The marketing trauma dejour – historically, markets have followed a crowd mindset. The more heated a market becomes, the more people want to buy in, and the higher the prices are pushed up.
This mindset has occured throughout history and the cycles can be studied consistently. Professor Watson teaches entrepreneurial marketing and the role in the market economy. Regardless of whether we want to evaluate recent credit markets which have Pop, these scenarios are not unique. They have regularly occurred throughout history.
One of the most reported upon historical markets that burst was Amsterdam’s Tuplip sector. We can analyzie the Tulipmania of the tulip market that burst in 1637 as a popularly documented historical account of a industry that overheated.
Tulips were originally brought from Turkey in the early 16th century. As new “varieties” of tulips were discovered, competition intensified and their prices soared. One legitimately rare variety was the Semper Augustus which reached prices in excess of 1,000 florins per single bulb in 1623. That price exceeded more than six times the average annual wage.
This industry mania continued – and ten years later the price had increased another ten times. At the market peak, the price of a single Semper Augustus bulb reached 10,000 florins – the value of what it cost to purchase a house in central Amsterdam at the time.
With time the market peaked and there was no-one remaining who still wanted to buy these bulbs at such high valuations. Within weeks, the market price crashed and thousands of people were left in financial ruin.
Throughout history – we have observed similar bubbles reoccur. As the crowd mentality continues to get more excited, those contrary views become less and less popular to be heard. Are any of the recent market bubbles any different? In today’s environment of politically correct speech, are the contrarian voices that stand up for morality, ethics, and honesty any different? Throughout time, these contrarian voices have been denigrated and ignored. But the market for products and the market for principles 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 required correction occurs. Today’s market is no different.
Tags: rare variety, Contrarian investing, central amsterdam, contrary views, Business Finance, Public opinion, correct speech
Filed under: Every Day Life
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