Recently, I’ve been studying some financial history and suddenly thought of the Dutch Tulip Mania. This story from the 17th century still holds quite a bit of relevance today.

Let’s start with the background. In the 17th century, the Netherlands had just gained independence from Spanish rule, and its economy was beginning to soar. People were unprecedentedly wealthy. At the same time, the Black Death was ravaging the Netherlands, with death and wealth existing side by side. The psychological gap led people to crazily pursue symbols of status. During this period, tulips were introduced to Europe from Turkey. Because of their rarity and beauty, they quickly became a favorite among the wealthy.

Interestingly, wealthy Dutch at the time didn’t flaunt their wealth through clothing. Instead, they preferred building grand estates and gardens in the countryside. A botanist named Clusius began promoting tulips, constantly searching for new varieties and distributing them across Europe. This move ignited the tulip craze. Merchants, officials, and even prime ministers started collecting tulips. Some even used optical devices to create visual illusions, making a few flowers look like hundreds, all to show off their collections.

Then, demand exploded. By 1630, every Dutch town had professional tulip growers. People realized they could make big money by reselling tulips, so a large number of newcomers flooded the market. Due to the supply shortage, trading methods changed. Flower farmers and buyers signed contracts, paid deposits, and conducted transactions in taverns. This was essentially the earliest form of futures trading—speculators bought during price fluctuations and sold at high prices, making astonishing profits.

How inflated did prices get? There’s a story about an orphan named Winker who auctioned his father’s single tulip for an astonishing 90k Dutch guilders. The entire market had completely detached from reality. People were entirely driven by herd mentality, with rationality completely gone.

The crash came suddenly. One day, those absurdly priced tulips suddenly couldn’t be sold anymore. The moment market confidence evaporated, prices plummeted. The panic spread from city to city, with everyone frantically selling off their tulips. Within days, countless flower merchants found themselves in dire straits. Eventually, the Dutch courts stepped in, helping merchants clarify chaotic transaction records and banning future tulip trading. Interestingly, even the courts themselves couldn’t clearly determine what exactly triggered the frenzy and the crash.

After reviewing the entire Dutch Tulip Mania story, you realize that this story from over 400 years ago contains all the elements of a financial bubble: obsession with wealth, loss of rationality, herd mentality, and ultimately, ruin. That’s why it’s considered the first recorded economic bubble in history. Interestingly, every subsequent financial crisis repeats the same story, just with different assets. The Dutch Tulip Mania reminds us that human nature’s weaknesses in the face of wealth have never changed.