What do tulips and Internet and Social Media stocks have in common? Maybe a lot or nothing at all? But, read on. What’s the best way to describe what’s happening on the Web? Folks are searching for the right metaphor to explain the current frenzy over Internet stocks. The Dutch tulip mania illustrates what happens when prices increase dramatically.
This is what happened in the Netherlands around the 1630’s. Demand for tulips spread across Europe from Turkey in the late 1500’s. People went crazy over tulips so that tulip valuations went ballistic. A variety of tulip bulbs was so popular that one bulb was exchanged for a successful French brewery. Ordinary Dutch families mortgaged their homes to buy bulbs and resell them at higher prices. Then in 1637, the bottom dropped out of the market. Could this happen with Internet stocks?