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Bubbles happen when everyone realizes there is a gold mine somewhere, but no one knows how to find it. Some things are overvalued, some things are undervalued.
by tybris 15y ago
Bubbles happen when everyone realizes there is a gold mine somewhere, but no one knows how to find it. Some things are overvalued, some things are undervalued. Usually the gold is in a place where you least expect it.
The Netherlands had two flower bubbles, but not because people where crazy. People started to realize that this tiny patch of soggy land would one day be the biggest exporter of flowers and vegetables in the world. Flowers are clearly worth way more per kg than grain, but how much exactly? No one knows, but surely those tulips must be worth a lot.
- yesbabyyes 15y agoThat sounds reasonable. So why did people buy tulip bulbs instead of land in the Netherlands?
- tybris 15y agoLand was being mass produced in the first half the 17th century. My guess is that people couldn't imagine running out of land because you could keep reclaiming it from the sea, but they could imagine running out of tulip bulbs. Thus they undervalued land, and overvalued tulips. Similarly, during the .com bubble, people couldn't imagine a slightly improved search engine would be worth anything, but an online grocery store seemed like a gold mine.
- yesbabyyes 15y agoMakes sense. Thanks!