The financial crisis dejour – throughout history, financial markets have followed a crowd mentality. The more heated a market gets, the more people want to invest, and the higher the prices are driven. This mindset has occured throughout history and the cycles can be studied consistently. Professor Greg Watson teaches serial entrepreneurs and the role [...]
The financial crisis dejour – throughout history, financial markets have followed a crowd mentality. The more heated a market gets, the more people want to invest, and the higher the prices are driven.
This mindset has occured throughout history and the cycles can be studied consistently. Professor Greg Watson teaches serial entrepreneurs and the role of the market economy. Regardless of whether we want to think about recent banking markets which have Pop, these fluctuations are not original. They have consistently occurred throughout time.
One of the most talked about historical markets that broke was Amsterdam’s Tuplip sector. We can evaluate the Tulipmania of the tulip market that burst in 1637 as a popularly documented historical account of a industry that overheated.
Tulips were originally imported from Turkey in the early 16th century. As new “varieties” of tulips were sold, competition intensified and their prices soared. One apparently rare variety was the Semper Augustus which reached values in excess of 1,000 florins per single bulb in 1623. That price exceeded more than six times the average annual income.
This industry mania continued – and 10 years later the value had risen another ten times. At the market peak, the price of a single Semper Augustus tulip bulb reached 10,000 florins – the value of what it cost to purchase a house in central Amsterdam at the time.
With time the market peaked and there was no-one remaining who still wanted to buy these bulbs at such high valuations. Within weeks, the market price crashed and many of people were left in financial ruin.
Throughout history – we have witnessed similar bubbles develop. 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 environment of politically correct speech, are the contrarian voices that stand up for character, ethics, and honesty any different? Throughout time, these contrarian voices have been ridiculed and ignored. But the market for products and the market for ideas has a way of eventually correcting itself from the heat of the crowd mentality – and those politically correct views tend to have their bubbles burst as the neccessary correction occurs. Today’s market is no different.
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