The first stock market crash and probably the first financial regulation can be traced to a virus. A plant virus. No humans were harmed in the making of this tweet thread - the 15th of the series of #LawforMortals. https://twitter.com/SandeepParekh/status/1171362281545879552?s=20

Plants are at least as susceptible to viruses as humans or animals. Potyviridae or Potyvirus (yes, yuck) is the biggest group of viruses affecting plants accounting for nearly 30% of all plant viruses. 2/n

The Potyvirus doesn't spread through touch. It needs an insect, a very specific one at that. Green peach aphid. Not red, not an apple and not a bee - it had to be green peach aphid. These aphids exist everywhere. 3/n

So the Potyvirus did not turn out to be catastrophic to the Tulips of Holland. In fact it caused a boom in Tulip cultivation which till today makes Holland the flower capital of the world. 4/n

Tulips were native to Central Asia and brought to Europe only in the mid 16th century. These were magical looking flowers. But the most magical were the ones which had a distinctive flaming pattern of streaks and stripes. 5/n

So distinctive, in fact, that a flaming version of a single tulip bulb Semper Augustus in 1635 could be exchanged for a massive bungalow. Around Rs. 8,00,00,000 in today's money. 6/n

To put it in contemporary currency equivalent: 7/n

It wasn't till 1920 that we understood that the unique patterns in these tulip bulbs were the result of the Potyvirus. The virus caused the stunting of production of part of the colours it was naturally born with. 8/n

In fact, the virus hampered growth of the plant, thus making the virulent ones more rare. Finally in 1920s the virus was eliminated to improve productivity. 9/n

From 1635 to 1637, you just couldn't go wrong with buying Tulips - they were the best investment products known to mankind - at least mankind living in Holland. They were a sure shot way to becoming a billionaire. Or at least a millionaire. 10/n

All you needed to do was shell out a huge sum of florins as down investment. Then it was just cornucopia. A sailor who by mistake ate one bulb thinking it to be an onion, was jailed for a long time. 11/n

Anyways, as all bubbles do, this one burst too. Tulip prices collapsed by 1637 to the equivalent of Rs. 50 each. Speculators who had promised to pay thousands or tens of thousands of florins each for a harvest of tulips didn't pay up. 12/n

From 1637 to 1638, the first set of financial regulations were drafted. Tulips were products and not investments. That meant tulips had to be paid in cash and not IOUs. Dutch banks could no longer accept tulips as collateral for loans and mortgages. 13/n

We have seen many many bubbles since then and people participate in them even though they individually know it is crazy to be a part. 14/n

Fear of being left out (the warmth at the middle of the herd is comforting), easy money and bigger fool theory probably all have a part of play with these bubbles. 15/n

Bigger fool theory is the knowledge that one buys an investment which is a useless investment but can be pawned off to a bigger idiot for a profit before the bubble bursts. 16/n

Over to @passivefool to talk about efficient capital market hypothesis now. END 17/N