Has tulip mania happened with guitars?

You've probably never heard of this, but you most likely already know what it is.

I'll first describe what tulip mania actually is and where it originates from.

Tulip mania originally happened in the Netherlands circa early 1600s. What occurred is that the prices of tulip bulbs (yes I am referring to the flower) got higher... and higher... and higher. At one point, the price of tulip bulbs sold for several times greater than what people made for income in a year. But then the price peaked and crashed spectacularly afterward.

What made the price of tulip bulbs go so high? A combination of them being fashionable and from speculators grossly overvaluing them. Some experts on the subject say speculators had little to do with tulip mania, but I disagree with that and believe it absolutely did.

Put more simply, the modern way to describe tulip mania is bubble. More specifically, a bubble bursting. You've heard this term used before such as with "economic bubble bursting", "real estate bubble bursting", and so on.

The last time tulip mania happened was with boutique guitar effect pedals. At one point in time not-so long ago, it was quite fashionable to use effect pedals that were hand-built, hand-wired, and so on. Did any of them sound good? Not really. The point to owning one was the whole "hand crafted" shtick, and things got ridiculous enough to where some were charging over $500 for a single-effect pedal.

What killed boutique guitar pedals was market saturation. As soon as it became "cool" to build junky single-effect pedals and charge hundreds for them, everybody did it. There were probably at least several hundred crappy distortion pedals on the market to choose from at one point - all priced too high, all awful.

The cool factor died, people wised up and stopped buying those crappy boutique pedals. Nobody spends $300+ on a distortion pedal anymore. They just get a BOSS DS-1 or SD-1 and call it a day.

Okay, let's get back to guitars.

How do I know tulip mania is happening with guitars?

I've been seeing this coming for a while now.

Right now, certain guitar companies are trying to convince you that $4,000 is a "normal price", $6,500 is "better", and $10,000 is "best".

No, I am not talking about the vintage collectible stuff. I am talking about new guitars here.

These certain guitar companies are trying to normalize high-four-figure and five-figure prices for electric guitars that literally are not worth more than $500.

And you know what? They're succeeding - for now. At the moment, there are people outright stupid enough to pay those prices. Granted, the majority of who purchases this stuff first are flippers, who then mark up the insanely high price and pass that on to the second idiot. It's the second idiot who's always the real loser.

What's happening right now is the same thing that happened with those boutique effect pedals. Market saturation. Unlike what happened with the pedals, the peak hasn't happened yet, but it will. When the market gets flooded with too many of these "custom shop" guitars, their value will drop like a stone.

The crash-and-burn moment will occur when the flippers are unable to flip their overpriced guitars. When that happens, flippers will stop buying. And when they stop buying, the party's over.

The party is still on, but there's a huge red flag in plain sight...

What's the biggest red flag that tulip mania is happening with guitars?

The biggest red flag of tulip mania with these overpriced guitars is the fact they're easy to get.

Have you noticed how easy it is to find and buy a $4,000, $6,500 or $10,000 electric guitar? A lot easier than you probably think it is.

"Custom Shop" guitars are grossly overpriced, but the fact they're so easy to acquire really devalues them in a big way.

Scarcity plays a big role where supply and demand is concerned. When there's too much supply, scarcity vanishes, demand diminishes and then ultimately just stops.

Let's say you actually had 10 grand to spend on a guitar. You would want that guitar to be super special, super rare and difficult to get. That's not what happens at all. What you get isn't special, isn't rare and is easy to acquire. All you need is the money. Money is the only barrier of entry, and that's simply not enough to come anywhere close to justifying the price. That means any other Joe Schmoe with cash can get the exact same thing you bought, cheapening your purchase big time. And it gets even cheaper every other time another Joe Schmoe buys the same thing.

If you're thinking about dropping a ton of money on a new guitar...

Option 1: Have a local luthier build one for you. Find a local guy who is willing to put the time and effort into crafting something special for you. Know that it will take many months for the build to get completed. Possibly up to a year. Worth it? Yes.

Option 2: If there is nobody local, seek out smaller guitar companies and don't be afraid to go international if you have to. If you're in the USA, start in Canada first. There are some seriously amazing craftsmen in maple leaf country. The same can be said for Mexico.

Option 3: Build the guitar yourself, either from scratch or from parts. Want the best stuff? Buy the best stuff. Your build, your way.

You have options. Don't fall victim to the tulip mania going on with guitars because it's just not worth it.

On a final note, also know there are many new guitars selling for well under $1,000 that are seriously good stuff. When you steer clear of the custom shop stuff, you have a lot more choice.

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Published 2020 Nov 10