Getting babel build errors with the next.js getting started example - reactjs

Question

Following along the getting started example from ZEIT for next.js, I'm getting this error:
error in ./pages/index.js
Module build failed: ReferenceError: [BABEL] /Users/Projects/nextDemo/pages/index.js: Using removed Babel 5 option: /Users/Projects/.babelrc.optional - Put the specific transforms you want in the `plugins` option
What is this error - is it trying to use my globally installed babel? Is there a version mismatch or an update I should be doing?
This is the basic steps I did to get here:
$ npm install next --save
$ mkdir pages
//pages/index.js:
import React from 'react'
export default () => <div>Hello world!</div>
Add a script to the package.json like this:
{
"scripts": {
"dev": "next"
}
}
$ npm run dev
and the installed packages:
└─┬ next#1.2.3
├── ansi-html#0.0.6
├── babel-core#6.18.2
├── babel-generator#6.19.0
├── babel-loader#6.2.8
├── babel-plugin-module-resolver#2.4.0
├── babel-plugin-react-require#3.0.0
├── babel-plugin-transform-async-to-generator#6.16.0
├── babel-plugin-transform-class-properties#6.19.0
├── babel-plugin-transform-object-rest-spread#6.19.0
├── babel-plugin-transform-runtime#6.15.0
├── babel-preset-es2015#6.18.0
├── babel-preset-react#6.16.0
├── babel-runtime#6.18.0
├── cross-spawn#5.0.1
├── del#2.2.2
├── domready#1.0.8
├── friendly-errors-webpack-plugin#1.1.1
├── glamor#2.20.8
├── glob-promise#2.0.0
├── htmlescape#1.1.1
├── is-windows-bash#1.0.2
├── json-loader#0.5.4
├── loader-utils#0.2.16
├── minimist#1.2.0
├── mkdirp-then#1.2.0
├── mz#2.6.0
├── path-match#1.2.4
├── react#15.4.1
├── react-dom#15.4.1
├── react-hot-loader#3.0.0-beta.6
├── read-pkg-up#2.0.0
├── send#0.14.1
├── source-map-support#0.4.6
├── strip-ansi#3.0.1
├── url#0.11.0
├── webpack#1.13.3
├── webpack-dev-middleware#1.8.4
├── webpack-hot-middleware#2.13.2
└── write-file-webpack-plugin#3.4.2

Answer 1

It uses your .babelrc file from the parent directory because:
Babel will look for a .babelrc in the current directory of the file being transpiled. If one does not exist, it will travel up the directory tree until it finds either a .babelrc, or a package.json with a "babel": {} hash within.
Use "babelrc": false to stop lookup behavior.