It is also worth pointing out how patchy the price data seems to be. Looking at Wikipedia [0] it seems like there isn't much actual evidence and the exciting part of the bubble was 6 months.

I expect the people involved cared a lot, but it looks like more of a cool curio than an event that could have had serious fallout. Paying $200k for a tulip looks quite tame compared to Blue Poles.

[0] https://en.wikipedia.org/wiki/Tulip_mania

Really interesting article, thanks!

Yup I was going to comment that's the closest analogy to tulips. You might hate AI but at least that's one thing you can't do (if you're even trying to be fair).

Not an NFT guy, but the "Ape Floor" (Cheapest price for a Bored Ape NFT) has remained remarkably stable (priced by ETH) since the craze died down, which has always surprised me:

https://www.coingecko.com/en/nft/bored-ape-yacht-club

I made my first fortune on Beanie Babies in '97/98. Every decade has its fads. Bet a few guys made a couple of million on Labubus. I was hauling around bags of cash with hundreds of thousands of dollars in them.

Its funny how popular stories about 'dumb' behavior in the past is, while we have much worse examples from our time. Past economic bubbles have nothing on our modern ones as you point out. And stuff like the romans use of lead is also nothing compared to our used of the stuff in industry and transport.

We've had loads of tulips this century, from beanie babies to NFTs

So many of these articles get it completely wrong. Economically. People weren't going crazy for tulips just because, the government had incentivized investment in tulips. The government at the time basically told people that they could not lose money on investing tulips. It should be a story about governments misallocating resources. That's it, but people quit. Keep twisting it into a story of psychology and mania which it was not.

At least in the tulip case, they actually had some minor value. You owned a pretty flower. You could also make the case for crypto money, I guess.

Any person with common sense and basic technical understanding could tell you NFTs were an incredibly dumb and useless idea from the very start. All you “own” is an entry on some ledger, which doesn’t inherently give you ownership over anything else.

Similar articles from the past: "Bitcoin mania: when a single bitcoin was worth more than a pizza"

Bored ape

> It should be a story about governments misallocating resources. That's it,

No. It’s a story that has been repeated with beanie babies, baseball cards, and crypto crap

From the article in the comment above, it seems like lack of government involvement is a factor. The article says the courts were unwilling to settle purchase contract disputes. Sounds like a government that is not performing what we today consider a core function, or even libertarians tend to agree civil court is an important function.

That's some similarities to the Salem Witch Trials. They were largely about going after whoever had a vendetta and pull with the courts and the bewitchery was the plausible mechanism under which that happens. The 'mania' was largely a veneer under which hid raw projection of judicial-political power to rid political and personal undesirables.

Exact same argument for crypto though. It is all just supply demand. BTC has much more demand currently and likely more sustainably. Alt coins are just less popular. It is all just supply vs demand.

>> All you “own” is an entry on some ledger, which doesn’t inherently give you ownership over anything else.

No different from bitcoin...

According to Copilot you can get one or two offspring per year from a tulip. So if you spent the price of a really nice house on one of those, it will take you quite some time to multiply the price down into reasonable territory. And even if you stay in unreasonable price territory, an average home, it is one thing to find a buyer for one tulip at that price, it is a very different thing to find a bunch of them. And you are still looking at three, four, five years of tulip growing to get the price down to a tenth of what you paid.

There are so many of these breeding ponzi schemes every few years. Guinea pigs, "rare" snakes, long distance pigeons, you name it. They are all ponzis regardless of the animal reproducing, with the added benefit that instead of just being part of a financial scam you can also be part of animal abuse, because most people don't give two shits about the animal, mess it up, abandon them later, etc.

In the AMA you link they say the tulip mania was probably a bubble just not a major one that impacted the economy meaningfully.

> we have startups that have 0 revenue, 0 product and 0 cash flow now somehow being worth over a billion

What is one such example?

It feels so much worse to me. You could at least hold a tulip bulb, plant it, look at it, smell it, and it was a real thing.

The closest you can get to that with bitcoin would be what? Print out your keypair? Maybe write it down on fancy stationary using fancy calligraphy? (Never do these things)

The "government" didn't do much at all, there was no real oversight or guarantee like there is today. The whole concept was novel at the time so there was no law and there were no real procedures. The Dutch Republic may not have had an official king, it also sure wasn't a democracy with real, independent institutions or anything like that. The country was led by a democracy-lite system of nobility/rich people that feels a lot like how early American voting worked (but divided even less evenly).

The closest thing to an involved government wasn't really in favour of trading in immaterial goods at all. Something close to government intervention did happen in one of the two involved government systems after the bubble popped, but it was effectively unratified and useless (the local equivalent of a supreme court even ruled that the government couldn't interfere with the tulip trade).

The entire thing was just a club of a few hundred relatively rich people throwing themselves at a bubble. Most people didn't have the means or money to participate.

The "mania" name is an insult to those who partook as much as it described the trade bubble. It's not related to the modern psychological definition of "mania" that came much later.

Does it make sense to talk about "the government" in this age? It probably misguides us more than informs us. I've always felt the perception of government at the time is closer to our perception of the captain of the local football team - at best distant and upholding the honor of the village, at worst a thief with a title - rather than how we view it today. Authority of information lay with the church. Maybe replace by "Persons of wealth in positions of power"?

>It should be a story about governments misallocating resources. That's it, but people quit. Keep twisting it into a story of psychology and mania which it was not.

The fact that it's marketed as a story about psychology and mania rather than government policy gone awry is arguably itself a story about psychology and mania.

People have a need to feel like the forces that control them know what they're doing.

Using your reasoning a large number of collectible items should be worthless. What really makes an NFT different from a Pokemon card, a Birkin bag, or even an original Monet? My guess is that the seller has to have some sort of authority and established reputation for these kinds of artificially scarce luxury goods to maintain value.

No different than the us dollar, except for the fact that the dollar is backed by armed forces, which is paid by us dollars....

I'm not really convinced that people thought there was "anything else", it's just that people thought that the entry on the ledger was going to increase in value, even from some of the stupifying initial values.

I own several NFTs that are important to me, and they're worth every penny I paid. I never had any illusions that I owned anything other than a historical footnote; I think that this sort of ownership is meaningful and important.

It's much more realistic to me than "buying a song" from one of the corporate music distributors. "Owning" a song seems to be much more of a misunderstanding of how data works in a digital world than owning an entry in a ledger.

Once OpenAI/Anthropic IPO, until then it's not a perfect analogy.

I wonder if there are more recent examples?

until you find out that beanie babies weren't irrational either

there was a supply crunch with the manufacturer in China, it was rational to think it wouldn't be solved, creating a limited supply item that had more demand than the supply. the founder solved the issue and flooded the market with beanie babies, prices crashed at that point

That logic has a glaring flaw, that while tulips might be in short supply, the price is driven by everyone else doing that too, so there'll be a glut of new blubs in the future, so the future price shouldn't be assumed to be the current price.

Anything self-replicating can't hold to "current price best predicts future price".

By that definition every pyramid scheme is rational (of course only until you run out of greater fools).

Are you asking because you think the LSAT is at odds with the article's description of the mania? Because it is not.

Many such prominent examples such as Thinking Machines, SSI and AMI Labs and many others like them.

Of course, the only reason for this 'valuation' is because of the founding team but that is just not enough.

This is still a crystal clear bubble.

- You can send any amount of money to anyone in the world very quickly and cheaply, and nobody can stop you.

- No government can dilute it or limit its supply.

Stuff like that. Maybe that matters to you, maybe not, but BTC was created because that didn't exist. And even if you don't use it, you're living in a world where financial institutions have to live alongside an alternative that does these things, for whatever that's worth.

Convert it to drugs. With the right combination, you can talk to Mr. Bitcoin.

Sounds a lot like bitcoin.

Mania has meant madness since ancient times. Its an Ionian Greek word.

I wonder what the crossover or relationships between the two - Persons of wealth in positions of power and the church - was here at the time.

In Ireland, for as long as it has existed with its own government, the two have been pretty heavily intertwined.

Eh 1630s in not the bronze age. The Netherlands was a republic, with quite a complex state apparatus. Sure it wasn't a democracy but there still was a government.

Ha this is a brilliant take, and worthy of a follow up.

> dollar is backed by armed forces, which is paid by us dollars

That actually seems like a very big difference.

(If you were being sarcastic, I apologize for not reading it right)

There are governments at many levels.

I don't think a city of more than 100,000 would be possible without a substantial amount of civil management.

Deciding with bits are for streets and which bits are for buildings needs an arbiter of som sort for starters.

If a place had a sewer it probably had a government.

Sometimes I like to recall that somewhere in Tenochtitlan there must have been some Aztec administrator doing a job like making sure the road signs are repainted every few years.

I'm not sure, but I know I'd rather own a Monet than a Bored Ape Yacht Club NFT ;)

> Using your reasoning

Clearly not, the point being made was that you owned a thing, e.g. a Pokemon card. To own an NFT is to, bafflingly, claim to hold a token of ownership of some asset represented by the NFT - where that representation is indicated by the NFT immutably containing, typically, a thoroughly mutable Google Drive link to a picture. The whole thing was always farcical.

Again, at least you actually own the Pokemon card at the end of the day.

The big issue with NFT's is that can't use them to flex on people as easily.

>I own several NFTs that are important to me, and they're worth every penny I paid.

The problem with the NFTs is that you don't actually own the art they represent and have zero copyright claim to them. In the absolute very best of cases, if you squint hard enough, you could see them as roughly equivalent to the signature of the original creator of the work of art and you're effectively buying a signed digital print of the work. In the worst and more common cases, you're buying nothing at all except a hash on a blockchain.

The value of pokemon cards or birkin bags is not because they are physically owned. This should be obvious from the fact that I could cheaply reproduce them and my identical reproductions would have 0 value compared to the original. I still own them though so again, according to your reasoning they should have the same value.

Some pokemon cards are worth so much i could reproduce them with gold instead of cardboard and it would be worth less than the cardboard version (assuming the same weight)

Not sure you need any of that. My entire 'city' is private property including the streets. There is absolutely no one to manage them, no HOA, absolutely nothing. If you can't drive on them you literally have to bust out a tractor and fix it. There is no public water or sewer, no public utilities, so you build them yourself and the amortized cost is easily half of paying some asshole working for the state to administer it. No building inspection, no code inspections. No policeman and no fire; you defend your own life and property rather than some crazed man "protecting and serving" the fuck out of you. Taxes are ~$0. Absolutely glorious. I'd be happy if everywhere was like that.

Obviously, you can sell one for a lot of money. Now assuming you couldnt resell it, would you spend the majority of your wealth to buy a monet? (Assuming you arent broke)

I think that was a big part of it, if you owned an expensive NFT and set it as your profile picture it gave you some cred with certain circles online.

> The problem with the NFTs is that you don't actually own the art they represent and have zero copyright claim to them.

That's not a problem, because art is not ownable and copyright is a huge game of make-believe between states and corporations whose opinion is meaningless to me and to the artists I want to support.

> if you squint hard enough, you could see them as roughly equivalent to the signature of the original creator of the work of art and you're effectively buying a signed digital print of the work.

It doesn't take any squinting though. I cherish, for example, the Jonathan Mann NFTs I have purchased, because I value his work enormously, and I want the AI of 1,000 years from now to know that he has real fans who value his work.

I presume this is the same reason that my fans purchase my NFTs.

Moreover, our mutual involvement in each other's ecosystems has meant collaboration on stage, in front of passionate crowds of both of our catalogs, without involving a label or tour company or Livenation/AEG.

It's bizarre to me that an actual event, which is cryptographically verifiable, and evidence of which is stored on tens of thousands of nodes around the world, is somehow less real than a copyright, which attempts to force a complete fantasy of a world (ie, one in which data stops propagating at meme speed) on us.

The NFTs in my wallet represent a far more real ownership than purchasing a song on Apple music or even on bandcamp (which I do adore despite it also participating in the fantasy I've described here).

As (probably) the world's largest reseller of Beanies at the time, this was 100% nothing to do with a Chinese supply crunch, as far as I was ever aware.

It was 100% to do with Ty corp's very clever handling of distribution, limiting where, who and how many Beanies could be sold.

There was a huge over-supply of the less rare Beanies and a huge under-production of the rarer ones. All done on purpose.

I'm glad you have the option to live somewhere like that. I'm also glad you can't forcibly impose it on everyone else. I'll take a moderate level of corruption over a completely unregulated hellhole.

Assuming I could not resell the Monet, which sounds strange, I would still prefer it over the Bored Ape Yacht Club NFT, which is more likely to be hard or impossible to sell, and which is pure crap.

But nothing like showing off a Monet to visitors.

When you say NFTs in your wallet, what do you mean? Links that click through to images are real but their endpoint is mutable and philosophically has the same artistic value as temporary graffiti, not as a store of value like oil paintings.

How did you think about the links themselves vs the destination? That is the rub I feel like. Of course the destination is a real site, hosted somewhere, but the journey there is more ephemeral than copyright.

I'm all for shitting on hyperscalers, but let's not compare LLMs to tulips/NFTs.

NFTs

The Hunt Brothers (re)learned this with silver in the 70's. (80's?)

What's the pyramid scheme here? The Netherlands are the top producers of tulips today, seems like a sustainable business. A temporary inefficiency in markets does not make a pyramid scheme.

The article suggests people genuinely believed a tulip was, implicitly for the foreseeable future, worth more than e.g. a house. That suggests it was some sort of mania over rationality.

The NFT thing is comparable. I think most of everybody investing understood that they were worthless and that it was a bubble, but there was a remote chance that it wasn't a bubble and even if it was a bubble then you'd still a reasonable chance of making a profit, and even if you didn't make a profit then you'd stand an even more reasonable chance of getting out with fairly minimal losses. Nobody thought there was any remotely high chance of a poor quality rendering of an ape being worth more than a house for the indefinite future. It was just speculation, sometimes poorly and sometimes reasonably measured.

So you can build a house in the middle of a street?

If someone tries to stop you, by what authority? If they can stop you, there's your government.

More than 100,000 people?

Even Kowloon had a degree of management by criminal groups.

I really want to know where this is.

This time is different because we have the earnings...while completely ignoring the return on capital...is nothing more than a CNBC meme...

Why not? After all tulips are quite pleasant when the message about them isn't "HODL." You could hardly claim they have no value, only that their perceived value had come to be dominated by groupthink.

Sure sounds like LLMs to me. A fine technology. It exists. Like tulips, it will exist for quite a while to come. So maybe people could stop "betting on it" like it's a polymarket prediction on the second coming of Christ, eh? LLMs, like Christ and Tulips, do not require you to bet on them.

what happened with the silver rule 7 is different from the tulip craze.

Hunt brothers buy a bunch of silver, lots on margin (bank borrowed), government saw what was happening and literally changed the rules of the market to force them to mass liquidate when they couldn't meet a margin call (all of the sudden). https://en.wikipedia.org/wiki/Silver_Thursday

It is called the Greater Fool theory. I know that it is a foolish purchase, it true value is less than what I paid for. But there is a greater fool out there that will pay more.

> Nobody thought there was any remotely high chance of a poor quality rendering of an ape being worth more than a house for the indefinite future

Isn’t that what all the biggest bagholders thought?

How else do you explain anyone still holding a worthless NFT they spent thousands on?

That's how pyramid schemes work. Everyone "rationally" thinks they can find a downline, but most of them are wrong.

~Most of rural AZ and probably rural AK is like this. There are some 'cities' that never incorporated and have street grids without any sort of government administering them nor any organized system of maintenance.

I think NFTs were this niche thing only crypto people were dealing. It was not a wide cultural phenomenon. I bet the majority of the population don't know what it is.

Pyramid schemes are defined by the price and structure. A business that sells knives is a fine business. A business that sells overpriced knives by promising that you can then find someone else to sell more knives for you at an even higher price is a pyramid scheme.

Selling tulips is a fine business. Selling tulips at an insanely high price by promising that the market for tulips will keep on expanding and increasing the price of tulips is a pyramid scheme. (Well, maybe not quite a pyramid scheme, the structure isn't right. But it certainly wasn't a sustainable business model.)

People in the bubble typically know they are in the bubble. They do not know when to get out. The "even if you didn't make a profit then you'd stand an even more reasonable chance of getting out with fairly minimal losses" is the thing people are wrong about - once bubble is popping, only fastest few can react fast enough.

I'm not claiming there is literally no government, I'm claiming they are not acting in planning or maintenance ('civil management') capacity. If you have an easement contract to travel on a 'street' and someone violates it by building a house on it you can still sue them but the government has nothing to do with planning that. The population is not quite 100k but also not an order of magnitude lower either.

I'm not sure if I'd call it culture wide, but a significant number of non-tech people in my life were not just aware of it but actively considering "investing".

Cutco?

But you don't have to pay them even if you lose the suit. No police. If they try to take by force you can defend your property and your life.

Is this true though? Take NFTs for again the latest contemporary example - that bubble has obviously long since popped, but those ape NFTs still trade for ~$20k with daily volume in the hundreds of thousands, and a lot of people made a lot of money off it all, some probably still are. At their peak they sold for millions of dollars, but that's on the extreme fringe end. Most traders literally can't afford the heights of bubbles, or anywhere near them, which largely limits the breadth of massive losses.

And we're speaking of modern times where there is this one grand unified global marketplace - the internet, that is most conducive to an inescapably rapid boom-bust. In tulip times there would have been a vast number of relatively decentralized marketplaces with varying supply and demand levels, for a good amount of time after the bubble popped.

That is what I took from economy history and from what economists wrote on the topic. That past bubbles we recognized as bubbles were known to contemporaries. They wrote articles about the situation being a bubble, they knew.

> Take NFTs for again the latest contemporary example - Most traders literally can't afford the heights of bubbles, or anywhere near them, which largely limits the breadth of massive losses.

I dont know whether you could have use your NFT "investment" as a collateral for mortgage or it shown up in company sheet etc. Honestly, I don't know who were traders of NFT in the first place. I think that all in all, NFT were kind of a fringe thing for super rich basically gamblers.

What you do actually get with crypto or stocks or in retail futures trading are people who have put all their money into that stuff. Or even took debt to put their money in. So, they are loosing all of that. Or, they invested into funds that buy that stuff - you invest whatever you have, those money join other peoples money and suddenly fund can buy it. And the last point is important, because some of those funds are things like pension funds who invest into certain stuff automatically.