How did tulip bulbs become so sought after, and so incredibly expensive? As with many other investment bubbles (when an asset surges in value by more than is warranted only for prices to collapse later) it had something to do with the thing people were investing in, the people doing the investing – and the structure of the market they were making their investments through.
Tulips were a luxury item – and they had an increasing number of luxury buyers ready to pay for them. A Flemish botanist had started cultivating them for the first time in Northern Europe in around 1593, but since it took between 7 and 12 years to produce a tulip bulb, supply was limited3. The most sought after bulbs such as the famous Semper Augustus, were even rarer, since their blooms got their spectacular marbled effect from a virus that made them even harder to cultivate.
Those who wanted tulips were competing for a very small number of luxurious flowers. And there were plenty of rich buyers who wanted them. Dutch merchants were growing wealthy on lucrative trade with the East Indies4 and looking to show off their status through planting spectacular flower gardens.