‘Tulipomania’ Revisited : 350 Years Later, There’s Talk of Full-Bloom Folly

If $20 billion sounds like a lot to pay for RJR Nabisco’s assortment of Oreo cookies, Ritz crackers and Camel cigarettes, it’s nothing compared to what the Europeans were paying for tulips back in the 1600s.

But as examples of what today’s psychologist would call “groupthink,” there are enough similarities that the recent mania for food companies cooked up on Wall Street has been likened to the tulip mania that blossomed in Europe from 1634 to 1637.

It was a bizarre period of speculative madness when the lack of a tulip was evidence of bad taste, bulbs were sold on the Amsterdam Stock Exchange and tulip jobbers speculated in the rise and fall of tulip stocks.

One boob was said to have forked over 24 farm animals, 1,000 pounds of cheese, four tons of beer and more for a single bulb of a tulip variety known as the Viceroy. And a botanist was jailed for cutting up a tulip bulb he mistook for an onion.

The analogy between 20th-Century food mania and 17th-Century tulip mania probably should not be carried too far. The fact is, you can eat or drink the stuff made by RJR Nabisco, Kraft and the other companies suddenly attracting food-crazed investors. You can only admire a tulip.

“The reference to tulip mania is used to show folly at its extreme,” says Kenneth L. Fisher, a money manager and author based in Woodside, Calif. “The tulip doesn’t have much utility. IBM has intrinsic worth.”

Whatever the philosophers might say about that, Fisher nonetheless finds a link between the food fights and the tulip fights: “The point still remains that you have individuals willing to pay prices that have nothing to do with reality.”

It is hard to imagine any price more divorced from reality than that commanded by the admittedly lovely tulip after it was imported to Holland and Germany from Turkey in the 16th Century.

Much of what is known about the tulip tumult comes from an 1841 book, “Extraordinary Popular Delusions and the Madness of Crowds.” A colorful account of early speculative frenzies such as the “South Sea Bubble” and the “Mississippi Scheme,” it was reissued in 1985 by Wall Street veteran John M. Templeton and has become recommended reading in the investment community.

The phenomenon called “tulipomania” developed after a European gentleman was sent a tulip bulb from a friend in Constantinople about 1559. Before long, the wealthy in Holland and Germany were sending extravagant sums direct to Constantinople for more bulbs.

Fortunes Gambled

During the next 70 years, the Dutch got so worked up over the tulip that they assumed the rest of the world would, too. As tulip prices skyrocketed, shopkeepers and chimney sweeps sold what they owned and bought tulip bulbs instead.

“Everyone imagined that the passion for tulips would last forever, and the wealthy from every part of the world would send to Holland and pay whatever prices were asked. . . . The riches of Europe would be concentrated on the shores of the Zuyder Zee, and poverty banished from the favoured clime of Holland,” wrote English historian Charles Mackay.

When the bulb burst, thousands were reduced to beggary. The government finally voided all tulip contracts and refused to enforce payment on tulip debts, but the economic havoc lingered for many years.