The story is told of two men, who desiring to safeguard their riches, decided to conceal them by burial. One of the men selected an area below a tree, the other choose a place within his garden. Having selected places they deemed safest, both men went about burying their gold, silver, and jewels.
Time passed and soon proved both men had failed in the choices they made. The man who buried his treasures in the garden mistakenly assumed someone stole his treasures because he could not find them. However he had simply just forgot the exact spot where he had buried them. The other man who had buried his below a tree was unaware a thief was watching in the near distance. No sooner had he tamped the dirt and departed, the thief came and exhumed the treasures.
Both men continued on living under an illusion, one thinking he had plenty yet had nothing while the other thinking he had nothing but had plenty.
Earlier this year I mentioned in my post Shadow or Substance a term used in the financial industry known as a “market bubble”. Recently I was reminded of that when I read something Al Gore said regarding oil. Calling out fossil fuels he categorized them as a carbon bubble: “Bubbles by definition involve a lot of asset owners and investors who don’t see what in retrospect becomes blindingly obvious. And this carbon bubble is going to burst.”
The blindingly obvious – that statement stands out to me. We’ve both heard it and phrased it in other ways ourselves: “Hindsight is 20/20” or “If I’d only knew then what I know now”. What is about the obvious that’s so elusive? Like sleight of hand, an act is carried out right before our very eyes yet something else had our attention.
Charles Mackay wrote a book in 1841 titled Extraordinary Popular Delusions & the Madness of Crowds. In it he describes the events that unfolded in Europe when the country was first introduced to the Tulip flower. Imported by the Turks, the tulip became an item of renown. As their fame spread, tulips became a status symbol and were considered a luxurious item. Some growers aiming to set their tulips apart began transmitting a virus into the bulbs. By creating unique color patterns, their bulbs would stand out from the rest. Everyone else caught on and moved in the same direction.
As time went on, contracts to buy bulbs at the end of their growing season were bought and sold. In his book, Mackay gives an account of people selling off or trading valuable possessions in order to participate in the Tulip market. At the height of Tulip Mania as it would become known, single tulip bulbs sold for more than 10 times the average annual income.
Today you can buy 10 bulbs for less than $6.00.
We shake our heads at the idea of masses being influenced by a flower. We laugh at the idea that an entire country could think something so temporal could possess such value. But how is it any different today? Our culture permits items with basic function and single purpose to net a return which generations before would scoff at. Purses, sunglasses, watches and a host of peripherals exceed the cost of cars, houses, or logical investments. Yet today society permits this and even celebrates it. Some prices are driven by inflation, some are driven by demand, and some are driven by ignorance.
“A fool and his money are soon parted”
A belief about something does not substantiate a reality…there may just be too many letters present.
Copyright © 2013 J.M. Cortés