The crisis dejour - historically, financial markets have experienced a crowd mindset. The more popular a market becomes, the more people want to buy in, and the higher the prices are driven.
This bubble has occured throughout history and the cycles can be analyzed consistently. Professor Watson teaches corporate ethics and the role of the market economy. Regardless of whether we want to think about recent stock markets which have Burst, these events are not new. They have regularly occurred throughout history.
One of the most well known historical markets that burst was Amsterdam’s Tuplip sector. We can consider the Tulipmania of the tulip market that burst in 1637 as a popularly known historical account of a market that overheated.
Tulips were originally introduced from Turkey in the early 16th century. As new “varieties” of tulip bulbs were introduced, competition intensified and their value soared. One legitimately rare variety was the Semper Augustus which reached values in excess of 1,000 florins per single bulb in 1623. That price was more than six times the average annual income.
This industry mania continued - and ten years later the price had increased another ten fold. At the market peak, the value of a single Semper Augustus bulb reached 10,000 florins - the value of what it cost to acquire a house in the middle of Amsterdam at the time.
With time the market peaked and there was no-one remaining who still wanted to acquire these bulbs at such high valuations. Within months, the market value crashed and thousands of people were left in economic ruin.
Throughout history - we have witnessed similar bubbles develop. As the crowd continues to get more hyped, those contrary voices become less and less popular to be heard. Are any of the recent market bubbles any different? In today’s times of politically correct speech, are the contrarian voices that speak up for morality, ethics, and integrity any different? Throughout time, these contrarian voices have been denigrated and ignored. But the market for products and the market for ideas 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 inevitable correction occurs. Today’s market is no different.