Did you know that concepts like stock markets, joint-stock companies, and insurance, in the modern sense we understand them today, already existed more than four centuries ago? And in more primitive forms, I’d dare say since the dawn of time.
In 1602, the Dutch East India Company (VOC) was founded in Amsterdam. It is considered the first modern joint-stock company. It issued shares to the public to finance trading expeditions, which could be resold in the world’s first formal stock exchange.
Guilders (gulden) were used as currency, and maritime insurance was already in place, offering compensation in case of ship or cargo loss.
One of the scenarios that gave rise to the stock exchange was the organization of commercial expeditions to the New World from the Netherlands in the 17th century.
Preparing such an expedition required a great deal of money. Chartering a ship was expensive, and to make the most of the voyage, you had to fill it to capacity with the most valuable goods—those that brought the highest returns while taking up the least space and weight.
The journey was long, with the possibility of breakdowns, delays, and unexpected stops at the very least…
And more serious risks included pirate attacks that could steal the cargo or hijack the ship, or storms that might sink it altogether.
This time, we Sail instead of Transurfing
Imagine you’re a Dutch entrepreneur in the 17th century.
You’re in Amsterdam and you have a plan: organize a commercial expedition to the New World. The opportunity is clear. If everything goes well, you could make a lot of money.
But there’s a problem: you don’t have the capital to get started.
The voyage costs 1,000 guilders, including the ship, crew wages, equipment, provisions, and port fees. After completing the trip, you expect to earn about 1,600 guilders. A good opportunity, no doubt.
But since you don’t have those initial 1,000 guilders, you look for partners. Since it’s too much to ask from a single investor, you decide to spread the risk.
You issue 200 shares at 5 guilders each, with the promise that:
- If the trip is successful, you’ll buy them back at 7 guilders (including interest).
- If the trip fails, you’ll pay 3 guilders.
Within a few weeks, the public in Amsterdam buys all the shares. You now have the 1,000 guilders.
You set sail.
After a successful trip, you return with valuable goods. You bring in 1,600 guilders in revenue.
You repay the 1,000 guilders and an additional 400 in interest: each share you sold for 5 is now bought back at 7.
Net profit: 200 guilders.
But what if the ship sinks?
Investors won’t be happy. So you take precautions.
You purchase insurance for 100 guilders:
- If the ship sinks, you’ll be compensated with 600 guilders. At least you’ll be able to pay what you promised the shareholders and protect your reputation for future ventures.
That’s the strategy of a good business: seeking profits by managing risk.
So how was the risk reduced?
In reality, the risk remains exactly the same. But we’ve distributed it between the shareholders and the insurer. Instead of you bearing all the losses, the investors take part of it, and the insurer takes another.
What’s in it for the insurance company?
They take controlled risks as a business model.
They charged you 100 guilders to insure the voyage. That money is already theirs.
But they lose 500 if the voyage fails (600 paid out minus the 100 you gave them).
Here’s the trick: they don’t just insure you, but many merchants. For their business to work, no more than 1 in 6 ships can sink.
As long as that average holds, their model is sustainable.
In Summary
As an entrepreneur, you can’t eliminate risk—but you can distribute it wisely.
By convincing others to join your journey, you create a safety net.
And if things go well, everyone wins.
If they go poorly, at least you don’t go down alone. That’s how great businesses are built: by sharing vision—and sharing vertigo.