Longreads + Open Thread

Rates, Newsletters, Trade, Smil, Serfs, Seasons, Shorting, The Super-Companies



Off and on I'll look into the early history of banking and money, just to figure out how we got to where we are and how many new inventions are really reinventions. Reading about the Medici, I learned a tidbit—they were actually the smaller, poorer echo of The Medieval Super-Companies, a group of even larger firms that traded grain, made loans, and manufactured textiles in 14th century Italy. 

It’s easy to map details of these businesses to modern finance. For example, a modern bank probably owns a substantial amount of treasury bonds and other sovereign debt, and an asset manager probably gets substantial capital from quasi-government entities like pension funds (which are regulated enough, and have their upside sufficiently capped, such that they’re more like an outsourced retirement safety net rather than an independent financial institution). In the 14th century, the equivalent was borrowing from religious institutions and lending to monarchs, a practice that had mixed success—it can be tricky to collect on debts when the person who owes you money is also the person who enforces property rights and decides what those rights are.

And some things don’t change: even in the High Middle Ages, finance was a job where the default career track involved elite education, in this case at specialized schools that taught students basic accounting, Arabic numerals, and abacus operations. (Yes, the idea that you should pursue a technical education to maximize your financial sector earnings is centuries old.)

It’s notable that these companies were larger than the Medici, but if you ask someone to name a famously wealthy Renaissance banker, “Medici” is the name you’ll almost certainly hear. There’s a lesson there: If you want to get rich, by all means, do it. But if you want to be synonymous with wealth half a millennium from now, you should move your focus away from mere accumulation before you're setting all-time records, and focus on patronage of the arts and amassing political power instead.

And now, let's pause to consider the scope of that business, and compare it to today. The Peruzzi Company's headcount was a bit over 100 people, and at the time the largest bureaucracy in Europe was that of the Papal court at Avignon, with around 250. So in size relative to governments, it's comparable to some of the largest companies today. Their annual wheat exports ranged from a typical 10,000 to a peak of a bit over 40,000 metric tons. 20k sounds like a high estimate for the average. A full import/export trip, importing Neapolitan wheat through the port of Bari to Livorno, then shipping it from Livorno to Tunis, totals 1,138 nautical miles or 1,310 miles. So, in a typical year, the Peruzzi company would move around 23.8m ton-miles of cargo.

A ship like the Ever Given has a dry weight tonnage of 200k, and Googling around indicates that two thirds of that is a good estimate for cargo capacity. They travel about 25mph. So one such ship duplicates the annual economic efforts of one of the biggest private enterprises in the world—an enterprise whose scope would be unmatched a century later—almost three times a day. The main lesson of reading older economic history is that we are, by historical standards, unfathomably wealthy. (Of course the only way we got that way was by wondering if, with a bit of effort and cleverness, we could find a way to be a bit less poor.)

Open Thread

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