In February 1637, the Dutch economy experienced one of the most bizarre financial collapses in history.
The cause? Flower bulbs.
Not gold. Not land. Not ships or spices or any of the valuable commodities that drove the Dutch Golden Age.
Tulip bulbs.
At the peak, a single rare tulip bulb sold for 10 times the annual income of a skilled craftsman. One bulb—“Semper Augustus”—was worth more than a luxury canal house in Amsterdam.
People mortgaged their homes. Sold their businesses. Bet their entire fortunes on tulips.
And then, in a matter of weeks, the market collapsed.
Tulip prices fell to 1% of their peak value. Fortunes evaporated overnight. The Dutch economy crashed.
All because of flowers.
How It Started
Tulips weren’t native to Europe. They came from Turkey in the mid-1500s and became a status symbol for the wealthy.
But some tulips were special. A virus (now known as the tulip breaking virus) caused dramatic color patterns—flames of red on yellow, white streaks on purple. These “broken” tulips were rare and highly prized.
By the 1630s, tulips had become a Dutch obsession:
- The wealthy displayed them in gardens
- Rare varieties became collectibles
- Owning exotic tulips signaled wealth and taste
Normal market so far. Luxury goods have always commanded high prices.
But then speculation entered the picture.
The Bubble Inflates
Around 1634, tulip prices began rising rapidly.
Professional “tulip traders” emerged. People who knew nothing about flowers started buying and selling bulbs as investments.
Tulip futures markets developed—contracts to buy bulbs that wouldn’t bloom for months. You could buy and sell tulips that didn’t exist yet.
Prices climbed:
- 1634: A rare bulb = a few hundred guilders
- 1635: Same bulb = a few thousand guilders
- 1636: Same bulb = a house, a farm, a year’s income
The logic was simple: “Tulips have only gone up. They’ll keep going up. I’d be stupid NOT to buy.”
Everyone started speculating:
- Merchants
- Farmers
- Weavers
- Chimney sweeps
- Even the poorest workers
People quit their jobs to trade tulips full-time. Why make 200 guilders a year as a craftsman when you could make 1,000 guilders in a week flipping bulbs?
Taverns became trading floors. Men gathered to buy and sell tulips on credit, using bulbs they didn’t own as collateral for bulbs they couldn’t afford.
Some examples of actual trades:
One “Viceroy” bulb (1636):
- 2 loads of wheat
- 4 loads of rye
- 4 fat oxen
- 8 fat pigs
- 12 fat sheep
- 2 hogsheads of wine
- 4 barrels of beer
- 2 barrels of butter
- 1,000 pounds of cheese
- A bed, clothes, and a silver drinking cup
Total value: ~2,500 guilders (about $50,000 today)
For. One. Bulb.
The Psychology
Tulip Mania wasn’t about tulips. It was about herd behavior and FOMO (fear of missing out).
The Rationalizations:
“It’s different this time”
- “Tulips are rare and beautiful”
- “Demand will always be there”
- “The wealthy will always pay”
“I’ll sell before the peak”
- “I’m smarter than the others”
- “I’ll get out before it crashes”
- Everyone thinks they’re the exception
“Look at my neighbor getting rich”
- Social proof is powerful
- When your neighbor buys a house with tulip profits, you feel stupid for not buying in
“Prices only go up”
- Recent history bias
- 3 years of rising prices = “this is permanent”
Sound familiar?
The Collapse
In February 1637, at a routine tulip auction in Haarlem, something changed.
No one bought.
Suddenly, after years of rising prices, buyers disappeared.
Maybe someone got spooked. Maybe a few people tried to cash out. Maybe it was random.
It doesn’t matter. Once confidence broke, the cascade was immediate.
Sellers panicked. Prices plummeted:
- Week 1: Down 20%
- Week 2: Down 50%
- Week 3: Down 90%
People who’d mortgaged homes to buy tulips now owned worthless bulbs. Contracts written on credit were worthless. Fortunes vanished.
The government tried to intervene, declaring contracts void. But it was too late. The damage was done.
What Is a Speculative Bubble?
A speculative bubble occurs when:
- Asset prices rise far above fundamental value
- Driven by hype, FOMO, and belief that “prices only go up”
- New buyers enter solely to profit from rising prices (not intrinsic value)
- Eventually, confidence breaks
- Prices collapse, destroying wealth
Key insight: Everyone knows bubbles pop. Everyone thinks they’ll get out first.
Classic Bubbles
1. Dot-Com Bubble (2000)
- “Internet will change everything” (true)
- “Therefore all internet companies are valuable” (false)
- Pets.com, Webvan, etc.—billions in valuation, zero profits
- Crash wiped out $5 trillion
2. Housing Bubble (2008)
- “Housing prices never fall”
- Subprime mortgages to anyone with a pulse
- Global financial crisis
3. Cryptocurrency (2017, 2021)
- Bitcoin to $20k, then $3k, then $60k, then $16k
- “Digital gold” or “greater fool theory”?
- Time will tell
4. SPACs (2020-2021)
- Special purpose acquisition companies
- “Blank check” companies raised billions
- Most crashed 80%+
5. Beanie Babies (1990s)
- Stuffed animals as “investments”
- People bought warehouses full
- Now worth $1-5 each
In Software Engineering
Tech is plagued by herd mentality and bubble thinking:
Framework Hype Cycles
New framework launches
Early adopters: "This solves everything!"
Influencers make tutorials
Everyone rewrites apps in new framework
Reality: It has tradeoffs like everything else
Crash: "Actually the old way was fine"
Example: Angular → React → Vue → Svelte → ...
Microservices for Everything
Google/Netflix use microservices
Blog posts: "Monoliths are dead!"
Startups with 5 users build 20 microservices
Reality: Complexity explosion
Crash: "Actually we should've started with a monolith"
NoSQL Mania
MongoDB launches
"Relational databases are obsolete!"
Everyone migrates to NoSQL
Reality: Joins are actually useful
Crash: "PostgreSQL with JSON columns is fine"
Blockchain for Everything
Bitcoin succeeds
"Put everything on blockchain!"
Companies add "blockchain" to name, stock soars
Reality: Centralized databases work fine for most things
Crash: Most blockchain projects abandoned
The AI/ML Gold Rush (2023+)
ChatGPT launches
"Add AI to everything!"
Startups pivot to "AI-powered [X]"
VCs fund anything with "AI" in pitch
Reality: TBD (we're still in this one)
How to Avoid Bubble Thinking
1. Ask “What’s the Fundamental Value?”
Strip away the hype. What’s it actually worth?
Tulip bulb: Produces pretty flower worth ~10 guilders
Selling for 5,000 guilders? Gap = speculation
NFT of monkey JPG: ???
Selling for $100k? Gap = ???
2. Watch for “This Time Is Different”
The four most dangerous words in investing—and in tech.
"This framework is FUNDAMENTALLY different"
(Narrator: It wasn't)
3. Check Who’s Buying
Are experts buying? Or are amateurs piling in?
Tulip Mania: Chimney sweeps trading tulips
Dot-Com: People quitting jobs to day-trade stocks
Red flag: When everyone's an expert overnight
4. Look at Incentives
Who profits from you believing the hype?
Tech influencer: "You MUST learn [framework]"
Incentive: Course sales, sponsorships, YouTube views
5. Beware Social Proof
“Everyone’s doing it” is not analysis.
"All the best engineers are using Rust now"
Are they? Or are 10 loud people on Twitter using it?
6. Have an Exit Strategy
If you can’t explain when you’d sell, you’re gambling.
Bad: "I'll hold until it moons 🚀"
Good: "I'll sell when price/fundamentals diverge by 2x"
The Deeper Lesson
Tulip Mania wasn’t about stupidity. These were intelligent, successful traders.
It was about herd behavior, FOMO, and rationalization.
When prices rise, our brains create narratives to justify them:
- “It’s rare”
- “Demand is infinite”
- “I’ll sell before it crashes”
When everyone around you is getting rich, staying out feels stupid—even if the fundamentals don’t make sense.
Bubbles are social phenomena, not economic ones.
The math doesn’t matter when your neighbor just bought a mansion with tulip profits.
The Programmer’s Perspective
As engineers, we like to think we’re rational. Data-driven. Immune to hype.
But we’re not.
We rewrite entire codebases in trendy frameworks. We adopt technologies because “everyone’s using it.” We chase resume-driven development.
The same psychology that drove Tulip Mania drives:
- Technology choices
- Career decisions
- Startup ideas
- Architecture patterns
Question: Are you choosing this because it’s the best tool? Or because everyone else is?
Because if it’s the latter, you might be holding a tulip bulb worth 10,000 guilders.
And February is coming.
Key Takeaways
- ✅ Speculative bubbles are driven by herd behavior, not fundamentals
- ✅ “This time is different” is usually wrong
- ✅ Everyone thinks they’ll exit before the crash (most won’t)
- ✅ Social proof ≠ good decision-making
- ✅ Question hype, especially when everyone agrees
In 1637, tulips made people rich. Until they didn’t.
The smartest people in the Netherlands convinced themselves that flower bulbs were worth more than houses.
Not because they were stupid. But because everyone else believed it.
The next time someone tells you “You HAVE to use [technology] or you’ll be left behind,” remember the tulips.
Are you making a decision based on fundamentals?
Or are you just afraid of missing out?
Because the difference between an investment and a tulip bulb is knowing when you’re holding one.