SPEAKER_08: Amazing, fascinating stories of inventions, ideas and innovations. Yes, this is the podcast about the things that have helped to shape our lives. Podcasts from the BBC World Service are supported by advertising.
SPEAKER_05: Ryan Reynolds here from Mint Mobile. With the price of just about everything going up during inflation, we thought we'd bring our prices down. So to help us, we brought in a reverse auctioneer, which is apparently a thing. Mint Mobile Unlimited Premium Wireless.
SPEAKER_03: How did it get 30? 30? How did it get 30? How did it get 20? 20? How did it get 20? How did it get 15? 15? 15? Just 15 bucks a month? Sold! Give it a try at mintmobile.com
SPEAKER_05: slash switch. New activation and upfront payment for three month plan required. Taxes and fees
SPEAKER_02: extra. Additional restrictions apply. See mintmobile.com for full terms.
SPEAKER_07: 50 things that made the modern economy with Tim Harford.
SPEAKER_03: One frosty winter morning at the start of 1637, a sailor presented himself at the counting house of a wealthy Dutch merchant and was offered a hearty breakfast of fine red herring. The sailor noticed an onion, or so he thought, lying on the counter. Here is what happened next, according to Charles Mackay, writing in Scotland two centuries later. He slyly seized an opportunity and slipped it into his pocket as a relish for his herring,
SPEAKER_06: and proceeded to the quay to eat his breakfast. Hardly was his back turned when the merchant missed his valuable semper Augustus worth 3,000 florins, or about £280 sterling.
SPEAKER_03: Relative to the wages of the time, that is well over a million dollars today, seeking a zesty accompaniment to his fish, the sailor had unwittingly pilfered not an onion, but a rare semper Augustus tulip bulb. And in early 1637 tulip bulbs were reaching some truly extraordinary prices. Then, very suddenly, it was over. In February, bulb wholesalers gathered in Haarlem, a day's walk west of Amsterdam, to find that nobody wished to buy. Within a few days Dutch tulip prices had fallen tenfold. Tulip mania is often cited as the classic example of a financial bubble, when the price of something goes up and up not because of its intrinsic value, but because people who buy it expect to be able to sell it again at a profit. It seems foolish to pay a million dollars for a tulip bulb, but if you hope to sell it onto a greater fool for two million, it can still be a rational investment. This is known as the greater fool theory. Whether or not it explains tulip mania is, however, a subtle question. Charles Mackay's 1841 account has cast a long shadow over our imagination. His book, Extraordinary Popular Delusions and the Madness of Crowds, is full of vivid stories about how the entire Dutch nation was involved. But those extravagant tales, including the one I've just told you about the hungry sailor, are probably false. Tulips were part of a cornucopia of new plants to arrive in Europe in the 16th century. Soon everyone was waxing lyrical about their beauty. Some tulips, infected by a virus, changed from simple, bold coloured petals to exquisitely varied patterns. Just as the super-rich today collect beautiful paintings at extraordinary prices, the newly wealthy Dutch merchant class began to collect and display rare tulips. And not always, honestly. The celebrated botanist Carolus Clusius generously shared his tulips with friends and colleagues, yet suffered many thefts of rare plants. His treasures were, after all, just sitting in gardens. Once Clusius had some unique flowers stolen, only to find them in the garden of a Viennese aristocrat. She, of course, denied all knowledge. The philosopher Eustace Lipsius wasn't impressed by the tulip collectors.
SPEAKER_06: What should I call this but a kind of merry madness? he said, adding, They do vaingloriously hunt after strange herbs and flowers, which, having gotten, they preserve and cherish more carefully than any mother doth her child.
SPEAKER_03: But in the early 1600s, the price of tulips just kept on rising. Adrian Pao, who was fabulously wealthy and the closest thing Holland had to a prime minister at the time, built a garden full of artfully positioned mirrors. In the centre were a few rare tulips, made by the mirrors to look like a multitude, an admission that not even Pao could afford to fill his garden. The highest price for which we have good evidence was 5,200 guilders for a single bulb in that winter of 1637. That is more than three times what Rembrandt charged for painting The Night Watchman just five years later, and twenty times the annual income of a skilled worker such as a carpenter. The idea that some poor fellow had his million dollar tulip bulb consumed with a herring may be fanciful. The idea that the rarest bulbs were million dollar treasures is about right. Could a tulip bulb really be worth a million dollars? It is not quite so absurd as it might seem. Tulip bulbs produce not only tulips, but offshoot bulbs, called offsets. Owning a rare bulb was a bit like owning a champion racehorse, valuable in its own right perhaps, but far more valuable because of its potential offspring. Given how far the wealthy would go to possess unusual tulips, there was nothing foolish about bulb traders paying top guilder for the bulbs. Financial bubbles burst when expectations reach a tipping point. Once enough people expect prices to fall, the supply of greater fools dries up. Does that explain the sudden collapse in prices in February 1637? Perhaps. But there is another theory. As rare bulbs such as Semper Augustus multiplied over the years, it is only natural that their price would fall. In Haarlem, one of the warmer Dutch cities, February is exactly when tulip shoots would have burst through the soil. Having seen abundant shoots on their journeys, the bulb traders might have realised that the crop would be bountiful, and the rare flowers rather less rare than they had imagined. If so, the fall in prices may have reflected an increase in supply rather than the bursting of a bubble. Whatever the reason, the mania subsided. The fallout was painful. Many trades were not simple exchanges of cash for bulbs, but promises to pay for bulbs in future. Between buyers who didn't have money and sellers who didn't have bulbs, there was a good deal of grumbling over who owed what to whom. But the prosperous Dutch economy sailed on regardless. Later bubbles were much more consequential. Perhaps the greatest boom and crash in history was the railway mania of the 1840s. Influential commentators waved away warnings of financial trouble ahead, and encouraged investors to bid up stocks in UK railway companies to absurd prices. One such bullish commentator? Charles Mackay, who had revelled in telling those wildly inaccurate but deeply satisfying stories about the greed and foolishness of the Dutch tulip speculators. Mackay's book about collective madness came out in a new edition after the railway bubble burst. Oddly enough, he said very little about it. It's easy to scoff at past bubbles. It's not so easy to know when one may, or may not, be in one.
SPEAKER_09: The Compass is the podcast from the BBC World Service that really gets under the skin of a story. I can tell you what I believe is not the truth, and you know it's not the truth, and I'll get away with it.
SPEAKER_04: So I will tell a lie.
SPEAKER_09: With series that take an in-depth look at how the world today really works.
SPEAKER_01: Sometimes I think that we are moving into the right direction and change is happening, and then I realise that nine to ten women get killed every day in this country, so I don't feel we're moving forward at all.
SPEAKER_09: And why things are the way they are. I have been socialised to be a soldier, to be someone aggressive, and even to dominate especially women or other people,
SPEAKER_00: so I have this kind of fear that what if I one day become a violent person. The Compass podcast from the BBC World Service.
SPEAKER_09: She shamed the politicians into taking an interest in it.
