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by graeme2 hours ago |
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upvoteby xnorswap2 hours ago|
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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".

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upvoteby 1 hours ago|
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upvoteby JKCalhoun1 hours ago|
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The Hunt Brothers (re)learned this with silver in the 70's. (80's?)
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upvoteby danbruc1 hours ago|
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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.
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upvoteby jansan2 hours ago|
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By that definition every pyramid scheme is rational (of course only until you run out of greater fools).
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upvoteby toenail1 hours ago|
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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.
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upvoteby gbear6051 hours ago|
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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.)

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upvoteby shiandow2 hours ago|
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Are you asking because you think the LSAT is at odds with the article's description of the mania? Because it is not.
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upvoteby somenameforme2 hours ago|
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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.

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upvoteby ses19841 hours ago|
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> 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?

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upvoteby bri3k1 hours ago|
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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.
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upvoteby tardedmeme2 hours ago|
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That's how pyramid schemes work. Everyone "rationally" thinks they can find a downline, but most of them are wrong.
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upvoteby watwut1 hours ago|
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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.
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upvoteby somenameforme1 hours ago|
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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.

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upvoteby watwut14 minutes ago|
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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.

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upvoteby vasco2 hours ago|
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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.
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