The First Tech Bubble: 1720
The first global financial bubble in stock prices occurred 1720 … Using newly collected stock prices for British and Dutch firms in 1720, we find evidence against indiscriminate irrational exuberance and evidence in favor of speculation about two factors: the Atlantic trade and the incorporation of insurance companies. The fundamentals of both sectors may have led to high expectations of future growth. Our findings are consistent with the hypothesis that financial bubbles require a plausible story to justify investor optimism. …
Although 1720 is not generally viewed as a period of technological novelty, we argue in this paper that there were at least three critical innovations that took place in a very short span of time; two of which were financial innovations, the other was a major potential shift in the configuration of global trade. The first innovation was financial engineering at a national scale. The Mississippi Company and the South Sea Company issued equity shares in exchange for government debt; in effect converting the national debt into corporate stock. …
The second innovation was an incipient shift in global trade. Both of the companies were set up to exploit trade in the Americas. … The third innovation was also financial. The first publicly traded insurance corporations were chartered in Great Britain 1720, as a result of the Act. As such, they represented a new model of capital formation for maritime insurance firms – in a nation built on maritime trade.
More here. These sure do seem like big innovations, which eventually did have large implications. The general lesson: it is easy to over-estimate the profits to be gained by first-movers exploiting even very large innovations.
Let me go back to the original argument. The three "innovations" in finance were institutional, but they had nothing to do with technology. It is not comparable to say some change in the financial system arising due to the invention of the internet and the emergence of online banking, or the invention of computers and advanced software leading to automated trading systems.
As for the reconfiguration of international trade, cross-Atlantic trade had already been going on for several centuries by 1720. The more historically astute Charles Kindleberger identified what lay behind the two bubbles as being the Treaty of Utrecht in 1713, which certainly had nothing to do with technology. It ended the War of the Spanish Succession, thereby ending seafaring wars that had been disrupting trade routes that already existed. This period coincided also with the peak of piracy, which would also begin to subside as the period of peace became increasingly established.
What about all those Efficient Market Hypothesis adherents who tell us there are no such things as bubbles?
In my naive way, I would have thought purchases of assets based on expectations of rising value in excess of actual increases in income from the assets would be a bubble. Surely, that is what happened with the housing bubbles, for example.