Tulips, Ponzi and ENRON

NMB, Florida February 6, 2001 A.H. Schectman

THINKING ALLOWED
Essays on Issues, Ideas and Reflections on the Times. Published Now and
Then. Opinions Pro or Con Are Welcome.
TULIPS, PONZI AND ENRON
We humans are herd animals and when one of us, respected by all as a
decisive thinker, begins to spook and starts running in one direction most
of the rest of us follow if even only to see what is so exciting.

Now why tulips in the 1600's would incite a stampede from a lot of our kind
to follow investing in this beautifully peculiar flower (it grows out of
bulbs that divide [increase] unseen in the ground) is unclear but it
happened. There was a vast excitement and investment in tulips that quickly
bankrupted many otherwise sensible people. Even sensible people can be
convinced they, too, can become rich because of the dependable unseen and
underground nature of the tulip bulb - dormant, then multiplied.

This was something like the investors' craze to buy into livestock in the
19th century American west. As the story goes, "natural increase" would
significantly make the herds numerically larger at the end of the cattle
drive. Somehow, the cows would attract the bulls and romantically private
gullies and draws in the great outdoors would provide unexpected profits for
investors and newborn steaks and hamburger from the interlude. Buyers of
tulips and "natural increase" hoped nature would enrich them.

Now Ponzi was a whole other thing. In the 1920's, following the economic
disaster called World War I, a certain Mr. Ponzi found that a slight
difference existed in post office drafts from say, France to the U.S. If you
wrote a lot of these purely financial transfers quickly and carefully you
could make some money in a real short period. The problem was that he was
an insider and others, wishing to emulate him, followed his advice (based
solely on post-office transfers of money) on all kinds of economic flyers.
His followers got burned and lost their shirts. We humans are social
animals, tend to be followers and do not watch where we are going.

Isn't it amazing or predictable how many still believe that there is
something more behind the ENRON "crash"? If September 11, 2001 hadn't come
along and if Americans and world wide capitalism were allowed to continue
the party of success and profit taking, perhaps the rest of us would benefit
somehow - maybe - I guess. Carol's Evaluation: 10 out of 10.