The marketing trauma dejour – historically, real estate markets have experienced a crowd mindset. The more popular a market becomes, the more people 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 of the market economy. Regardless of whether we want to evaluate recent technology markets which have Broke, these scenarios are not unique. They have regularly occurred throughout time.
One of the most discussed historical markets that broke was Amsterdam’s Tuplip market. 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 introduced, competition intensified and their prices soared. One honestly rare variety was the Semper Augustus which reached prices in excess of 1,000 florins per single bulb in 1623. This price was more than six times the average annual wage.
This economic mania continued – and 10 years later the price had increased another ten fold. At the market height, the value of a single Semper Augustus tulip bulb reached 10,000 florins – the equivalent of what it cost to buy 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 bulbs at such high valuations. Within months, the market price crashed and many of people were left in financial ruin.
Throughout history – we have observed 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 modern environment of PC speech, are the contrarian voices that speak up for character, ethics, and honesty any different? Throughout time, 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 polar views tend to have their bubbles burst as the neccessary correction occurs. Today’s market is no different.