Lessons from the Past - Tulipmania

‘Our descendants doubtless will laugh at the human insanity of our Age, that in our times the tulip-flowers have been so revered.’
(Theodorus Schrevelius, 1648)1

The mania for buying and selling tulip bulbs in the Netherlands during the 17th century was arguably the earliest asset bubble in history and the precursor of financial manias over the following centuries. Tulipmania still provides valuable lessons for investors today.


Dutch Economic Miracle (The Golden Age)

The Dutch economy grew spectacularly in the 16th and early 17th centuries as foreign trade with the East Indies boomed. Amsterdam became the centre of global capitalism with a stock exchange, savings bank and thriving consumer market. The art market ballooned; Dutch culture of the Golden Age was mirrored in the paintings of Rembrandt and Vermeer. Gardens and gardening became popular and the Dutch fell in love with one particular flower – the tulip.

Tulip Fever

The tulip was introduced into Europe in the 16th century from the Ottoman Empire. First cultivated by the nobility, its popularity quickly spread, reflected in a catalogue of 1612, which included 100 plates of the flower. The Dutch middle-class were soon intoxicated with the tulip. 

As demand for bulbs grew, prices rose, encouraging the cultivation of new varieties. The popularity of highly prized tulips, such as flamed and striped blooms like the Semper Augustus2, spread across Northern Europe and western parts of Germany and there was rising demand for bulbs in France.3

In the early 1630s, Dutch horticulturists became increasingly entrepreneurial, renting land for cultivation and significantly increasing supply.4 At the same time, the minimum number of bulbs an individual could buy dropped. Bulbs could be bought by the basket, pound or even individually, boosting demand significantly as many more people could afford to enter the market.

By the winter of 1635, buyers included a broad range of the population, from merchants and shopkeepers to skilled workers and artisans.5 The historian Goldgar notes that buyers were mostly merchants and skilled craftsmen, rather than nobles, and they were based in cities rather than the countryside. In Haarlem, a town close to Amsterdam, they included manufacturers, lawyers, surgeons, doctors, notaries, artists, silversmiths and a variety of craftsmen.6 In other words, the bubble was limited to those with access to capital. Six companies and a number of partnerships were set up especially to buy and sell tulips.7

At the time, there was no official market for trading bulbs, like a stock exchange. Deals were conducted by private arrangement at auctions in gardens, or at informal and formal sales in inns, in a similar way to the trading of company shares in the coffee-houses of London in the 1690s.8

Trading Frenzy

The frenzy for bulb trading was relatively short-lived and reached its peak during the winter months of 1636/7. Rising prices attracted speculators into the market, increasing transaction volumes and pushing prices further into bubble territory.

A contributing factor was the development of a futures market which became the primary focus of trading.9 This was an important piece of financial engineering and contributed significantly to the bubble. Futures were not a new phenomenon in the Dutch Republic as Baltic grain futures dated back to the mid-16th century.


Prices of bulbs continued to rise in early 1637. Switsers, one of the most popular varieties, rose from 125 florins per pound on 31 December 1636 to a high of 1500 on 3 February 1637 – a 12-fold increase in the space of a month.10 This was the peak of the market. Prices collapsed in early February 1637, the fall beginning in Haarlem, where many investors were based.

Goldgar has convincingly argued that some aspects of the tulip bubble, and its impact, have been exaggerated by later commentators who did not base their accounts on contemporary historical sources. However, Tulipmania was perceived as something remarkable and unprecedented by contemporaries.

The mania spilled out of the financial world to influence broader Dutch culture. Jan Brueghel the Younger depicted bulb traders as monkeys in his painting A Satire of Tulip Mania and, in Wagon of Fools, Hendrik Pot painted them as a ‘Ship of Fools.’

(Jan Brueghel the Younger, Satire on Tulip Mania, c. 1640. Source: Wikipedia)

Many contemporaries were bamboozled by the bubble. They had known religious frenzies in the past, but a mania focused on a tulip bulb! What particularly concerned them was how it undermined their notion of ‘value’ - how could a tulip bulb suddenly be worth a sum equivalent to a tract of land or the annual wages of a skilled worker.11 The large number of pamphlets published in the wake of the bubble, criticising the folly of investors, was a reflection of this unease.

Perhaps surprisingly, the Dutch economy did not suffer significantly from the collapse. The amount of debt taken on to invest was not significant enough to cause a major credit crunch. Individual investors did, of course, make significant losses, especially if they purchased bulbs near the top of the market. It has been argued, however, that rather than an economic crisis, the impact was more subtle, contributing to a breakdown of honour and a destruction of trust, with significant long-term effects on Dutch society.

Tulipmania became a symbol of the ‘madness of crowds’, often cited as a warning during the asset bubbles that followed. It was the first appearance in history of a new financial and cultural phenomenon, an important milestone in the history of the modern financial world. Indeed it could be argued that tulipmania was an early sign of the ‘blooming’ of modernity.

(Sotheby’s technician with flower still life by Jan Brueghel the Elder. Source: Getty)

Lessons for Investors

The earliest bubble was an unusual one - it was focused on a plant, rather than the shares of a company or a precious metal. Nonetheless, it offers a number of lessons for investors today. It shows how a combination of factors, including an extended period of economic growth, plentiful liquidity, financial engineering and a group of new investors can produce an asset bubble.

At Stewart Investors we believe it is important to identify and acknowledge asset bubbles. By applying strict valuation discipline, we aim to avoid paying excessive prices for shares in the companies in which we invest.

We believe our first duty as investors is to preserve our clients’ capital. Along with our emphasis on stewardship and focus on the quality of franchise and financials, an important aspect of doing this is identifying and avoiding extreme levels of valuation.

Important information

This material is for general information purposes only. It does not constitute investment or financial advice and does not take into account any specific investment objectives, financial situation or needs. This is not an offer to provide asset management services, is not a recommendation or an offer or solicitation to buy, hold or sell any security or to execute any agreement for portfolio management or investment advisory services and this material has not been prepared in connection with any such offer. Before making any investment decision you should consider, with the assistance of a financial advisor, your individual investment needs, objectives and financial situation.

We have taken reasonable care to ensure that this material is accurate, current, and complete and fit for its intended purpose and audience as at the date of publication. No assurance is given or liability accepted regarding the accuracy, validity or completeness of this material and we do not undertake to update it in future if circumstances change.

To the extent this material contains any expression of opinion or forward-looking statements, such opinions and statements are based on assumptions, matters and sources believed to be true and reliable at the time of publication only. This material reflects the views of the individual writers only. Those views may change, may not prove to be valid and may not reflect the views of everyone at First Sentier Investors.

About First Sentier Investors

References to ‘we’, ‘us’ or ‘our’ are references to First Sentier Investors, a global asset management business which is ultimately owned by Mitsubishi UFJ Financial Group (MUFG). Our investment teams operate under the trading name of Stewart Investors which is part of the First Sentier Investors group.

We communicate and conduct business through different legal entities in different locations. This material is communicated in:

  • Australia and New Zealand by First Sentier Investors (Australia) IM Limited, authorised and regulated in Australia by the Australian Securities and Investments Commission (AFSL 289017; ABN 89 114 194311)
  • European Economic Area by First Sentier Investors (Ireland) Limited, authorised and regulated in Ireland by the Central Bank of Ireland (CBI ref no. C182306; Registered office: 70 Sir John Rogerson’s Quay, Dublin 2, Ireland; Company no. 629188).
  • Hong Kong by First Sentier Investors (Hong Kong) Limited and has not been reviewed by the Securities & Futures Commission in Hong Kong. First Sentier Investors and Stewart Investors are business names of First Sentier Investors (Hong Kong) Limited.
  • Singapore by First Sentier Investors (Singapore) (Company no. 196900420D) and has not been reviewed by the Monetary Authority of Singapore. First Sentier Investors (registration number 53236800B) and Stewart Investors (registration number 53310114W) are business divisions of First Sentier Investors (Singapore).
  • Japan by First Sentier Investors (Japan) Limited, authorised and regulated by the Financial Service Agency (Director of Kanto Local Finance Bureau (Registered Financial Institutions) No.2611).
  • United Kingdom by First Sentier Investors (UK) Funds Limited, authorised and regulated by the Financial Conduct Authority (FCA ref no. 143359;  Registered office: Finsbury Circus House, 15 Finsbury Circus, London EC2M 7EB; Company no. 2294743).
  • United States by First Sentier Investors (US) LLC, authorised and regulated by the Securities Exchange Commission (RIA 801-93167).
  • In other jurisdictions, where this document may lawfully be issued, by First Sentier Investors International IM Limited, authorised and regulated in the UK by the Financial Conduct Authority (FCA ref no. 122512; Registered office: 23 St. Andrew Square, Edinburgh, EH2 1BB; Company no. SC079063).

To the extent permitted by law, MUFG and its subsidiaries are not liable for any loss or damage as a result of reliance on any statement or information contained in this document. Neither MUFG nor any of its subsidiaries guarantee the performance of any investment products referred to in this document or the repayment of capital. Any investments referred to are not deposits or other liabilities of MUFG or its subsidiaries, and are subject to investment risk, including loss of income and capital invested.


  1. Quoted in Anne Goldgar, Tulipmania: Money, Honor, and Knowledge in the Dutch Golden Age, 3.

  2. Simon Schama, The Embarrassment of Riches, 351.

  3. Peter M. Garber, Famous First Bubbles, 43.

  4. Schama, 356.

  5. Schama, 356.

  6. Goldgar, 141.

  7. Goldgar, 184.

  8. Goldgar, 211.

  9. Garber, 44.

  10. Goldgar, 202.

  11. Goldgar, 18.