Economic Bubbles should Pop – Is anything original Today?

The marketing trauma dejour – historically, real estate markets have experienced a crowd mentality. The more excited a market gets, the more people want to buy in, and the higher the prices are pushed up.

This social experience has occured throughout history and the cycles can be observed consistently. Professor Greg Watson teaches business strategy and the role of the market economy. Regardless of whether we want to evaluate recent technology markets which have Pop, these fluctuations are not unique. They have routinely occurred throughout time.

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

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

This industry mania continued – and 10 years later the value had increased another ten times. At the market height, the value of a single Semper Augustus bulb reached 10,000 florins – the equivalent of what it cost to acquire a house in the middle of Amsterdam at the time.

With time the market peaked and there was no-one left who still wanted to purchase these tulips at such high valuations. Within months, the market value 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 excited, 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 stand up for morality, ethics, and honesty any different? Throughout history, these contrarian voices have been ridiculed and ignored. But the market for products and the market for principles has a way of always correcting itself from the heat of the crowd – and those polar views tend to have their bubbles burst as the required correction occurs. Today’s market is no different.