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Aaron Brown

What Jamie Dimon Got Wrong About Bitcoin and Tulips

The problems cryptocurrencies help solve will not disappear if their prices collapse the way tulip futures did in the 17th century.
Cryptocurrencies are misunderstood by many.

Cryptocurrencies are misunderstood by many.

Image: Bloomberg

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon made news last week by criticizing bitcoin. Asking a bank CEO what he thinks of bitcoin is like asking the head of the post office what he thinks of e-mail. In a perfect world, Dimon would note the reasons why people use the cryptocurrency along with the dangers, and explain how JPMorgan is working to provide its customers with the advantages that come with bitcoin in safer forms. Instead, he denounces innovation as fraud and threatens to fire any employee who trades in bitcoin.

Dimon compared bitcoin to tulips, which is accurate, though not in the way he intended. Popular notions of the 17th century Dutch Tulipmania are derived from an 1841 book “Extraordinary Popular Delusions and the Madness of Crowds,” by a fact- and logic-challenged journalist named Charles Mackay.  Mackay confused two distinct eras. He reports stories  from around 1610 about high prices paid for individual bulbs. What he failed to realize is that people were not paying for single flowers, but for the entire breeding stock -- or a significant portion of it -- of popular new tulip varieties. People have continued to pay higher inflation-adjusted prices for new tulip and lily bulbs to this day.