“The current dot.com IPO mania is a lot like the ‘tulipomania’ craze that overtook Holland in the seventeenth century. (It didn’t end well.)”
Some people just don’t get it, or so I am told. They just don’t get that the advent of dot.communism heralds a new age of wealth and prosperity. Let there be no doubt that the innermost desire of everyone is to be a millionaire, and now it is possible.
Come up with a catchy name and a nifty idea for joining together all members of a “community” (such as snowboarding ex-history majors) in order to sell them stuff, and bingo you too can get a fat IPO (Initial Public Offering of stock, in case you hadn’t heard). Everyone can gleefully order an arugula salad for $13.50 accompanied by a $6.00 bottle of water. The smart people will all be rich.
This is delusion. It’s madness. And it’s all been seen before. In the opening of Extraordinary Popular Delusions and the Madness of Crowds, the author states that people “think in herds” and further that “they go mad in herds, while they only recover their senses slowly, and one by one.”
This delightful text (available in its entirety at www.litrix.com as well as in bookstores) is not a pop psychology book from the sixties or seventies. Rather, it comes to us from the dusty nineteenth century and the pen of Charles Mackay. A contemporary of Charles Dickens and Karl Marx, Mackay was an ardent Scottish cynic who chronicled the incessant folly of group activity.
I’ve been wary of crowds ever since I was struck in the head by a baseball bat in a parking lot crowded with boys waiting to have their bats signed by ballplayer Curt Blefary. I remember almost nothing about this now obscure player, but I remember distinctly a big bleeding welt on the top of my head and that nobody much cared. Hey, what’s a little blow to some kid’s head when you have a chance to shake hands with none other than Curt Blefary?
When we crowd, we act in frightening yet doltish and predictable ways. When my father ran the 1939 World’s Fair dance hall, crowds mobbed the doors, suffocating and trampling each other underfoot. To prevent this, he would open a door at one end, causing people to rush in that direction, and then open another at the opposite end, causing others to rush back. The crowds dispersed and entered in a more orderly and sheepish fashion.
Crowds are like this. Their collective frenzy yields to all sensibility, such as in the current IPO craze, wherein a colossal “burn rate”—how quickly a fledgling company goes through cash—is seen as a mark of innovation, rather than the carelessness and waste it may truly represent.
The stock prices commanded by “pre-profitable” internet companies can never be sustained. Yet youngsters who have made fortunes overnight are sought out as gurus on how to run companies. There is just the slightest chance they’re not offering the wisdom of the ages.
This is reminiscent of the true-life parable of tulipomania, the craze that overtook Holland in the seventeenth century so well described in Mackay’s book.
The enduring national symbol of the Dutch was not native to the region. It was brought from Turkey, where tülbend referred to the muslin used for turbans (a fully opened tulip was thought to resemble a turban).
When tulips arrived in Northern Europe in the sixteenth century, they were regarded as extraordinarily exotic, like a new operating system. By 1635, a full-fledged mania surrounded exotic species, so that sums that would sustain a working family for many years were paid to purchase a single bulb. By 1636, tulip marts existed at stock exchanges throughout the country.
At first, as Mackay writes, “confidence was at its height, and everybody gained.…Many individuals grew suddenly rich…and one after the other, they rushed to the tulip marts, like flies around a honeypot.” Money started pouring in from all around the world and “tulip notaries” were appointed by the government to oversee the trade. But of course the bottom dropped out of the whole thing, as the bulbs began to be seen once again as what they actually were: something to plant in the earth. Prices plunged.
As Mackay sums it up, “Many who, for a brief season, had emerged from the humbler walks of life, were cast back to their original obscurity. Substantial merchants were reduced almost to beggary, and many a representative of a noble line saw the fortunes of his house ruined beyond redemption.”
We laugh, but it is not entirely funny. The buoyancy of the crowd gives way to a lonely despair, and people look once again for something more genuine to chart their course by. What endures, then, comes not from the madness of crowds or from the extraordinary delusions of the day, but from appreciating a flower as a mere flower—beautiful, alluring—but a blossom that inevitably will fade and die away.
