- Harlem, February 10th, 1637.
The college meets in their usual tavern
ready to begin a robust day of trading.
To kick things off, one seller decides to test the market
with an easy auction.
He offers twisters at a rate of 1200 gilders per pound,
a standard price,
but no one calls for slate and shock to bid.
Huh? Okay, how about 1100 a pound?
Still no takers.
Things in the Tavern go quiet.
Traders sipping beer, laying out their futures contracts,
stop and look up.
Okay, 1000 gilders. Anyone?
Come on, gentlemen. This is an incredible deal.
No bids, none at all.
The bottom has fallen out of the tulip market and
all of these men who 10 seconds ago were wealthy on paper
now hold contracts full of nothing but empty promises.
(gentle music)
Thanks so much to Brilliant
for helping to bloom today's historical tale.
Even before the bottom fell out of the tulip market,
in early February, 1637,
there were signs that tulip traders were in trouble.
There was, for instance, the simple fact that
prices had risen so high and not just for the
very fine and rare individual tulips,
like the Viceroy and Semper Augustus,
but also the more ordinary varieties had shot up in value,
even those sold by the pound.
And there was probably another kind of volatility.
That of personal taste.
See while everyone agreed which tulips constituted the
top tier of the market, those were generally unattainable.
In the 1620s, there were only around a dozen
Semper Augustus tulips in all of the Netherlands and
all held by one individual.
It was only when he sold a single bulb
that they started to slowly propagate,
taking years for each generation of offsets to fully grow.
But below that, kind of like with art,
it's really a matter of personal taste and fashion.
One variety of tulip might be more popular and sell for more
in Amsterdam than Harlem or vice versa.
And a tulip considered aesthetically pleasing and
desirable today might be upstaged by
a newly hybridized variety emerging the next year.
And we can actually see this by the grandiose names
growers christened into their tulips with.
One named Admiral would get successful
until of course it meant a challenger named
Admiral of Admirals.
Simple novelty did play a role.
And like today's art market,
one person just might think a tulip was great
while another hated it entirely.
Multiple bulbs were promoted as the thing that would finally
unseat the Viceroy or Semper Augustus, but none did.
The most extreme version of this were the efforts to breed
a pure black tulip which was believed, if produced,
to be the most valuable tulip ever.
Rumor had it a grower produced one and offered it for sale.
The next day, a consortium of three growers from Harlem
showed up to see it and amazed
offered him 1500 gilders for the flower.
He accepted, they carried it outside,
then threw it on the street
stomping and grinding their heels into it.
Fool! They yelled.
We would've paid 5,000.
We have a black tulip too,
but now ours is the only specimen.
(evil laughing)
This like many tulip tales at the time never happened.
In fact, only in the modern day
did someone actually manage to create a black tulip.
And even then, it's actually just very dark purple.
Though the myth did inspire in Alexander Dumas novel.
So, there was already trouble
with market volatility and sky high prices
when the tavern scene from the intro of our episode
played out in Harlem.
Over the next two weeks, the downturn spread
with prices crashing across the united provinces.
Now pricing data on tulips is
fragmentary and hard to compare,
but it seems that between February and May,
some varieties dropped 95% in value.
Several theories seek to explain this drop.
Perhaps prices simply got too high and
traders realized they couldn't possibly find someone to buy.
That's the traditional story and would indeed
make the tulip mania the world's first economic bubble.
But there is a rival theory.
See, the crash seems to have begun in Harlem,
which is significant because it has a warmer climate
than the other cities where tulips were traded.
What does that mean, you ask?
Well, perhaps everything
because tulips start to emerge in February in Harlem and
with interest in tulips on the rise for years and
more growers getting into the market,
it would make sense if the 1637 crop
was the largest ever seen.
All those planted seeds and offsets were coming up.
Meaning there was a greater supply of tulips
making the ones people already held less valuable.
Not a bubble, but a simple result of supply and demand.
This would also explain why the
best and rarest variety of tulips
did not dive in prices as badly as the others
because there were still very few of them.
And it also explains a rumor that Dutch troops
were sent to trample the tulip fields
in a bid to stabilize prices.
Now, is that rumor true?
No, not on the slightest, a fiction, total fabrication.
But it is the kind of rumor that would start
if the problem was oversupply rather than a market bubble.
And that's when the repercussions started.
Last episode, we talked about how futures contracts
had been sold and resold with
little or no money changing hands.
And that if the person left holding the contract
couldn't sell the tulip, it would set off a chain reaction
where everyone along the line
didn't get paid what they were owed.
But in actuality, it goes beyond that.
See these futures contracts
were not agreements to buy the bulb,
but the option to buy the bulb.
There was no legal requirements to purchase this tulip.
And it was frankly dubious.
If the promissory notes holding the chain of buyers together
were even legally enforceable.
In most cases, little to no money had ever changed hands
while passing the contract on.
And for the record, while we hear about contracts
changing hands 10 times in a single day,
when historian Ann Goldgar dove into the actual documents,
she never found a chain of ownership longer than five people
but none of that stopped people from going to court,
specifically the court of Holland,
the highest court in the land.
Sellers took their buyers in for nonpayment and
buyers whose friends guaranteed loan
so they could buy a tulip took them to court
for not ponying up.
Basically when the bottom fell out,
everyone just refused to pay everyone else and
tried to sue each other.
And after a short period of looking at this mess,
the court of Holland made an announcement.
Hi, oh, hello.
After investigating the relevant facts,
we at the court believe that the
backbone of our young nation are strong city governments
that can best address these local concerns.
So yeah, cities, you sort this out.
We're done with all this.
We're not even gonna hear tulip cases anymore, so bye.
We'll see you next time we do this meeting.
This is great. Okay.
See you, bye.
Buyers and sellers fought it out in city courts for months
with the result generally being that buyers at most
ended up paying around three to 10% of the promised price.
Most people didn't pay anything at all.
In fact, in a few cases,
debt collectors tried to shake loose tulip money
decades after the buyers were already dead
bugging their next of kin.
In other words, not many people actually lost money
in the tulip crash.
Most of the wealth gained was on paper, not in cash.
And the people who handed over hard currency for tulips
were those that could afford to lose it.
Of course, that's not to say there was no financial pain.
Clearly there were some people hit hard.
Especially the growers,
expecting those futures contracts to be made good.
But it should be noted that Goldgar was unable to find
a single bankruptcy traceable to tulips.
In fact, the tulip trading market appears to have been
very small and mostly carried out among
friends and neighbors.
One theory even has it that the whole thing was a
mostly farcical game to keep people
entertained during the winter.
Regardless the Dutch economy trundled on unaffected.
But while the tulip mania wasn't a financial crisis,
the extreme cycle of boom and bust
initiated a full blown moral panic.
As Dutch Calvinists used it as a way to critique
what they saw as the excesses of capitalism.
After all, was it not sinful to make money
by investing rather than honest work?
Why if that were allowed to run rampant,
the most undeserving lower classes could rocket their way
to the top of society in a most unnatural way.
I hope you can hear me clutching my pearls through my voice.
So join us next time, as the backlash starts,
the myth of the tulip mania is born and
Dutch growers figure out how to sell
what's become Holland's signature flower
to the rest of the world.
Now, everyone knows that tulips have stems, right?
Well guess who else is really into
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Nailed that transition. 10 outta 10, no notes.
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A hearty thanks of legend to Ahmad Ziad Turk,
Alicia Bramble, Angelo Valenciana, Arkhalight Games,
Casey Muscha, Dominic Valenciana,
Joseph Blaim, and Kyle Murgatroyd.
(gentle upbeat music)