The stock markets have their origins in the transportation of spices

B shares are older than A shares and Indians invented the bills. The history of securities trading is older than we suspect.

B shares are older than A shares and Indians invented the bills. The history of securities trading is older than we suspect.

Speculators, options and B shares – the world of securities is full of terms that come from ancient and medieval times.

Even during the time of the Crusades, there was a need for an international financial market.

We dive into the first stocks, the oldest bonds, and an African king with so much gold in his pocket that he caused inflation to soar in the Middle East.

This is how stocks and all other securities were invented:


The Dutch corporation VOC was a huge company and ran its own shipyard. The company’s headquarters in Amsterdam can be seen here in the background.

The Dutch were the first to sell shares

As early as the days of the Tang Dynasty (618-907), the Chinese used a kind of securities that can resemble stocks. But the first shares in their current form were offered in the Netherlands in the 17th century. The reasons were bad weather and pirates.

In the 16th century, the Spanish and Portuguese prospered by transporting spices from the East, and the Dutch wanted a slice of this pie. In 1602 they founded the United East India Company (Verenigde Oostindische Compagnie, VOC).

By then, the states on the Iberian Peninsula had close to a hundred years of experience in sailing across half the globe with herbs that were worth their weight in gold. The Dutch immediately realized that such journeys would be both long and dangerous, and that both bad weather and pirates could rob them of all the valuables.

No man was wealthy enough to take such a risk alone. The solution was to spread the risk among many people.

VOC shares as they appeared in 1606. This share was owned by the Jansz family for four generations.

The VOC shares were sold in Amsterdam and anyone could buy them. Just like now, all shares gave ownership in the company.

Each shareholder, of course, hoped that the VOC ships would return home safe and sound, full of spices, and that the company would be able to pay the shareholders their share of the profits.

If the ships moved or the cargo fell prey to pirates, the shares would be worth little and the company could potentially go bankrupt. The shareholders would thus have lost their money. Fortunately, the spice shop exceeded expectations.

The company’s initial capital was 6.4 million Dutch guilders, but 35 years later the company’s accounts showed equity of 78 million. In 2023, it corresponds to around 2.6 billion euros or more than 400 billion Icelandic krónur.

For almost two centuries, this corporation paid an annual dividend of 18%. The party did not end until 1796, when the company went bankrupt due to both corruption and new buyers’ wishes for tea and porcelain – but in that area, the company did not have exclusive rights.

Short sale

For stockbrokers, the bear represents a decline in the market, while the bull represents progress. Short selling is about betting on the bear.

The short sale quickly came into play

1609: Most people see the benefits of buying stocks in the hope that they will go up in price, but short selling – which is profiting from a stock going down in price – is more difficult to understand. However, it was as early as 1609 that an angry Dutchman realized this possibility.

After losing lawsuits against the first joint-stock company in history, the VOC, the Dutchman Isaac Le Maire (1558-1624) swore an expensive oath that he would take revenge on the company with a cunning plan – and make a good profit from it all.

He negotiated with hundreds of investors to sell them shares for 145 gilts each (about 2,400 euros in current value) and that the buyers would receive the shares after one year. Such a large volume of trading inevitably led to a fall in the stock price, but since the buyers were not supposed to receive the stock for a year under the contracts, Le Maire was in effect selling stock that he had not yet bought.

Before he started buying the shares himself, he started a rumor that the company’s ships had sunk one by one and the company was going bankrupt. His trick backfired and the stock fell in price.

Isaac Le Maire founded the company Groote Compagnie in 1609. Together with 14 other Dutch rich people, he wanted to speculate against the VOC shares.

This well-thought-out and clever plan consisted of buying the shares when their price was the lowest – for example around 45 gilts – and then handing them over to their counterparties at a profit of 100 gilts per share.

This trick is nowadays called “shorting” or short selling, but to the horror of the inventor, the representatives of the company got the Dutch government to ban the sale of shares that one did not own, and Le Maire lost a lot of money.

B shares

The Chinese could buy B shares 1400 years ago.

B shares date back to Imperial China

Now there are share classes, for example A and B shares. Then, for example, A-shares can give full voting rights, while other share classes have limited or even no voting rights. The concept of passive shareholders can be traced back a long way to the Imperial period in China.

During China’s Tang Dynasty (618-907), merchants conducted business with the support of passive investors who had little control but were entitled to a share of the profits.

The Swedish tycoon Ivar Kreuger (1880-1932) sold B shares. They gave only 1/1,000 voting rights in his company.

This system was improved during the Song Dynasty (960-1279) and merchants were given almost complete freedom in their operations. The law ensured that ownership and operation were completely separate, thus creating a new class of merchants who essentially ran businesses owned by others.

Investors bought into the business, and travel traders didn’t really need any equity to get off the ground, just a good idea.


Mansa Musa ruled Mali for 25 years. Among other things, he had the famous Djinguereber Mosque built for his huge profits from slave trading, gold mining and salt mining.

A spendthrift king caused hyperinflation

High inflation kills purchasing power as more money is constantly needed for purchases and the poor are always the worst hit. This was also the case when the first documented case of hyperinflation occurred in Egypt.

In 1324, the king of Mali, Mansa Musa, went on a pilgrimage. The wealth of this extravagant king caused massive inflation all the way from West Africa to Mecca.

According to contemporary sources, the king traveled with an entourage of 60,000 men. Of these, there were 12,000 slaves who all carried 1.8 kg gold bars. And the camels, 80 in number, each carried a 100 kg sack of gold sand.

This Spanish map from 1375 shows Mansa Munsa on his throne holding a large golden royal apple.

Mansa Musa won the gold with both hands during his trip through North Africa, but his arrival in Cairo, Egypt, had the greatest impact. There, the king of Mali spent so much gold that the price of it dropped rapidly.

And since all payment systems were based on the price of gold, the price of grain and other food rose sharply. The result was hyperinflation that spread throughout the Middle East, because Cairo was a major trading center.

If the inflation had stopped when Mansa Musa was out of sight, the crisis would not have become very serious, but for the next 12 years the price of gold remained around half of what it was before in these countries.

The bubble

Tulip mania was so widespread that some Dutch Golden Age scholars described it as risky speculation.

The tulip bubble that burst with a bang

Prosperity creates investment interest. In the 17th century, bulbs became a popular investment in the Netherlands, but it turned out that the addiction to profit created a danger.

Profits from the spice trade made the Dutch rich. And with increased prosperity came an increased demand for luxury goods that the wealthy could boast of, for example tulips.

These colorful flowers had relatively recently arrived in Eastern Europe from the Ottoman Empire, and the tulip trade was out of control. In 1636, tulips ranked fourth on the list of Dutch exports, after brandy, salt herring and cheese.

After the tulips had bloomed, the bulbs were dug up and sold. The price went up and up. Before it was over, one basket of onions had become so valuable that the price could buy an entire house in Amsterdam.

Jan Brueghel the Younger (1601-1678) was an eyewitness when Holland’s tulip bubble burst. In his painting “Allegory of Tulip Mania”, speculators are depicted as monkeys.

Investors couldn’t wait to get their hands on the tulip bulbs, so they started buying the right to buy bulbs later. The sellers then promised to deliver a certain number of onions later. Now this is called forward trading and should be familiar to Icelanders after the banking collapse.

These future promises were often sold on, even 3-4 times and at ever-increasing prices, without the buyers being delivered a single onion.

Of course, this could not last and in February 1637 the tulip market collapsed. Rumors that prices would go down made everyone want to sell but no one dared to buy. Many people lost a lot and the first investment bubble in history burst with a big bang.


The oldest business documents in history are inscribed clay tablets. The letters were engraved in soft clay, but the tablets were then hardened by firing.

Bonds became the liberation of farmers

Bonds are one type of securities and they can be resold. The concept benefited the ancient Babylonians.

Bonds originated in the Middle East and the concept is 4,400 years old. The oldest known bond is a clay tablet found in Nippur, Babylonia, a powerful kingdom between the Euphrates and Tigris rivers, in what is now Iraq.

According to the text, one farmer was drafted into the army and had to get another to work the land. A neighbor offered to rent the farm and they made an agreement on how the income would be divided when the farmer returned.

The text of the clay tablet obliges the neighbor to pay the farmer after the war. But on the table, a certain merchant also becomes liable for the payment of the debt, if the neighbor is unable to fulfill his share. With this guarantee, the clay tablet has become a real bond.

Bonds financed the US war against Mexico from 1846 to 1848. The US Treasury offered 6% interest over the 20-year term of the bond.

In recent times, the bonds that are bought and sold are usually issued by large companies or governments, when large-scale projects need to be financed.

The Hundred Years’ War between England and France lasted from 1337 to 1453 and was financed with so-called war bonds.

Among today’s investors, government bonds are considered extremely safe investments. The state, and thus all the country’s inhabitants, guarantee that the investors will be paid the principal and interest on the bond’s maturity date, which is often 5-20 years from now.

Bill of exchange

The Knights Templar not only defended Jerusalem against Muslim armies. They were also ATMs for pilgrims and other crusaders.

The Knights Templar grew rich on promissory notes

In ancient times, Indian traders rarely took large amounts of cash with them on long journeys. Instead, they used so-called promissory notes. Christian knights took advantage of the idea and made a fortune from the bill trading.

Bills of exchange could be called the checks of the past, and they could be exchanged for cash upon arrival at the destination.

Around 300 BC Indian merchants deposited cash with the bankers’ predecessors and received a receipt for the deposit. At some distant location, they could then hand the receipt to another banker and receive cash in return.

Using promissory notes cost an agent’s salary, but in return they insured the holder against losing large sums of money in the hands of robbers, since robbers would hardly have taken the risk of trying to redeem the promissory notes.

In 1939, Indian car importer Narbheram & Co made this invoice of approximately 1000 rupees.

In Europe, the Christian Knights Templar adopted this business practice. In their fortified castles, money was safely kept, and since this knightly order had castles all over Europe and the Middle East, it was possible to exchange bills in many places.

According to the rules of the Church, Christians were not allowed to charge interest on money loans, and officially the Knights Templar did not do it either. Just like the Indians, however, they took commissions from pilgrims and crusading knights on their way to the Holy Land with bills in their suitcases.

Promissory notes remained popular and were the most common form of short-term credit well into the 20th century, until the advent of credit cards and ATMs.

Purchase right

Thales from Miletus is considered among the wise men of antiquity. And he seems to have had a good sense of olive harvest anyway.

Stock options showed the value of the philosophy

A call option is a financial instrument that gives an investor the right to buy, for example, shares at a certain price. The term dates back to 635 BC. when the Greek philosopher Thales wanted to clear his name.

The oldest example in history of a right to purchase can be found among the ancient Greeks. The philosopher Thales (about 623-545 BC) is said to have bet on a good olive harvest.

He obtained permission to use all the olive presses in the city-state of Miletus in present-day Turkey.

A Greek olive press consists of a stone slab with a drain. The olives in sacks were placed on top of the plate and pounded with, for example, heavy stones so that the oil seeped out.

Thales got the presses at a reasonable price and was later able to rent them out for a much higher sum, when he proved to be right and the olive harvest broke all records.

The story comes from Aristotle who said that Thales did not do this to make money, but to demonstrate the usefulness of philosophy.

One of the inhabitants of Þales had declared that he did not understand that a man as wise as Þales could be so poor.

stock exchange

Stock exchanges in the Middle Ages did not sell securities, but sold, for example, wool in large bales and wine in barrels.

Market squares became stock exchanges

All kinds of products have been bought and sold on marketplaces for a very long time. Trading in securities moved from this open market into houses and now securities are bought and sold on stock exchanges.

The port city of Brügge in Belgium was a center of trade in the Middle Ages and merchants from all over Europe flocked there.

In the 13th century, the van der Beurze family ran a restaurant in the city, and by listening to their guests, the family gathered a good knowledge and understanding of supply, demand and price formation in business.

The family could give good advice to merchants and sometimes acted as middlemen in large transactions. Eventually the family gave up the restaurant business and instead opened their doors to merchants who could meet and do business under greatly improved conditions.

The House of Van Der Beurzerne, the world’s first stock exchange is still located in the old town of Bruges.

The building that housed this first stock exchange in history for a long time has been renovated and is called “Huis ter Beurze.” The name Beurze is widely used for stock exchanges in Europe, for example in the Nordic countries where the stock exchanges are called Börsen or Børsen.

Read more about stock history

David EY Sarna: History of Greed: Financial Fraud from Tulip Mania to Bernie Madoff, Wiley, 2010

Ivan Gan: A Short History Of Risk: From Tulip Mania To Crypto Mania, Investproper, 2018.

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