- [Narrator] So it's Haarlem in 1636,
and you wanna buy a tulip.
All right, here's what you do.
Head to a tavern and fumble your way through the pipe smoke
to find the tulip traders,
colloquially known as The College.
Now, if you're lucky,
there's an auction going on, but not to worry.
If not, just tell The College you're interested
and they'll set you up with a seller.
Hmm, that's a beautiful violet.
Okay, how much?
Well, that's up to you.
You write your low bid on a slate
and the seller writes their high bid.
Then you pass both of those to The College
and they pick a number between the two
that they think is fair.
And if you both agree, the sale goes through.
And to thank The College,
you buy them a pitcher of wine, and everybody gets sloshed.
Then an hour passes and someone asks you,
"Hey, buddy, you selling that Tulip over there?"
"Oh, Tavernkeep?
More wine, please."
Ain't capitalism grand?
(cheerful medieval music)
Thanks so much to Morning Brew
for helping us bring this history to life.
Last time, we talked about how the Netherlands
fell hard for tulips.
By having one, it showed you were educated and worldly
and put you into a class with the best people,
which was no small thing
in a society like the United Provinces,
which, as a republic,
generally governed through local bodies
and didn't have an aristocracy.
There, status usually came from how rich you were,
plus your standing in religious groups,
trade associations, and roles in local government.
In other words, it was a world that,
while family counted for much,
you could theoretically buy and maintain access to.
Owning goods like tulips, Netherlandish paintings,
or a painting of you with your tulip
could signify that you were part of that world
and help you make connections
with others of your desired class,
which was a big concern in the United Provinces
since their break from Spain
and tolerant religious policies
triggered an influx of immigration.
There were Calvinist immigrants
from the rest of the Netherlands, Jews seeking refuge,
minority Protestants, like the Mennonites,
and Catholics who wanted a part of the lucrative sea trade.
Frequently, these immigrants were artisans
and trade people with money, wanting to establish themselves
in both business and society,
and things like investing in Netherlandish paintings
or tulips helped in that transition.
Oh, you heard right, investing,
because tulips could also bring in cold hard guilders.
And in a society like the United Provinces,
with its stock markets, shipping investments,
and where, thanks to grain imports,
commoners could work as artisans rather than farmers,
making money was on people's minds.
But how exactly do you monetize tulips?
Well, think of it for a moment not as a flower,
but as a, um, ooh, a show dog.
If you buy or raise a show dog and it's a champion,
you could monetize it by selling it.
I mean, you could do that
if you were a cold-hearted monster.
Aww, you're pretty attached to this good boy.
So better to breed the champion dog and sell the puppies,
or have people pay you to breed their dog with yours, right?
With tulips, it's the same thing.
Of course, you could raise and sell a tulip,
and many people went into business as growers,
doing just that, but you could also sell the offsets,
these so-called daughter bulbs
that would become full tulips in two years,
and while there was no guarantee that the resulting flower
would look similar to the parent,
a broken tulip usually stayed broken.
In other words, there was an entire little trade and economy
around tulips with its own markets, practices, and rituals.
First of all, there was a trading season for tulips.
The flowers bloomed in April and May
and taken out of the ground
in what was called lifting time in June.
Thus, summer was the tulip trading season,
when a buyer could inspect flowers before they withered
and went dormant and buy the bulbs directly for cash
before planting them in their own gardens in October,
where they'd pass the winter.
But then someone thought, wouldn't it be great
if you could buy tulips year round?
That's where The Colleges came in.
These were unofficial organizations
based in taverns and inns that created a framework
for bulb trading and a sort of semi-legitimate body.
I mean, you couldn't trade flowers on the stock market,
so they developed a system where bulbs were priced by weight
using a spectacularly small measure called aces,
usually used for gold.
The heavier the bulb, the more it was worth,
but here's the crucial part.
Instead of buying a bulb,
you would buy an option to buy a bulb come lifting time.
This is what's known as futures trading,
and it was already being practiced
on the Amsterdam stock market for grain and lumber.
For example, say person A wants to buy a tulip
and enters a contract with a grower
that agrees, when lifting time comes,
that they'll buy a fine red striped tulip for 100 guilders.
To secure the contract,
person A then pays the grower a 10% deposit.
And if, when lifting time comes,
that tulip is worth 150 guilders,
person A can pay the remaining 90 guilders
owed to the grower,
and then sell it for 50 guilders of profit.
But you know, why wait that long?
If person A made a contract to buy 100-guilder tulip
and person B offers them 150% contract
a month before lifting time,
it would be smarter for person A
to take the money right now, right?
I mean, it removes the risk.
So now instead of trading bulbs,
you are trading for a piece of paper
saying you own the option to buy those bulbs.
Hmm, starting to sound a bit familiar.
But wait, there's more.
See, those people buying those contracts
are often not actually handing over money for them,
just a promise to pay when they eventually sell the tulip.
So imagine if, after person B buys the contract
for 150 guilders, they sell it to person C for 200.
Come lifting time, person C buys the tulip
and sells it for 250 guilders,
then keeps 50 guilders and uses 200 to pay off person B,
who keeps 50 guilders and pays person A 150.
Boom, everybody profits.
I mean, what could possibly go wrong
with this paper chain of dubiously enforced contracts
for a bulb that's still in the ground
and that no one who's buying it
has ever actually seen, right?
Everyone gets instantly rich,
as long as person C can sell that tulip.
Wait, what if they don't?
This type of trading was called the wind trade,
where nothing was physically exchanged
apart from promissory notes,
a practice that became far more dangerous
as some traders practiced short selling,
the act of taking out a loan
you don't have the capital to cover.
I mean, after all, if you have 50 guilders,
why just put five guilders down on one 50-guilder tulip
when you could put five guilders down
on ten 50-guilder tulips, huh?
I mean, if the value goes up,
it's practically not even a risk.
And a lot of people suddenly had money to spend
and gamble on the trade.
There were the rich with their new money, sure,
but there had also been a terrible plague epidemic in 1636
that had killed a significant amount
of people in the Netherlands,
meaning the survivors were suddenly flush
with inheritance money, so why not play around with it?
Tulip prices in 1636 and 1637 went to the moon,
and not only the rare varieties that were always expensive,
but also baskets of common tulips sold by weight.
In a single month, a relatively common
yellow and red tulip variety called Swisters
increased in value twelvefold,
from 125 guilders per pound on December 31st, 1636,
to 1,500 guilders per pound on February 1st, 1637.
Oh, and for reference,
this is a time period where a skilled carpenter
made around 250 guilders a year, so, yeah.
Tulips got so valuable
people were sleeping in their flower beds to guard them
or rigging strings around their gardens tied to bells
so they could be alerted of any garden raiders.
And then, on February 5th, 1637,
the biggest profit of the craze bloomed,
for that was the day the whole tulip collection
of Wouter Winkle went up for auction.
Winkle had been a tavernkeeper and grower,
known to have one of the greatest collections
of rare tulips in all of the Netherlands.
But in the summer of 1636, he passed away,
leaving his several children in the care of an orphanage,
so they would auction his collection
to give his kids something to live on.
The bidders were invited to come and look through
a 124-page watercolor catalog showing the collection,
though, by that time, the most expensive
had already been bought in a private sale,
a fine admiral tulip with an offset for 5,200 guilders
and a pair of violet tulips for 3,200.
It was a frenzy.
Tulips went for prices two or three times
what they'd been demanded a year before,
and when the smoke cleared,
the several orphans had made an unthinkable 90,000 guilders
from the sale in cash, enough that, if they were frugal,
none would have to work again.
Oh, and they would be grateful
the sale happened when it did,
because just days later, the tulip bubble burst,
and everyone's favorite floral moonshot
came crashing back to earth. (dramatic music)
You know, I'm no tulip scientist by any means,
but it seems like the oncoming crash
could have been mitigated a bit
if folks had been more informed.
If only, back in the day, they had access to Morning Brew,
and, you know, email and smartphones
and a series of tubes.
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(quizzical music)