The World's First Listed Company

Hi everyone, welcome to Cold-Knowledge Blind Box. If you ask me what the hottest topic was after the National Day holiday ended, it would have to be stocks.

They say one big bullish candle can change your beliefs. Many people were counting down the days of the holiday, waiting to rush in as soon as the market reopened. Of course, reality is pretty harsh. Investing carries risk, and in just a few days, the new investors got a lesson in investor education that went straight to the bone. Be careful when you enter the market! Today on Cold-Knowledge Blind Box, let's talk about this "pig-butchering scheme," or rather, let's talk about the story of stocks.

Let's look at how the stock that so many people dream about was invented, and under what chance circumstances it came about.

The world's first listed company was a peak from the start. Its average annual dividend could reach 18%, and at its highest it could pay out 40%. It could even keep distributing dividends at that rate for 200 years, outshining any P2P company at its peak. And if you strip out inflation, its total market value came to an astonishing 7.9 trillion dollars, more than double today's Apple, which is worth about 3 trillion.

What kind of business is this profitable? One that can even go public and share the money with everyone? Is there really such a good deal in the world? Can I buy in right away?

Hold on. When we open this company's financial statement, the main business written there in bold is: colonial trade.

This is the Dutch East India Company, the first multinational company, and also the first joint-stock limited company, founded in 1602. The Dutch colonizers that our national hero Koxinga drove out were the Dutch East India Company.

The story has to start with the grand Age of Exploration. The reason the Age of Exploration began was actually quite simple. The Ottoman Empire used giant cannons to blast open the gates of Constantinople, and the Eastern Roman Empire fell. Constantinople was later renamed Istanbul.

If you've been to Turkey, or if you look at a world map, you'll see that Istanbul sits in an excellent location, right at the junction of Asia and Europe. It's also very close to the Mediterranean. Porcelain and spices from the East arrived there along the overland Silk Road, and from there the goods could be shipped in bulk by sea to the countries of Europe.

But now that trade route had been seized. The greedy Venetian merchants took advantage of it to raise prices, leaving the royal families of Europe in misery. No matter how deep their pockets, they couldn't withstand the wild rise in prices. Send an army to attack the Ottomans? That was a pipe dream. Besides, the European countries weren't united. Well, there was no way around it. Spices from the East made food taste so much better, so the higher prices were just something they had to accept, and saving a little here and there was a comfort.

But this couldn't go on. Whoever could find a way to bring prices down, the royal families would gladly invest in! Portugal was the first to start venture capital funding for navigators. The explorers Dias and da Gama were backed, and they discovered a sea route around the Cape of Good Hope to reach India directly. That effectively broke the Turkish monopoly. Portugal could now go straight to the upstream manufacturers on its own, with no more middlemen taking a cut. On the contrary, it could even use this information gap to sell goods to other European countries.

Spain was not to be outdone either. It sponsored Columbus, who discovered the American continent. What came with it was practically a state secret: the water depths, weather information along the way, and stable sailing routes. All of it was carefully recorded on navigation charts. Other countries knew that they could reach Asia by going around the Cape of Good Hope, but they didn't know the water temperatures and geography along the coasts, and they were unfamiliar with the Indian Ocean monsoons that let ships travel long distances after passing the cape.

They could either build their own ships and send their own people, spending money to buy experience, which was not easy, because they might be ambushed at any moment. Or they could simply use the merchant ships of this Portuguese middleman to ship their goods. Portugal thus monopolized the Eastern sea route for more than a hundred years.

But latecomers have an opportunity to overtake on a curve. Guess what it is? It's stealing, or in other words, commercial espionage. This is where we introduce the great hero of the Dutch merchants, Jan Huyghen van Linschoten. Let's just call him Old Yang.

Old Yang was born in the Netherlands, and went to Portugal with his family to make a living. Then he joined the Church and got a job that sent him to Portuguese India. Spain and Portugal had a gentlemen's agreement at the time: Portugal monopolized the sea route to India in the East, and Spain monopolized the route to the Americas. But Spain still had no intention of giving up, and wanted a slice of the Eastern route too, so it infiltrated large numbers of spies through the Church.

Old Yang had his own plans. He naturally became a Spanish spy, helping Spain collect information about the climate, water conditions and local customs along the Indian sea route. And he didn't stop there: he also secretly collected information about the seas from East Africa to the Arabian Sea, and even as far as Malacca. His hard work moved the Portuguese, who promoted him, and the Spanish were very pleased with him too.

After 14 years as a spy, in 1595 Old Yang returned to Europe with a large amount of material, and then he chose a path no one had imagined: building up his homeland, the Netherlands!

In the same year, the first Dutch long-distance fleet set out. Carrying the navigation guide Old Yang had provided, four ships, 247 people and 100 cannons slipped past the Portuguese and the sea blockade of pirates along the way. It took a full 15 months, and they finally reached Java, near what is today Jakarta in Indonesia. In one stroke, they broke the Spanish monopoly.

With the monopoly of the Portuguese Eastern sea route broken, the Dutch, now with their eyes opened, kept sending out fleets, and their power and wealth grew. Between 1595 and 1602, the small Netherlands saw 14 trading companies appear. The average return on each voyage was 400%. But it quickly got out of hand. Because all the ships set out at about the same time, when they reached their destinations, everyone bought local goods at once, and local prices soared. And the knives and firearms the ships carried also arrived at roughly the same time and were unloaded together. So for the destinations, it suddenly became a buyer's market, and they could pick the best knives and guns at their leisure.

When the big bosses saw this, they knew it couldn't continue. To avoid vicious competition among companies, the 14 companies naturally came up with the idea of merging into one joint company to hold prices up.

So in 1602, the East India Company was founded. Although it was founded two years later than the English East India Company, through some financial innovations its later development completely crushed the English one, and its scale grew to ten times larger.

Shipbuilding in the Age of Exploration was very expensive, and sailing was dangerous. A ship could capsize if you weren't careful. Even the richest people in the Netherlands, no matter how wealthy, had only just touched the broth of the Age of Exploration. They weren't rich enough to bear this kind of loss alone.

Meanwhile, the Dutch people were extremely enthusiastic about making money. They had seen ships return from distant lands and get sold at auction for several times their cost, so they were very eager to join in too.

Then a bold idea was born: could we turn a company into something that can be traded? Split it into smaller pieces, so that everyone who wants to buy can buy. Spread the risk across the whole nation. And so the concept of the stock was born. It was an innovation: it took the ownership certificates of a company and traded them. Investors who subscribed could share in the company's dividends through these certificates.

In 1606, the first IPO in human history appeared. The Dutch East India Company first issued its shares to the Dutch people on the Amsterdam Stock Exchange. This did spread the risk across the entire nation, and it also laid the groundwork for later financial crises.

That's where this episode of Cold-Knowledge Blind Box ends. In the next episode, we'll cover the wild drama that surrounded the Dutch East India Company, including the first short selling and trading on insider information, and how these games, all revolving around human nature, shaped the modern stock market.

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