Industry Bubbles may Break – Is anything original Today?

The financial crisis dejour – throughout time, financial markets have experienced a crowd mentality. The more heated a market becomes, the more people want to buy in, and the higher the prices are pushed up.

This mindset has occured throughout history and the cycles can be observed consistently. Professor Greg Watson teaches serial entrepreneurs and the role in the market economy. Regardless of whether we want to think about recent stock markets which have Burst, these events are not unique. They have routinely occurred throughout time.

One of the most popular historical markets that broke was Amsterdam’s Tuplip economy. We can analyzie the Tulipmania of the tulip market that burst in 1637 as a popularly documented historical account of a economy that overheated.

Tulips were originally introduced from Turkey in the early 16th century. As new “varieties” of tulips were marketed, 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. That price was more than six times the average annual income.

This market mania continued – and ten years later the price had risen another ten fold. At the market peak, the price of a single Semper Augustus bulb reached 10,000 florins – the value of what it cost to purchase a house in the middle of Amsterdam at the time.

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

Throughout history – 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 modern times of PC speech, are the contrarian voices that speak up for morality, ethics, and integrity any different? Throughout history, 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 inevitable correction occurs. Today’s market is no different.