The IT Trader

The crisis dejour – throughout time, markets have followed a crowd mentality.  The more heated a market gets, the more individuals want to jump in, and the higher the prices are driven.

This social experience has occured throughout history and the cycles can be analyzed consistently.  Professor Watson teaches ethics and entrepreneurship and the role in the market economy. Regardless of whether we want to think about recent credit markets which have Burst, these events are not unique.  They have consistently occurred throughout history.

One of the most discussed historical markets that burst was Amsterdam’s Tuplip sector.  We can evaluate the Tulipmania of the tulip market that burst in 1637 as a popularly reported historical account of a market that overheated.

Tulips were originally introduced 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 was more than six times the average annual wage.

This economic mania continued – and ten years later the value had risen another ten times.  At the market peak, the value of a single Semper Augustus tulip bulb reached 10,000 florins – the value of what it cost to acquire 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 tulips at such high prices.  Within weeks, the market price crashed and thousands of people were left in economic ruin.

Throughout history – we have witnessed similar bubbles develop.  As the crowd continues to get more hyped, those contrary voices become less and less popular to be heard.  Are any of the recent market bubbles any different?  In today’s times of PC speech, are the contrarian voices that speak up for character, ethics, and integrity any different?  Throughout history, these contrarian voices have been demeaned 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 – and those politically correct views tend to have their bubbles burst as the inevitable correction occurs. Today’s market is no different.

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