[Economic Column] Born from "Gambling"? The History of the Joint-Stock Company

In today's class, I learned that the greatest features of a joint-stock company are "collecting small amounts of money from many investors" and "limited liability," meaning that even if the company goes bankrupt, you will not lose more than the money you invested.limited liability So, when, who, and why was this ingenious system invented? The answer dates back about 400 years to the 17th century, the
Age of Discovery. At that time, Europe was desperate to get its hands on "something" from Asia. That something was spices like pepper, cinnamon, and cloves. You might think, "It's just seasoning, right?" but in those days without refrigerators, spices that could mask the smell of meat and allow for long-term preservation became status symbols among the wealthy in Europe, and were traded as luxury goods worth their weight in gold.
If you could go to Asia, fill a ship with pepper, and return, you could instantly become a multi-millionaire who could live in luxury for the rest of your life. For people at the time, a voyage to Asia was truly a "get-rich-quick dream."
However, voyages at the time were literally a "life-or-death gamble." In an era without satellites or GPS, ships getting caught in storms and sinking was a daily occurrence. Furthermore, there was always the constant risk of being attacked by terrifying pirates or having the entire crew wiped out by mysterious infectious diseases. It is said that only a fraction of the ships that set sail returned safely to Europe.
To build a ship, hire a large crew, and load months' worth of food, you need
enormous capital equivalent to hundreds of millions to billions of yen in today's money. If you were a wealthy person at the time and invested billions of yen by yourself to send out a ship, what would happen if that ship sank in a storm? You would lose your entire fortune in an instant, and your family would go bankrupt. Even if the potential return was attractive, it was too scary for anyone to invest.
So, in 1602, Dutch merchants and investors gathered and turned an ingenious idea to solve this major crisis into reality. That was the
East India Company (Dutch East India Company), considered the world's first joint-stock company. Their idea was surprisingly simple: "If one person is afraid to put up 100 million yen, why don't 10,000 people put up 10,000 yen each? That way, we can build a 100 million yen ship."
They distributed "certificates (tickets)" to those who invested, based on the amount they contributed. This was the beginning of modern
stocks. With this system, the risk of the voyage changed dramatically. Even if a ship sank and caused a loss of 100 million yen, the loss for each investor would only be the "10,000 yen" they initially put in. This way, you wouldn't lose your entire fortune and ruin your life. This was the moment
limited liability was born. Conversely, if the ship successfully overcame the rough seas and returned loaded with a large amount of pepper, the huge profits from selling that pepper at a high price were shared among everyone according to the proportion of their investment. This is the mechanism of modern
dividends. Minimizing risk to the limit and sharing the returns when successful. By developing this "spice of a system" called the joint-stock company, humanity became able to gather
enormous capital into a single organization. The Dutch East India Company used the massive funds it collected to send dozens of ships to Asia simultaneously, seized control of Asian trade, and grew into the world's largest mega-corporation.
If our predecessors 400 years ago hadn't invented the joint-stock system of "everyone sharing the risk a little bit and aiming for big returns," the history of the Age of Discovery would have been completely different. In fact, modern big projects requiring hundreds of billions to trillions of yen—such as automobiles, airplanes, smartphones, and space development—might never have been born.
The modern capitalist society we live in operates on this grand system that has lasted for 400 years, built by the "adventurous spirit of sailors" and the "wisdom of merchants" from the Age of Discovery.