Back in the mid-1980s, the “Baby Boomer” generation began entering middle age. Many began to look back to their childhoods for comfort or nostalgia, and one of the things that stuck out in their collective memories was baseball cards. These simple pieces of paper brought back powerful memories of lazy summer afternoons trading cards with friends, breathlessly opening new packs hoping for “THE card” and even putting the cards into the spokes of their bicycles to create faux motorcycle sounds as they pedaled down the street.
Unfortunately for the Boomers, most of their mothers had thrown the cards away ages ago, thinking them to be worthless. However, since the Boomers were entering their prime earning years, many had cash to spend on the hitherto “worthless” cards. Almost overnight, a huge market opened up for old baseball cards, and cards that might have sold for a quarter at garage sales now started commanding hundreds or even thousands of dollars.
The baseball card industry took immediate notice. They began producing baseball cards of all kinds: cards based on “classic” 1950s designs, cards branded under the names of 1950s manufacturers (like Bowman) that had long since gone out of business, cards with “low numbers” (which included the previous season’s rosters) and cards with “high numbers” (which incorporated last-minute trades), packs of cards with autographed cards or other pieces of memorabilia, and so on. And where there had been only two companies making baseball cards in the early 1980s (longtime market leader Topps and perennial second-banana Fleer), new companies like Donruss, Score and Upper Deck entered into the market.
Baseball card hysteria took off in the early 1990s. Most every town, regardless of size, seemed to have at least one card shop. And with so many cards available, markets for complimentary items like price guides and protective plastic casings helped fill the stores’ shelves as well. People began buying cards left and right, but not for the nostalgia value… they were hoping to pay for their kid’s college education with a few boxes of baseball cards. Card auctions were closely watched, as prices for cards seemed to rise ever higher.
Alas, it wasn’t to last. For the baseball card craze was just another economic bubble. A bubble is defined as “a market condition in which the prices of commodities or asset classes increase to absurd or unsustainable levels (that no longer reflect utility of usage and purchasing power).” The problem with bubbles is that they always burst – which means that the prices drop dramatically. In the case of baseball cards, some people took a deep breath and looked at the market. They saw companies like Topps and Upper Deck flooding the market with “rare” and “limited edition” cards and realized that the cards were worth far less than what they were selling for. And so they stopped buying. This had a ripple effect on the market, and more and more people stopped buying. Soon, the market collapsed altogether. Prices fell through the floor. Card shops closed by the thousands. Cards that once fetched hundreds now sold for pennies on eBay.
As you might guess, the baseball card bubble wasn’t the only “bubble” in history. In fact, it’s not even the strangest – for that we have to go back to the Netherlands in the 17th century.
You might think that tulips are native to the Netherlands. You’d be wrong. They are, in fact, native to southern Europe and the Middle East. They were introduced to northern Europe via Ottoman Turkey sometime in the late 1500s, and the first known instance of them being cultivated in Holland was by Charles de L’Ecluse in 1593. The flowers rapidly became both a luxury item and a status symbol. The highest possible prices were paid for tulip bulbs with unique colors or lines. Trading in tulip bulbs began in many Dutch stock exchanges. People from all parts of society began speculating in bulbs. As you might imagine, the rich only invested money they could afford to lose, whilst many middle class families sold or traded land, livestock or even personal possessions to get in on the action.
And what action it was! By 1623, a single common-variety tulip bulb could cost thousands of florins at a time when the average income was 150 florins a year. In 1635, a single bulb – the Semper Augustus – sold for 6,000 florins; that same 6,000 florins could have bought 60 tons of butter or 200 well-fed pigs! In that same year, a sale of 40 bulbs was recorded for the princely sum of 100,000 florins, or approximately the average income of 667 people. A good trader could make around 60,000 florins a month, and the system for purchasing tulips became so complex that the Dutch began speculating on bulbs that hadn’t even been planted yet – effectively creating the futures market.
But just like the baseball card market, it couldn’t last. By February of 1637, prices simply couldn’t go any higher, so tulip traders began to sell. People that had dabbled in tulip futures were now left owning contracts to buy tulips at ten times the cost they were going for on the open market. Others were left owning dozens (or even hundreds) of bulbs they had paid huge amounts for and which were now worthless. Thousands of families throughout the Netherlands were financially ruined.
You’d think that other Europeans would have learned something from Holland’s “Tulip Mania”, but, in fact, they did not. The same scenario repeated itself throughout Europe for the next 150 years – especially in England, where the average price for a tulip bulb hit 15 guineas in 1800, which was enough money to feed, clothe and house a laborer and his family for six months! Thankfully, “Tulip Mania” didn’t hit the rest of Europe on the same scale as it did in the Netherlands.