History Deepdive: Tulip Mania (1636-37) vs Watch Mania (2021-22)
Owning rare tulips was a status symbol in 17th-century Dutch society. This period, known as the Dutch Golden Age, was marked by immense prosperity due to the Netherlands' exploration and trade expeditions to the East Indies (today's Indonesia). The Dutch cornered important commodity markets, bringing back spices, silk, and other luxury goods that fueled wealth and social standing.
In the midst of this affluence, Tulip Mania emerged. Introduced to Europe from the Ottoman Empire, tulips quickly became a coveted luxury item. Rare and exotic varieties, such as the "broken tulips" (see photo below), which had unique, flame-like color patterns caused by a virus, were especially sought after, leading to a speculative frenzy.
At the peak of Tulip Mania, single tulip bulbs were selling for more than ten times the annual income of a skilled craftsman. The speculative buying reached irrational levels, with people purchasing tulips not for their beauty but as investments, hoping to sell them at higher prices.
This period was famously depicted in “A Satire of Tulip Mania” by Breughel the Younger, painted in 1640. The painting humorously illustrates the absurdity of the frenzy, showing people as monkeys engaging in tulip trading, reflecting the irrational behavior of the market participants.
Fast forward to the modern era, and we witness a similar craze centered around luxury watches. The watch mania of 2021-2022 saw unprecedented demand for high-end timepieces. The COVID-19 pandemic played a significant role in this surge. With more disposable income, limited spending options, and increased interest in investment-grade collectibles, the prices of luxury watches soared.
Tulip Mania famously ended in a market crash in February 1637, when prices plummeted, leaving many investors in financial ruin. However, this phenomenon did not critically influence the prosperity of the Dutch Republic, which continued to thrive as the world’s leading financial and economic power. The Dutch even recorded the highest per capita income in the world at that time.
The watch market of 2021-2022, while not experiencing a crash of the same magnitude, has seen some corrections. They underscore the timeless nature of human behavior in the face of perceived value and the cyclical patterns of market speculation. As we continue to navigate the ever-evolving landscape of collectibles and investments, these historical parallels offer valuable insights into the dynamics of market bubbles.
References:
This Watch, That Watch's "Watch market update: Rolex, Tudor, Patek...." YouTube Video
https://www.luxewatches.co.uk/which-luxury-watches-appreciate-over-time/
https://corporatefinanceinstitute.com/resources/economics/dutch-tulip-bulb-market-bubble/
https://www.phoenixperennials.com/bulbs/the-beauty-and-history-of-broken-tulips/
https://castlesandcoffeehouses.com/2017/04/14/monkey-business-with-tulips/
New watch collector
History is full of all sorts of these things examples. Wasn’t salt and other spices also insanely expensive at one point in time?
History is full of all sorts of these things examples. Wasn’t salt and other spices also insanely expensive at one point in time?
Nutmeg. It was so precious that in 1667, the Dutch who owned the island of Manhattan traded it to the British for a tiny nutmeg-producing island in the Banda sea (eastern Indonesia). The 17th century was wild!
Nutmeg. It was so precious that in 1667, the Dutch who owned the island of Manhattan traded it to the British for a tiny nutmeg-producing island in the Banda sea (eastern Indonesia). The 17th century was wild!
So future historians will look back at us and laugh at the cost of things like electric vehicles and cryptocurrencies.
A young guy who used to sell colourful playful socks from Italy and fashion brand Paul Smith transitioned to a career as a grey market seller of in demand steel sports watches just before the global pandemic,he did great but admits that a lot of his customers have seriously cooled their watch buying routines. He wondered if I was still interested in a white dial ceramic Daytona, I can be but it would be on my terms, lol. There is going to be more than a market correction, I have been a serious watch enthusiast for almost 50 years, according to a few of my veteran watch seller friends, a lot newcomers have already lost interest in the hobby. The problem might not be an unwillingness to pay sky high prices more no desire at all.