Market Bubbles that Pop – Is anything new Today?

The marketing trauma dejour – historically, markets have followed a crowd mentality. The more excited a market becomes, the more individuals want to buy in, and the higher the prices are pushed up.

This mindset has occured throughout history and the cycles can be studied consistently. Professor Greg Watson teaches serial entrepreneurs and the role in the market economy. Regardless of whether we want to analyze recent technology markets which have Pop, these events are not original. They have routinely occurred throughout history.

One of the most discussed historical markets that popped was Amsterdam’s Tuplip economy. We can consider the Tulipmania of the tulip market that burst in 1637 as a popularly known historical account of a industry that overheated.

Tulips were originally brought from Turkey in the early 16th century. As new “varieties” of tulip bulbs were introduced, competition intensified and their value soared. One legitimately rare variety was the Semper Augustus which reached prices in excess of 1,000 florins per single bulb in 1623. This price was more than six times the average annual wage.

This industry mania continued – and ten years later the value had increased another ten times. At the market height, the price of a single Semper Augustus tulip bulb reached 10,000 florins – the equivalent of what it cost to acquire a house in the middle of Amsterdam at the time.

With time the market peaked and there was no-one left who still wanted to acquire these tulips at such high prices. Within months, the market price crashed and thousands of people were left in economic ruin.

Throughout time – we have seen similar bubbles reoccur. As the crowd continues to get more hyped, those contrary views become less and less popular to be heard. Are any of the recent market bubbles any different? In today’s times of PC speech, are the contrarian voices that speak up for morality, ethics, and honesty any different? Throughout time, these contrarian voices have been demeaned and ignored. But the market for products and the market for principles has a way of eventually correcting itself from the heat of the crowd mentality – and those extremist views tend to have their bubbles burst as the inevitable correction occurs. Today’s market is no different.

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