EW JOURNAL

On the night of Friday, the sixth of February 1637, in an Amsterdam tavern called the Menniste Bruyloft, a Haarlem cooper named Andries de Busscher put a pound of Switser bulbs on the table and asked the room for a price. Switsers were the striped ones, red streaked over yellow, and a pound of them functioned, that winter, like a currency more than a rarity; men who dealt in them had watched the same weight move from something near a hundred and twenty-five guilders at the turn of the year to something near fifteen hundred by the first of February. The bulbs themselves were unremarkable objects, brown and dry, indistinguishable from onions to anyone not in the trade, and they were, in spite of the sums changing hands, still in the ground half the time they were being sold. That evening de Busscher found no buyer at any figure he proposed.

Days earlier, at an auction in the same town, the pattern had already shown itself. The auctioneer called a lot and met silence. He lowered the price and met silence again. The Haarlem trade, and then every tulip market in Holland, discovered inside a single week that the number it had been quoting to itself was not a price at all but a consensus, and consensus does not survive being tested one participant at a time.

The mechanism underneath that winter deserves more respect than the fable it became. The trade was called the windhandel, the wind trade, because the goods were not present: a buyer signed for bulbs that would be lifted from the soil in June, paying nothing on the day, the whole obligation falling due at delivery. Business was done in the back rooms of taverns, in informal societies the Dutch called colleges, each with its own locally invented rules about how a bid was recognised, how a dispute between members was settled, and what happened if a buyer failed to appear on delivery day. Contracts were sealed by handshake and a settled ritual of drink paid for by the buyer, a custom called the wijnkoop, which functioned as something close to a notarised signature among men who mostly could not be bothered with an actual notary for a transaction this size. No exchange stood behind any of it, no clearing house, no margin, and nobody had put up cash, which is precisely why, when February came, so little money was actually lost. What collapsed was a network of promises that had not yet come due.

Then the propaganda arrived, and it has, since decades, proved more durable than the market.

Two pamphlets printed in Haarlem between February and May of 1637, dialogues between characters named Waermondt and Gaergoedt, True-mouth and Greedy-goods, supplied nearly every detail that later became common knowledge about the episode. Anne Goldgar, who spent years in the notarial archives of Haarlem, Amsterdam, Alkmaar and Enkhuizen, established that the standard account of tulipmania descends chiefly from those satires and from a chronicler writing three decades after the fact, and that the trade involved a fairly small circle of people, many of them connected by family, religion and neighbourhood, nothing like the nation of maddened peasants mortgaging farms for a flower that the legend requires. She found a handful of companies formed to trade in bulbs, not hundreds. The mania that everybody knows about is, to a considerable extent, a document about how the seventeenth-century Dutch preferred to talk about themselves once the embarrassment had passed.

This leaves the historian, three centuries on, in an awkward position. The prices were real; the move in Switsers between December and February is attested in the notarial record. The collapse was real; the trade stopped inside a week. What was not real was the scale of the ruin, and the reason the myth of ruin was needed at all is the interesting part: a society that had just watched value evaporate wanted an explanation in which the victims deserved it.

One question sits at the centre of the whole affair, and I cannot answer it. When a room of florists in the Menniste Bruyloft quoted fifteen hundred guilders for a pound of bulbs, did any one of them privately believe that figure, or did each believe only that the next man would honour it? The notarial records show who signed and for how much. They do not show what anybody thought he was buying, and no archive ever will.

What the bulbs had was not a cash flow. A tulip produces offsets, small daughter bulbs, and a rare cultivar therefore promises a slowly expanding supply of itself, the opposite of scarcity, on a lag of a few years. Anyone pricing Switsers at fifteen hundred guilders a pound was pricing a closing window, the interval before propagation caught up and supply expanded, and that interval was the only asset in the transaction; a stream of income never entered into it. This is why the windhandel worked at all, and why it could not survive a single failed auction. A claim whose value rests entirely on the willingness of a later buyer has no floor beneath the willingness. There is no residual here, no liquidation value, no coupon, and no covenant to enforce, nothing at all to fall back on once the buyers stop coming. When the Haarlem auctioneer lowered his price and nobody bid, the instrument evaporated on the spot, because the only thing it had ever been was other people’s intentions, written down.

Valuation exists to keep that dependency visible. It was never going to abolish it. A discounted cash flow quietly relocates the future buyer’s dependency to a later date: the terminal value at the end of the projection, the exit multiple, the assumption that someone in year six will pay a certain number of times earnings for a business that will by then be somebody else’s problem. The discipline of the exercise lies in making the exposure explicit, in knowing what fraction of a present value is a claim on cash and what fraction is a claim on a stranger’s future opinion. A valuation that cannot answer that question is quietly still the windhandel, just no longer recognised as one.

Dutch courts, faced in 1637 with thousands of contracts nobody intended to honour, arrived at something less than a resolution. Provincial authorities mostly declined to enforce the agreements, disputes were sent down to local arbitration, and a good many were settled at a few percent of the contracted sum or simply abandoned. The law, asked whether a promise made in a tavern about an object still underground constituted a debt, preferred not to decide.

De Busscher’s pound of Switsers went unsold that Friday night, and the men in the room went home and told nobody, until the notaries began taking depositions and their evening became evidence.