I want to talk about the human propensity for greed, by first discussing a small family of viruses which ignore humans completely - the Potyviridae. These five related parasites, each 100th the size of a bacteria, do not infect humans, but they do infect and quickly kill lilies – after all, the word virus is Latin for poison.
In response, lilies evolved the tulip, resistant enough to the Potyviridae that they could reproduce for perhaps a dozen generations before succumbing to these miniature succubus. And that's when humans come into the picture, because long before humans knew there was such thing as a virus, they found a way to ruin their lives, and the lives of thousands of their fellow humans, by investing in Potyviridae - which they did not know even existed.
See, tulips evolved from lilies where Europe blends into Asia, in the Ferghana Basin, north of Afghanistan, east of the Caspian Sea and west of Lake Balkhash - what is today Uzbekistan. The basin is surrounded by mountains, and in this isolated test tube 36 different varieties of wild tulips developed over a few thousand years.
Some had multiple stalks and blooms, some only one. The blooms could be white, red, yellow or orange.
But when infected with Potyviridae the blooms would be wildly stained as if a child had asymmetrically dripped paint over them. This was the normal interaction between a species and a virus which preyed on it. But then the unexpected happened.
In the 8th century, humans living in the Ferghana Basin converted to Islam, and tulip bulbs were transported westward to Islamic population centers, as a beautiful curiosity, the more so because of the fanciful patterns they displayed when infected by Potyviridea, which traveled with its host bulb. And because the bulbs could be transported thousands of miles, because they were purely ornamental, and because they had to be replaced every decade or so, to own and grow the infected tulips became a display of extreme wealth, conspicuous consumption, restricted to the ruling caliphs in Baghdad and later Istanbul.
The Dutch Revolt of 1581 freed the local merchants from paying protection money to Spanish Catholic royalty. Left to their own devices, the Protestant capitalists were interested in just two things, making money, and showing everybody how much money they were making.
The “Nouveau riche” adopted all the accouterments of their noble predecessors, including fine clothes, large homes, fancy carriages, personal portraits, and within ten years, ownership of the exotic tulip, so named because its bloom resembled a Turkish turban (above). And it was now that human greed is unleashed in our story, when rare infected tulips pass from being a de rigueur symbol of wealth, to a means of measuring and displaying that wealth.
The Lord, it seemed, had designed the tulip to make humans rich, and more than a few Calvinist ministers in Holland pointed this out. The plant blooms for only a week or two in the spring. And having proven its colors, after the leaves have died back, the bulb may be dug up and sold and traded, and stored almost indefinitely in a cool dry place before being returned to the soil where it would sprout and bloom again.
So the tulip market was set by the plant itself, each fall. The rest of the year traders would buy and sell future contracts on the bulbs in storage or in the ground, gambling on their future vitality, which, considering their most desirable pattern variations were being determined by an invisible virus that was slowly killing the plant, was never a sure thing.
The futures market in tulips began to drive the price of tulips upward, until, within twenty years of Clusius' first experiments with bulbs in 1610, the burgomasters felt required to make it illegal to sell tulip futures “short”, meaning to gamble that the price for bulbs in the ground would drop before the next spring bloom.
A disaster in the tulip trade was predictable as far back as the summer of 1623, when a bulb of the rarest variety (only 10 existed), Semper Augusttus (above), was sold for a thousand guilders. The most skilled carpenters earned only 250 guilders a year, and Carolus Clusius, the man responsible for all of this, had earned a mere 750 guilders a year. But when the bulb of the Semper Augusttus (above) was pulled from the ground by it's wealthy owner, Adriaan Pauw, he found it had produced two “daughter” bulbs, meaning the value of each of Adriaan's Semper Augusttus bulbs had just been reduced by 15%. So he stopped digging them up.
The law against selling tulip futures short had been reaffirmed in 1621, and again in 1630, and yet again in 1636. So it seems the practice was continuing and getting more popular. And clearly many burgomasters saw the practice of betting on a catastrophe as dangerous. At the same time no penalties were ever attached to a violation of these laws, so traders kept making money with their bets.
The general feeling in Holland seems to have been (as it is in America today about big banks and hedge funds, and corporate geniuses and bit coins ) that everybody could continue making money as long as everybody stayed greedy but smart. Except, that has never happened in all of human history.
And it did not happen in 17th Century Holland - first because the traders were not trading in what they thought they were trading in, which was not tulips, but in a virus which infected tulips. And second, since they were assuming they could stay greedy and smart, they were doomed to fail since in all cases and all the time, greed makes you stupid.
Adriaan Pauw (above) was smart. He kept the value of his Semper Augusttus high by the simple expedient of not digging up his bulbs to sell them, which prevented anybody from noticing that they got weaker with each generation.
But he did go to considerable expense of constructing a gazebo in the garden of his estate at Heemstede (above) , "... a weird contrivance of wood and cunningly angled mirrors that stood in the middle of the tulip bed...From a distance...Pauw’s single tulip bed looked densely planted with hundreds of brilliant flowers. It was only ...an optical illusion. The mirrors of the wooden cabinet had turned the few dozen tulips in Pauw’s collection into a spectacular profusion." Thus more than doubling the impression of his wealth. Which made it easier for Pauw to borrow money. Which he did, a lot.
In 1624 Pauw's 12 prized Augusttus were valued at 1,200 guilders each. The next year that went up to 2,000 guilders each, and in 1626 up to 3,000 guilders for a single bulb. That was never sold. Inflation spread like a virus to all varieties of virus infected tulips.
During one two year period the price for a “General of Generals” Tulip (above) bulb increased from 100 guilders to 750 guilders. On 5 February, 1637 at an auction held in the lake side fortress village of Alkmarr, where 70 rare bulbs sold for 53,000 guilders, an all time high - several hundred million American dollars today. Who could resist such temptation?
Not Pauw. He finally sold a single bulb of Augusttus (above) for 5,500 guilders. But the bloom was about to fall off this rose.
Just two days earlier and 20 miles to the south, in the village of Harrlem, a tulip investor club – called a college – decided to see how deep the demand for tulips really was. They held an auction of a huge quantity of common tulip bulbs.
Only one buyer showed up. Realizing he was the market, he demanded a 35 % discount. And he got it. And when word of this investment disaster reached Alkmarr prices of tulips collapsed like the price of baseball trading cards in 2007 or crypto currencies in 2022. That year of 1637 many varieties of tulips would quickly lose 95% of their value.
Families went bankrupt - heads of households and sons committed suicide - how many has become a subject for much debate in modern economic circles. Many victims sought a new start in the New World. Said one Calvinist, it was “ God’s Just Plague-Punishment, for the attention of the well-to-do Netherlanders in this bold, rotten century.” It was the usual, "Heads, God wins; tails human lose" philosophy. But why should God get involved when there are so many lawyers around?
There were endless lawsuits. And because every buyer wanted out of their futures contracts and every seller wanted them enforced, the politicians did nothing. Most futures contracts were quietly closed out for 10-15% of their paper value.
A lot of people have tried to claim the Tulip Mania was not a “market bubble”, like all the other market bubbles since. But the best description of what went wrong that I have found was written by A Maurits van der Veen, from the Virginia college of William and Mary. (BUBBLE)
He wrote in 2009, “...it became increasingly difficult to distinguish those with solid private knowledge from those who were simply following the crowd... these constituted a new kind of trade, no longer linked to individual bulbs.” In other words, greed driven investors were betting not on tulips, but on other tulip investors - call it the tulip derivatives market. That was where the tulip market had first blown up. Sounds like a market bubble to me. And when Tulip mania died, so did some of the most valuable tulips, because their viruses were not passed on. There has not been a real Semper Augusttus bloom since the middle of the 17th century.
There are many who still insist the Semper Augusttus (above) was the most beautiful tulip that ever existed, as there are many who insist an unregulated “free market” is morally and functionally superior to regulated markets. And people are still buying Crypto coins because greed always makes people stupid.
But Semper Augusttus was not a true species, but the by-product of a Potyviridae (above) devouring the tulip from the inside, consuming its genetic code, and eventually killing and devouring the bulb.
The infected bulbs (above) lived no longer than the rich man who had the fortunes to maintain their artificial existence. Modern tulips are far stronger, their colors stronger and their genes more resistant than the frail infected flowers that so entranced the “Nouveau riche” of 1637.
And because of that, billions of people today enjoy tulips Some day, perhaps, the nouveau riche of a new age will come to admit that like the Potyviridea infected tulip, an unregulated “free market”, is merely a splash of color which distracts your attention from the parasite devouring capitalism from the inside - unrestricted uninhibited greed.
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