Labyrinth of chaos

“Life-tree” was the written equivalent of the grand plan I made for myself. It extensively detailed the road-map to achieve both professional and personal goals. It also covered the time-lines to achieve those benchmarks. I was impressed with this exercise; I had effectively laid down the blue print for the next 50^* years of my life. I was confident. However, there is a small glitch..

Humans have a peculiar trait, we like to see order, plan, organize and trick our minds into believing that we are in complete control of our present and future. The universe, in contrast behaves quite the opposite, it embraces chaos where change is constant.

The Black Swan, written by Nassim Taleb explores this theme in greater detail. At its crux, the book focuses largely on the extreme impact, rare and unpredictable events have on our lives. Although the book is quite complicated in its structure and content, it did however, make me aware and take notice of something I had so far ignored – Uncertainty.

You see, “Life-tree” was a very good effort; it channelized my efforts and helped me take charge. The problem was that it had an implied assumption of life being linear and predictable. It had no room for uncertainty; there was no space for change. The fact is, I have no idea what lies in store for me and the future is filled with infinite possibilities.

Today, my “Life-tree” is simpler. I avoid setting too many numerical benchmarks for myself, I don’t plan too much and too far, I don’t set rigid time-lines for activities and plans which extend beyond a short period, I try to keep my thought process flexible to adapt to new ideas and information.

People think differently and respond to situations in their own unique ways, after many bitter experiences, unexpected turns and some deliberate efforts I am finally learning to traverse this Labyrinth of chaos called Life.

(*) This figure is subject to change.

Greed is good?

Would you sell your house in exchange for a few flower bulbs? , No? If I had put this offer across 375 years back in Netherlands (Holland), you probably would.

For those who don’t know, I’m referring to “Tulip mania”, one of the first economic bubbles in recorded history. Tulips were originally introduced to “The Dutch” by the Flemish botanist ~ Carolus Clusius in the late 16^th century, It was unlike any other flower known to Europe at the time, it soon rose in popularity and became a status symbol among the rich and affluent.

It usually takes between 7-12 years for the seeds to grow into flowering bulbs, so you can imagine the scarcity in production in contrast to the prevailing demand.

Combined forces of their demand, rarity and time taken to grow these beautiful and exotic flowers caused prices to rise dramatically over a period between 1600’-1636’. This hike in prices was fueled by speculative trade, traders and merchants entered into formal futures contracts to buy and sell bulbs at the end of the season, what is more surprising is that neither party paid any margin money or mark-to-market margins, only a paltry deposit- “Wine money” prior to entering into a contract.

Things got out of hand when at its peak a single tulip bulb sold for more than 10 times the annual salary of a skilled craftsman, sometime around 1635, 40 bulbs were exchanged for 100,000 florins which equates to 2500 florins for a single bulb, For that amount  you could buy all of the following:

2 Lasts of wheat	448 f
4 Lasts of Rye	558 f
4 fat oxen	480 f
8 fat swine	240 f
12 fat sheep	120 f
2 hogshead of wine	70 f
4 tuns beer	32 f
2 tons butter	192 f
1000 lb. cheese	120 f
A Bed	100 f
A Suit of clothes	80 f
A Silver drinking cup	60 f
Total	2500 f

*Courtesy Wikipedia

By 1636, it wasn't just the traders and merchants involved in this rampant speculation, the common masses  joined in too, so much so that people ignored their primary occupations and participated in Tulip trade. In the last few months leading to the subsequent crash of this irrational euphoria, the prices of tulip bulbs rose by close to 20 times.

Tulip trade reached its peak during the winter of 1636’-37 and had attention of the entire nation. February 1637, tulip bulb contract prices suddenly began to fall, and no deliveries were made to fulfill any of the contracts, this lead to free-fall in the prices of these bulbs, the market for “Tulips” evaporated overnight, there were simply no buyers for any contracts any more, only sellers. There was widespread panic and merchants turned to the government for help. Tauntingly, the Government announced that anybody could pay a 10 percent fee and void the contracts; the courts of law wouldn't help either as they termed this activity as “Gambling” and declared that these contracts weren't enforceable by law. This led to further fall in Tulip prices, any attempts to reach an agreeable solution failed and they couldn't find any brakes to halt or even slow down this continued fall in prices.

The mania finally ended and People were left with flowers, worth a fortune just a few weeks back, now fetched a fraction of that amount. The Dutch economy was in mild recession for a few years following this event. The market values of various commodities was questioned, people were now fearful and more cautious than ever.

Think about it, Prices of these bulbs which took years to appreciate and rise in value were beaten down to almost nothing in just a few weeks.

At the crux of this incident lies a very basic human instinct and emotion ~ Greed. It’s a drug which you simply can’t afford to abuse.

* Primary source of facts and figures - Wikipedia.