Musings /Blinds and Bulbs Bubbles

On falling prey to delusion, or not.

In a previous existence I practiced law as a sole practitioner in central London. A fledgling novelist in search of material could not do better than open a law office and wait to see what turns up. There is a grapevine in every major city that informs indigent but compulsive litigants that a new lawyer has hung out his shingle. Within days of opening your doors, you will be visited by as many misfits and eccentrics as ever peopled a Dickens novel. Two or three months in, I had already seen off the twittery lady the government had cheated of 10 million pounds, and the man who only needed an amendment to his birth certificate to prove he was the true Duke of Devonshire.

I learned to recognize them. For one thing they would invariably hump around carrier bags stuffed with documents. The character in Harold Pinter's "The Caretaker," who is always on the verge of going to Sidcup to retrieve his papers, was surely drawn from life; it is their papers that define such unfortunates. What they also had in common was their down-at-heel appearance.

So, when an empty-handed, immaculately suited gentleman entered my office, I believed that I might finally have found a rational client. He told me he wanted to talk to me about Venetian blinds. Unwisely I now see, I thought to put him at his ease by telling him what I knew about Venetian blinds. This was not information I had obtained from my crisp new third edition of "Halsbury's Laws of England," but from a more venerable possession: my 1942 edition of "The Beano Annual."

I was in the happy position, I told him, of knowing how to make a Venetian blind: You poke him in the eyes. For good measure I informed him, without pausing for his reaction, that I also knew how to make a Maltese cross (you kick him in the shins) and a Swiss roll (push him down the mountainside). None of this went down too well because, for him, as soon became apparent, Venetian blinds were no laughing matter. Still, I did not immediately grasp what he wanted of me. He was clearly not a salesman. I initially hoped that he might be soliciting my opinion on one of those problems so dear to the hearts of my profession. Something wrong, perhaps, with the bill of lading or letter of credit for a cargo of Venetian blinds, sold f.o.b. Hamburg for shipment to Valparaiso.

But all my courteous visitor was seeking was a fellow enthusiast. He wanted the world to know that he adored Venetian blinds, that he could not live without them. I had to tell him, as gently as I knew how, that, while I had nothing against Venetian blinds and would happily allow one in my home, I did not feel any burning personal commitment to them. In fact - and I realized that this deeply troubled him - I shared the general public indifference, reprehensible though he might regard it, to the place of Venetian blinds in an unfriendly world. Disappointed, he left me in search of another with time on his hands, with whom he could share his passion.

I never discovered whether he ever reached his Venetian blinds nirvana. In truth, in those days before the Internet enabled seekers to indulge every kind of idiosyncrasy, it must have been difficult to locate fellow Venetian blind fetishists. There were, indeed, magazines that catered for a wide variety of interests - racing pigeons, bottle caps, pepper shakers, teddy bears and electric trains - but I never heard of one for Venetian blinds.

But, imagine if my visitor's proselytizing mission had borne fruit and that he had found a number of like-minded fanciers of Venetian blinds and made common cause with them. Together, they would start buying Venetian blinds in earnest and would soon drive up the price. Others would see what was happening to the price and would themselves start buying. Rapidly, producers of Venetian blinds would be unable to supply the swelling demand and would enter into contracts to deliver quantities of them in, say, six months' time. Meanwhile, demand would push up the price so that these contracts would themselves have value and could be sold on and traded. Eventually someone, judging that now was the time to take a profit, would start unloading his purchase contracts and generate a run on Venetian blinds, bringing down the whole market.

Credulity and cupidity

Something like that happened in the 17th century in the Dutch republic. The object of desire was the tulip - for my money, not much more alluring than the Venetian blind. This craze for tulips occurred at the height of the Dutch Golden Age, the age of Rembrandt and Spinoza. The period is memorably recaptured in "The Embarrassment of Riches," Simon Schama's fascinating description of the time. It was a period of unprecedented prosperity and this prosperity was reflected in the sciences and the arts. Yet, the stolid Dutch, fell prey to a mass delusion; they went wild over tulips. Later generations called it "tulipomania."

The staid burghers you see staring at you from Rembrandt portraits invested all their wealth in tulip bulbs. At a time that the average yearly income was 150 florins, a single bulb of Semper Augustus went in Haarlem for 6,000 florins; for that sum you could buy more than 500 sheep. They sold townhouses and cattle to buy these tulips, and then tulip futures - surely as evanescent a form of wealth as, well, Venetian blinds.

This was perhaps the first recorded case of what economic historians term a "bubble" and, like all bubbles, it burst. Of course, later bubbles involved the pursuit of shares in public companies rather than tulips or Venetian blinds, but the principle is the same. What is remarkable about bubbles is that the most feverish speculators who, in pursuing the chimera of sudden wealth, lose sight of the intrinsic value of the object they are buying, often come from the most educated branches of society. When credulity is mixed with cupidity, reason flies out of the window.

In a book published as long ago as 1841, author Charles Mackay first drew attention to the bubble phenomenon. Its title, "Extraordinary Popular Delusions and the Madness of Crowds," says it all. What drives this lemming-like behavior is mass hysteria. Like Dr. Johnson's definition of second marriages, market bubbles represent the triumph of hope over experience. And people never learn.

Over a period of years Israel's leading banks shamelessly manipulated the prices of their own shares in a variety of ways. The bubble burst in 1983 when the banks no longer had the funds to buy their shares so as to prop the prices up. And, in the United States, the biggest ever bubble burst only six years ago: It was called the Dot-com Bubble. Millions of people threw billions of dollars after Internet companies that had consistently made heavy losses on the flawed theory that if those companies built up enough brand awareness, they could, at some future stage, make money.

In future, if you want my advice, buy Venetian blinds. You get what you pay for and the banks aren't on to them yet.