I was in Holland last week, and the Dutch tulips are in full and magnificent bloom. The fields full of technicolor flowers, in a display so extensive and impressive that it seems impossible, might not have made the list of Seven Wonders of the World, solely because they did not exist in ancient times. Nor, even, did they exist in the 16^th century, when the modern list of Eight Wonders was published in 1572 by the Flemish engraver Philips Galle.

Most people involved in markets or investing have heard of the Tulip Mania. The modern accounts of the Tulip Mania tend to be based mainly on journalist Charles MacKay’s 1841 book now known as Extraordinary Popular Delusions and the Madness of Crowds. It was recommended to me when, as a teenager, I began studying markets. That was in the 1970s.

It turns out that the advice (indirectly) came from an impeccable source: Benjamin Graham. Yes, that same Ben Graham who literally wrote the book (Security Analysis—also known as “Graham and Dodd”) that established the modern profession of financial analysis. And the same Ben Graham who may be most famous as the teacher of Warren Buffett.

One of the best, and best selling, popular books on investing is Princeton professor Burton Malkiel’s A Random Walk Down Wall Street also references Delusions as a warning against the dangers of speculative bubbles.

But despite these illustrious recommenders, it seems likely that Mackay is more profitably viewed as an entertainer than as an historian.

Mackay’s Presentation

If you haven’t read it (or don’t recall), Mackay presents a highly over-dramatized version of events. He reports that the Dutch “tulip mania” was a wild, irrational frenzy during which people of all social classes—from wealthy merchants to servants and sailors—speculated recklessly in tulip bulbs. He reports that tulip prices escalated absurdly, with rare bulbs selling for the market-price equivalent of a luxury home.

That much appears to be true. However, he also claims that ordinary citizens mortgaged their houses and abandoned their trades to buy and sell bulbs. They became, he implies, the 17^th century version of day traders. According to Mackay, when the—inevitable given the wisdom of hindsight—collapse came, widespread financial ruin devastated the Dutch economy, leaving many bankrupt and tarnishing the international reputation of the Dutch.

Academic Interpretations

More recent research suggests that only the first claim, that some bulbs reached unimaginable prices, is true. All the rest, the ordinary servants and sailors betting and losing everything, are fiction. Recent academic scholarship reaches the conclusion that while there was a speculative bubble in the price of tulip bulbs, the broader effect on the economy was minimal.

Anne Goldgar (in Tulipmania: Money, Honor, and Knowledge in the Dutch Golden Age University of Chicago Press, 2007) argues that the tulip trade was primarily confined to a relatively small group of affluent merchants and artisans. She believes that the economic impact of the tulip price collapse was limited, with few individuals suffering significant financial losses. The widespread belief that the mania led to a national economic crisis seems to be largely myth.

Taking a slightly different perspective, economist Peter M. Garber, in his article Tulipmania (in the Journal of Political Economy, 1989), argued that the price fluctuations of tulip bulbs were not irrational but reflected the market dynamics of rare commodities. He contends that the high prices were driven by the rarity and desirability of certain tulip varieties, and that the subsequent price decline was a natural market correction rather than a catastrophic crash.

Earl A. Thompson suggests that the reported volatility in tulip prices reflected, at least in part, the emerging nature of the market. In his paper (The Tulipmania: Fact or Artifact? Public Choice, 2007), Thompson posits that the tulip market’s volatility can be attributed to changes in the legal framework governing futures contracts. He suggests that the introduction of options-like features into these contracts altered trader’’ risk assessments, leading to rapid price escalations followed by a sharp decline when the legal environment shifted again.

So What?

There are a number of possible lessons that modern investors might draw from the history of the Tulipmania. These include the traditional Ben Graham interpretation about the warning against valuation bubbles, a more modern lesson highlighting the need to read financial journalists with a healthy dose of skepticism, and a dramatic illustration of the investor’s saying that “being early and being wrong look the same 99% of the time.”

Valuation Bubble

Was the Tulipmania a bubble? By the definition that we will advance, the answer is yes. Reasonably reliable reports suggest that the price of certain individual bulbs reached 4000, or perhaps even 5000, guilders at the height of the mania.

A Dutch guilder, also known as a Florin,[1] was defined as approximately 11.35 grams of gold. Thus, 5000 guilders, at recent gold prices, might have been the equivalent of somewhere in the neighborhood of $6 million! 

If we view a bubble as a meteoric rise in price, followed by a collapse, the Tulipmania qualifies as a bubble.

Early = Wrong?

However, tulips, unlike certain other financial bubbles (perhaps including crypto?) have utility. Indeed, in 2025, the tulip industry in Holland (Netherlands) is a big business. The Netherlands exports approximately 4 billion bulbs a year, and tulips thus comprise an important economic sector in the country.

Admittedly, the tulip industry developed its current size centuries after the Tulipmania, and unless your name is Methusala, being two or three centuries early is the same as being wrong.[2]

Skepticism About Journalism

Journalists traditionally have had at least two significant obstacles to getting right what they write. One of these has been the constant pressure of very short deadlines. It’s hard to get things right when you have only hours to go from first learning about something to producing content that will be published. I believe this persistent time pressure, over the years, encourages journalists to develop habits that don’t lead to high accuracy.

Researchers and writers who have more time to think, to analyze, and to check the accuracy of their work should, on average, produce better, more reliable work.

Second, few journalists have the ability to develop true expertise in the area about which they write. Again, there are many reasons for this, but the result is that most journalists are not experts, and often don’t realize that what they are reporting may at best be someone else’s biased view, or at worst, someone else’s promoted propaganda.

Thus, it’s usually a good idea to try to verify journalistic claims from another, reliable source—if you care about what’s being reported.

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[1] Hence the old reference in literature to Dutch prices quoted in “Fl” which was the abbreviation for Florin. The Dutch Guilder persisted as a currency until the end of 1999 when the Dutch gave up the Guilder for the Euro.

[2] There is a debate to be had about how discounting would work if our life expectancies were ten times longer than they are. If you could reasonably expect to live to be 980 years old, would that result in a different discount rate? Would it, under such circumstances, be reasonable to make an investment which you expected to have to wait two or three hundred years to pay off? Would that be like a person with a life expectancy of 98 being willing to wait twenty or thirty years for the investment to pay off? Maybe.