You won’t be surprised that Donald J. Trump doesn’t know the history of the Tulip Mania that has become a cautionary tale for economists everywhere about financial bubbles. After all, this is the president who knows so little about botany and biomes that he believes that raking the forest, as the Finns do, prevents forest fires.
Firstly, Finns don’t do that. Secondly, that’s because that’s not what causes forest fires. This was from Trump’s first term when he was saying stupid stuff because he misinterpreted or misunderstood what people said to him; now, thanks to his senility, he bases the stupid stuff he says on imaginary conversations he holds in his head. And we know how very, very, very little Trump, who bankrupted casinos, knows about business and economics. So for sure, there’s no way Trump knows about Tulip Mania and what it might mean for the AI industry.
The rise and fall of the tulip
At the end of the 16th century, the Netherlands became the superpower: Obscenely rich and so powerful militarily that they were able to gain their freedom from Spain and declare the Dutch Republic in 1581. Yes, the Spain that was able to conquer the New World. In the following century, the Dutch East India Company and the Dutch West India Company set up colonies and trading posts worldwide. At the start of the 17th century, the Dutch were already rich as Croesus. By 1650, the Dutch had 16,000 merchant ships.
And like the American 1% today, the top of the Dutch food chain were eager to exhibit their wealth. And just as the 1% began investing in art and artificial intelligence certain that they’d make a killing, the world-traveling Dutch sailing for spices from Turkey discovered and began investing in a very pretty, if fragile, flower hailing from there: the tulip.
With extra disposable income, the wealthy Dutch began speculating on tulip bulbs. The price only seemed to go up! Soon even artisans and the middle class joined the fun. And why not? This was one investment where you were guaranteed to make money. Anyone who got into the game early enough was sure to double or triple or more their investment by planting tulips and selling the bulbs. (The Netherlands remains awash in tulips to this day.) Soon everyone got in on the action, as the Amsterdam Tulip Museum describes:
Finally, speculators, usually called florists, began to meet and do business in taverns all over the Dutch Republic. Many florists were middle class artisans, farmers and tradesmen. Some cared nothing for the flowers themselves, buying and selling the bulbs according to the model of the new futures markets established for Amsterdam grain sales. Florists simply wanted to get rich quickly. Their lively trade, fueled by tobacco and alcohol, drove prices up in a frenzied market boom.
Tulip Mania began in the 1630s. Eventually, one didn’t even need actual bulbs. “Often, no physical bulbs or tulips were actually sold; the trading instead occurred with a ‘futures contract’ — a piece of paper guaranteeing the right to specific bulbs that would be blooming in the coming spring,” according to the Amsterdam Tulip Museum.
The tulip economic bubble got to the point that a single Agustus Semper tulip bulb was worth a whopping 3,000 florins, the equivalent of more than $1 million today. (You can see a watercolor of one of these extraordinarily lovely specimens here on Wikipedia.)
Not only were tulips sure-fire investments, they were the status symbol. Investopedia quotes the Library of Economics and Liberty, thusly: “It was deemed a proof of bad taste in any man of fortune to be without a collection of [tulips].”
So what happened? Tulip Mania hit its peak in the winter of 1636–37. But in February 1937, the market collapsed, although no one can really explain why. Would-be buyers tried to wheedle out of their contracts, while sellers tried to enforce them so as not to go bankrupt. “Demand disappeared, and flowers tumbled to a tenth of their former values. The result was the prospect of financial catastrophe for many,” says the BBC. Historian Anne Golgar writes in her 2007 book Tulipmania: Money, Honor, and Knowledge in the Dutch Golden Age that Dutch courts continued to deal with these Tulip Mania lawsuits until 1639.
Is AI the next “Tulip Mania” financial bubble?
Were there signs of the impending burst of the Tulip Mania financial bubble? I don’t know, just as I don’t know if someone savvier than I could have foreseen the collapse of the South Sea Bubble of the 1710s, the British Railway Mania of the 1840s, the dot-com bubble of the late 1990s, and the disastrous 2008 crash that ended one of the bigger financial bubbles in the 2000s. But what I do know is that even an economic ignoramus like myself can see impending doom for this AI bubble.
First of all, consider what’s already collapsed. Mark Zuckerberg’s much-heralded Metaverse, considered so promising in 2014 when it began, is virtually gone. Secondly, AI deals are flying as fast and furiously as they did during Tulip Mania. Indeed, experts claim that the AI bubble is the only thing preventing a recession. Harvard economist Jason Furman estimates that 92% of 2025’s GDP growth is due to AI investments. Natasha Sarin, a Yale Law School professor, warns:
The situation is worse than having all of your economic eggs in one basket. It’s closer to putting all of your eggs in one basket and stomping on all the other baskets.
There are signs that the non-A.I. economy is under duress. As economists predicted, tariffs are pushing up inflation and dragging down growth. Hiring has stalled. Jobs are particularly hard to come by for young people entering the labor market; youth unemployment is at 10.5 percent, a level not seen in nearly a decade, absent the pandemic.
In addition, a shift to AI from any other part of the economy would mean an increase in unemployment. As Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, pointed out: “While it takes a lot of people to build a new data center, it takes relatively few to operate one.”
In another setback, many of these round-the-clock data centers require more electricity than their host cities can even produce, up to 1 billion watts apiece. Right now, AI centers use 4% of all the electricity generated in the United States; that would grow to 9% to 12% by 2030 if the Tech Bros get their way. All while these data centers soak up so much electricity and water that citizens, even in ruby-red cities are telling them no. Why would they want water shortages, even higher electrical bills, and electrical brownouts for a tiny economic payoff? Thus far, $64 billion’s worth of data center projects have been killed or delayed.
Does this sound like an industry headed for ever-greater glory? Or profits? John Higgins, chief markets economist at Capital Economics, told Fortune magazine that the AI stock bubble has already burst. Not sure that’s necessarily so, but the writing certainly is on the wall, no matter what Grok’s Elon Musk, Nvidia’s Jensen Huang, Google’s Sundar Pichai, or ChatGPT’s Sam Altman say. They just don’t want to read it.
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