a coveted luxury item. A profusion of varieties followed, including the celebrated Rembrandt breaks.

It is worth pausing here to discuss the breaks. Just what a break was wasn’t known for many centuries. We now know that the color of a tulip is formed from two pigments working in concert; a base color that is always yellow or white, and a second laid-on pigment of anthocyanin (see Scilla or Lungwort for a further discussion of this interesting molecule). The mix of these two hues determines the visible unitary color. Should the bulb be infected with the tulip-specific mosaic virus, known as the "tulip breaking virus", the infection will suppress anthocyanin and the base color will be exposed as a streak. Figuratively, the virus ‘breaks’ a petal into two or more colors. The multicolor effects of intricate lines and flame-like streaks on the petals are vivid and spectacular, and were deeply prized by the exotic hungry Dutch. Truly broken tulips are not cultivated anymore; the closest available specimens today are part of the aforementioned Rembrandts – so named because Rembrandt painted some of the most admired breaks of his time.

Anonymous 17th-century watercolour of the Semper Augustus

Enter the Tulip Bulb Exchange. Tulips bloom in the spring for about a week and then go dormant in mid summer. During this time, bulbs could be purchased on the spot (in the so called ‘spot market’) while they could easily be uprooted and moved about. Throughout the rest of the year, however, tulip traders had to speculate on what might be popular, available, and/or profitable the following year. Florists, as they were called, could sign forward contracts to buy next season’s tulips, creating the world’s first futures market. As the flowers grew in popularity, traders paid higher and higher prices. Particularly inflated were the prices of the breaks, which were notoriously fickle and slow to propagate. By 1635, speculation has soared so prodigiously that contract offerings were outpacing home values and beyond. A sale of 40 bulbs for the eye watering sum of 100,000 florins was recorded in that year; for context, a skilled laborer might earn 300 florins per annum and purchase 8 healthy swine for 240. The most egregious and compulsive abuse of good sense took place in February of 1637 when 12 acres of land were reportedly traded for a single Semper Augustus bulb.

The collapse began in Haarlem February 3rd, when, for the first time, buyers apparently refused to show up at a routine bulb auction. As realization set in that there were no buyers willing to pay the increasingly inflated prices, the demand for tulips collapsed, and prices plummeted and the speculative bubble burst. By May they had reached rock bottom.

At least, that is how the story has always been told. Attention to the rapid rise and fall of the tulip exchange was first put to light by Scottish journalist Charles Mackay two hundred years after the fact in his Extraordinary Popular Delusions and the Madness of Crowds, published in 1841, and it is from this work alone that nearly every other account of the event is based. Mackay’s version itself was sourced heavily from another late account, a 1797 work by Johann Beckmann titled A History of Inventions, Discoveries, and Origins which used satirical pamphlets and anecdotes mocking high society as evidence. Mackay was the Malcolm Gladwell of his day, a masterful craftsman of compelling stories but not one to put facts or research in the way of entertainment. The truth is that research is difficult because of the limited economic data from the 1630s. But the so called burst did nothing to topple Dutch prosperity.

“Far from it. Tulipmania was followed by a century of Dutch leadership in almost every branch of global commerce, finance, and manufacturing”

— Anatole Kaletsky.

Other historians have questioned Mackay’s narrative as well. “My problem with Mackay and later writers who have relied on him—which is virtually everybody—is that he is taking a bunch of materials that are commentary and treating them as if they’re factual,” says Anne Goldgar, professor of early modern history at King’s College London. To get the real scoop on tulip mania, Goldgar went to the source. She spent years scouring the archives of Dutch cities like Amsterdam, Alkmaar, Enkhuizen and especially Haarlem, the center of the tulip trade. She painstakingly collected 17th-century manuscript data from public notaries, small claims courts, wills and more. What Goldgar found wasn’t an irrational and widespread tulip craze, but a relatively small and short-lived market for an exotic luxury.

“It’s a great story and the reason why it’s a great story is that it makes people look stupid… But the idea that tulip mania caused a big depression is completely untrue. As far as I can see, it caused no real effect on the economy whatsoever.”

— Anne Goldgar

Some individuals did, in fact, offer a great deal of capital for what today we find wilted and unloved on the clearance rack at Walmart. The most expensive tulip receipts that Goldgar found were for 5,000 guilders, the going rate for a nice house in 1637. If you’re wondering, a guilder is the same unit of currency as a florin and were referenced in the 1987 classic The Princess Bride (you may recall the Guilder’s were the sworn enemy nation of the Florins). But those exorbitant prices were outliers. She only found 37 people who paid more than 300 guilders for a tulip bulb.

Thus, as with so many things we accept as fundamental and couldn’t-be-otherwise, Tulip Mania was contextually much different than our contemporary perspective suggests. In the wild it behaved much more as a fickle fashion craze than an economic disaster.

In the end, the reason so few showed up in Haarlem to purchase contracts that day in February was likely due to an outbreak of bubonic plague. And so, considering much of the preoccupation with tulips arose from viral induced varietal iterations, it could be said that infectious disease was both the cause of and end to Tulip Fever.