The Serious Money in Tulips

Tulips: The serious money in tulips - at Moneyweek.co.uk - the best of the week's international financial media.

In the late 16th century, Holland, and especially Amsterdam, was in the grip of Tulip Mania'. Frantic speculation in tulip bulbs drove prices to such levels that a bulb was worth more than a mid-sized house. Then, as bubbles always do, the tulip bubble burst, leaving many speculators both penniless and homeless. Since then, no one has dared seriously suggest investing in tulips again: even the suggestion of doing so is often enough to provoke the most violent response. But times have changed, and today there really is serious money to be made in tulips for those who are willing to do their homework.

Investing in tulip bulbs is not that different from investing in stocks or bonds. It all depends on what you buy and when. To do this successfully, one has to know a bit about tulips and the way they are grown. Tulips are one of the hardest flowers to breed and grow. Breeding new tulips is necessary because existing breeds genetically degenerate over time, which makes growing them economically unviable. This degeneration occurs because every year the best bulbs are used to grow flowers from, leaving the second-rate bulbs for the year after. New breeds result from cross breeding as well as mutation, but this is a very slow process as, on average, tulip bulbs only multiply by a factor of 2.4 a year. Thus it takes about 20 years before a new tulip reaches the consumer. This makes the breeding of new tulips highly capital and labour intensive, which implies a clear need for financing, and thereby an opportunity for investment.

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