In the first part of this series, we saw how 17th-century Dutch shipping companies turned to private investors and insurers to share the risks of commercial expeditions.
They issued low-cost shares, promised profits, and took out insurance to cover potential disasters.
You put up the money, they put up the ship.
Now it’s your turn to be the investor in this story.
Imagine (again) that you live in the Netherlands in the 17th century, and one morning, while strolling through the port of Amsterdam, someone offers to sell you a piece of paper.
That paper is a receipt proving you’ve helped finance a commercial expedition.
The seller explains the details: how his company has the best ship, poised to make a fortune transporting goods to the New World and bringing back exotic products.
Your Perspective, as a Shareholder
You decide that paying 5 guilders per share is a good deal. If the ship completes the journey, you’ll be able to redeem your share for 7 guilders.
In fact, it looks so promising that you buy two shares.
When the expedition is complete, you’ll have 4 extra guilders in your pocket. Those 4 extra guilders are your reward for taking on your share of the risk.
But on your way home, you overhear Hans talking to his brother-in-law about a terrible shipwreck that just happened.
This year, there have been more storms than usual.
You start doing the math. If the ship sinks, you’ll get 6 guilders—3 for each share. But you paid 10.
Suddenly, you remember you can’t afford to lose that kind of money. You had a fight with Elsje, your wife, the other day. You should probably get her a bouquet of tulips. And for some reason, those damn flowers keep getting more expensive.
So when you get home, you ask your neighbor Werner if he’d be interested in joining a wonderful business opportunity dealing in goods from the New World. All he has to do is buy a share from you for 6 guilders, and he’ll be able to redeem it for 7 when the ship returns.
Your neighbor, who’s no fool, says he’s not interested. But if you sell it to him for 4 guilders, he’ll throw in a quarter wheel of cheese he just finished making.
Nervous, and tempted by the smell, you agree. Fear and hunger are a bad mindset for investing—you’ve just lost 1 guilder.
Actually, you could say you bought a quarter wheel of cheese for 1 guilder, when it normally sells for half a guilder (which is 10 stuivers, but that’s another story).
In Summary
As an investor, the promise of profit is enticing—but fear also plays a role.
Sometimes you win. Other times, you sell your dreams for a quarter wheel of cheese.
But each share, each decision, is part of a bigger lesson: risk doesn’t disappear—it gets negotiated. And you decide how much of it you’re willing to carry.