It was a remarkable feature of Amsterdam’s society that all sorts of people—not just professional merchants and traders but coopers, blacksmiths, weavers, glaziers, basketmakers, bronze founders, cutlers, rope makers, and others, including no fewer than seven housekeepers—tramped into Dirck van Os’s home to buy the original shares in the VOC. Indeed, one of the oldest and most celebrated shares of stock in the world tells a modest little story of its owner. In August of 1602, an elderly and very wealthy woman named Agneta Cock entered Van Os’s home and agreed to pay 4,800 guilders for shares in the VOC. We know she must have done so because two and a half years later her grandson was born, and a year and a half after that, in 1606, Agneta Cock’s estate, including the VOC certificate, was registered over to him. (We know she was wealthy because 4,800 guilders was an enormous sum: one could rent a fine house in Amsterdam for 100 guilders a year.) The papers detailing Hendrick Janzsoon Cock’s inheritance were eventually housed in the archives of the Amsterdam Orphans’ Chamber, and there they remained. The reregistered VOC certificate, bearing the name of Agneta Cock, was until recently considered the oldest existing share of stock (which, for the record, is not technically true since the VOC issued receipts rather than shares). This piece of paper, which gained a flurry of fame when it was used as the plot vehicle in the 2004 movie Ocean’s Twelve, bears, in accordance with VOC rules, the signatures of two directors of the Amsterdam chamber. One of those—bold slashes of ink that turn the curtness of the last name into a flourish—is Dirck van Os. In 2010, Agneta Cock’s certificate lost its claim as the oldest share when a Dutch history student found, in the West Frisian Archive in Hoorn, a VOC receipt that predates hers by a few months. In any case, the point holds that the Amsterdam chamber of the VOC expressed the outward expansive impulse of the entire city, an impulse that ordinary Amsterdammers felt as strongly as did major businessmen.
Now, once again: you are standing on the New Bridge, with Central Station behind and the canal called the Damrak stretched before you. But you are looking not at Amsterdam today but at the city of 1602; in fact, let’s be very precise and say it is August 31, 1602, the day that subscriptions for VOC shares ends and thus the date when trading in those shares could legally begin. The harbor bristles behind you, and (as today, minus the tacky neon and the candy wrappers blowing down the sidewalk) the rickety stretches of gabled brick buildings line the canal in front of you.
So the connecting point between the harbor behind you and the city in front of you—that is, the logical nerve center of this city that is with incredible rapidity becoming the entrepôt of the world—is the bridge on which you stand. This very bridge, for all the inconsequential drab humbleness of its twenty-first-century self, became, as of late August 1602, the financial district: the de facto stock exchange. Here investors encountered one another, agreed to buy or sell VOC shares, then, following the rules, marched together along the Warmoesstraat to your left toward the East India Company headquarters (the red-and-white-brick building still stands and today houses part of the University of Amsterdam), where they formalized the stock transfer with the company bookkeeper. Buyer and seller got signatures from two of the VOC directors, paid 2.20 guilders tax plus 0.60 to the bookkeeper, and the transfer was complete.
This secondary trade was vigorous from the start, for the good reason that the fortunes of the VOC fleets were public knowledge. Within days of Dirck van Os’s closing his doors to initial subscribers in the company, news arrived of a successful convoy and the price of VOC shares went up 15 percent; at other news shortly thereafter they went up by 40 percent; and not long after that their value doubled. There was money to be made—not only in the backbreaking and seriously hazardous work of sailing around the world and haggling for spices but in the far more gentlemanly pursuit of speculating on that work.
As any casual investor knows, straight transfers—simple buying and selling—account for only a portion of possible financial transactions. Derivatives—financial securities derived from stock—are not an invention of the Wall Street bubble of the late twentieth century. Nearly all variations on financial transfers in use today—call options, repos, futures contracts, short selling, naked short selling—were invented or pioneered in Amsterdam in the seventeenth century, as traders sought innovative ways to speculate on the underlying price of VOC shares. We know from the existing books of Amsterdam notaries, for example, that futures trading on shares of stock—an agreement to buy at a set price on a future date—began with open-air meetings on the New Bridge in 1607.
Derivative devices such as short selling—selling shares one doesn’t actually own in order to profit from an expected downturn in price—open the door to financial scamming, and two years later the first scandal erupted in Amsterdam’s open-air securities market when a powerful trader named Isaac le Maire, at the head of a consortium of traders, engaged in short selling of VOC shares. This in itself was not problematic, but the details made it so. Le Maire—one of the more flamboyant figures of Amsterdam’s heyday—had been part of the brain drain from Antwerp to Amsterdam in 1585. It was perhaps natural that he and Dirck van Os would join forces; they had both taken part in that migration, and both were ambitious businessmen at a time and place that favored big ambition. The two had collaborated to open the city’s trade into Russia. Le Maire had then watched from the sidelines as Van Os and others founded the Company for Faraway Lands; he was inspired by Cornelis de Houtman’s ragged voyage to launch an East Indies venture of his own. He had then joined his colleague Van Os in becoming one of the founding members of the VOC. But in 1605 the two men split: Le Maire was forced out of the company in a dispute over financial irregularities. As a result of this public humiliation, he seems to have turned his energy to getting revenge. He secretly undertook a mission to the French king, Henry IV, and set in motion plans for a French East India company. Acting on this privileged information, Le Maire gathered his consortium of short sellers in order to take advantage of what he expected would be a dramatic drop in VOC shares due to competition from the new company. But he miscalculated: plans for the French company died. When VOC shares did not drop in value, Le Maire led his fellow short sellers on a rumor campaign—company vessels lost at sea, and a sizable fortune with them—which did indeed send share prices plummeting. The rogue traders, having sold at a higher price shares they did not own, then bought the same amount of shares at a far lower value and delivered them to their buyers, pocketing the difference. (Technically, in modern parlance, what Le Maire and his confreres engaged in was naked short selling, a riskier activity than short selling today, since there was no broker involved.)
Van Os and the other directors of the VOC intuited what was happening—that the value of the company was dropping less for real-world reasons than through manipulation—and further, they believed they knew who was behind it. They issued an appeal to the States of Holland, the provincial governing body, to make such practice illegal. What is interesting about the matter is that within a few years of the launch of the first modern capitalist venture came the sort of unscrupulosity that has ever since been a feature of capitalism, followed by the first concerted effort at financial regulation. The directors, in their appeal for reform, cited biblical principles of fairness and decency. They pointed out that widows and orphans had their savings in the company, which meant that willingly depressing its value was a strike against society’s most vulnerable.
The governing body sided with the directors and banned the practice. The ban didn’t hold for long, since it was in the traders’ interest to allow short selling, but then again both the ban and the failure to enforce it indicated the government’s willingness to play an active role in this new game. And that willingness—the enthusiastic support of government for trade—would continue to serve the city of Amsterdam.
Meanwhile, as the VOC prospered, it paid dividends to its stakeholders. This was at first a creaky process, since the directors had decided that these should be paid in kind. So
, for example, in April 1610, Agneta Cock’s little grandson would have been inundated by a dividend on the order of 5,000 pounds of mace, the spice derived from the outer covering of the nutmeg seed: that is, 3,600 guilders’ worth, or 75 percent of the value of the shares in the company that his grandmother had bought. Later dividends were paid in sacks of pepper and nutmeg. While some Amsterdammers were happy to jump into the spice market as resellers, it was quickly found to be a cumbersome means of recompense, and by 1618 dividends were paid in cash. Whether or not stakeholders received fragrant sacks as part of their profit taking, the association of spices with high value became embedded in the culture. To this day, if in Dutch you want to express your feelings about the forbidding price of the new watch or car your spouse has an eye on, you say the item is peperduur—“pepper-expensive.”
Short selling, futures trading, stock jobbing: all of this ornate activity had been taking place outside, on the New Bridge, amid the rain and wind and the jostling and cursing of sailors. Sometimes in foul weather traders were allowed to gather in the St. Olof Chapel on the Zeedijk (which still exists, a hundred or so paces to your left), but clearly an institution was in the making—within a decade or so of the founding of the VOC, Amsterdam had three hundred licensed brokers and trade negotiators—and it needed a home. Construction on one was finished in 1611; it was built by the city’s leading architect, Hendrick de Keyser, who also designed the East India House. The new Amsterdam Merchants’ Exchange, when complete, had a grandeur that suggested the role the city saw it playing. It stood like a Renaissance castle, a rectangle of elegant colonnades around a central courtyard. It was conceived as an actual marketplace: trading was still conducted in the open air, but under sweeping vaulted roofs. Each commodity being traded (for the exchange was meant not only for VOC shares but shares in beer, salt, wood, copper, wine, cotton, and other goods) had assigned areas among the pillars.
The Amsterdam exchange straddled the water on the other side of Dam Square. What you see at the far end of the Damrak is a later iteration of the stock exchange, built in 1903 by Hendrik Berlage, who was the city’s chief architect of his era. Berlage’s building has since been repurposed. The current home of Amsterdam’s stock exchange—which these days trades around $3 trillion in shares in a given year—is now just beyond Berlage’s structure, out of sight from where you stand, housed in a modest palazzo of a building tucked between Berlage’s modernist take on a medieval bourse and the Bijenkorf department store. NYSE Euronext, as the Amsterdam Stock Exchange is now officially called (after mergers with the New York Stock Exchange, the Brussels Stock Exchange, and the Paris Bourse), is the oldest stock exchange in the world, according to both its Web site and the guard who chatted with me as I poked around its lobby one day. Antwerp and London both claim the oldest stock exchange, which is true in a sense (Antwerp’s building predates Amsterdam’s by eighty years) but theirs were commodities markets. Taken in the modern sense, of a market where shares of company stock are traded, which is the essence of capitalism, Amsterdam was the originator.
Of course, the Amsterdam Stock Market was not an end in itself. Those pieces of paper that changed hands were valuable because they represented other things. Indeed, over the course of the next few decades they came to represent, not to put too fine a point on it, everything. Europe was in the early stages of its infamous period of exploitation of the wider world. The image we have of Europeans of the seventeenth century—semimedieval peasants rooted to their villages, their entire lives, including all they consumed, comprised of what was available within a few miles of their homes—is in need of updating. Europe was exploring the world with vigor, and Europe was ready to exploit—to consume. And the Dutch were on their way to becoming the greatest shipping nation the world had ever seen. The genius of Amsterdam in particular—the economic foundation to the political and social liberalisms it was soon to spawn—lay in its identifying and solving the problem that Europe’s would-be consumer culture faced: life was staggeringly unpredictable. Fate was swift and could blindside anyone. Plagues swept in on a sudden wind. A returning fleet would be swallowed by a storm. Life was carried on perilously close to its natural state, which Thomas Hobbes would famously describe a few decades later as “nasty, brutish, and short.” Nobody could count on anything, and therefore business suffered. Price and availability were wildly variable.
Security was what was needed, and Amsterdam’s stupendous rise can be seen as a result of the awareness that, if you provided this, virtually everyone would thank you for it. Your enemies, your competitors, would be grateful to you for giving them a small foothold of safety and would repay you over and over, even if they hated you at the same time.
The first step in achieving this security was providing a central stock exchange. Another was having insurance offices and other services, as well as hotels and facilities for traveling merchants. All of these services came into being and were clustered in the buildings laid out around the exchange. But also part of the plan was the concept of a central storehouse. Shortly after the founding of the stock exchange, Amsterdam went about making itself into the Amazon.com of the seventeenth century, the place where everything was available to everybody. But of course it was an analog emporium: nothing was virtual; everything was real, in all its bulky, aromatic, or reeking glory. That meant an unfathomable amount of hard work. And it meant that the city—a city with barely a foundation, which had been tenuously built on marsh and swamp and for which inundation was a constant threat—would have to transform itself to hold all the goods of the earth.
Amsterdam’s physical self as it developed in the seventeenth century—and as is largely still evident in the city center today (one notion that repeatedly strikes you if you live in the city center, with its teetering brick facades and undulating parade of gables, is that it’s always the seventeenth century here)—was a product of this awareness and this decision. The city morphed itself, carved itself, flooded itself, dammed itself, built itself up brick by brick around this idea, which is part of the foundation of liberalism. For individual freedom can come about only, can be conceived only, if there is some sense of security to life. In fact, the city’s rise—its coming role not only as the world’s economic entrepôt but as a center of scientific learning, art, shipping, and much else—can be seen as the antidote to the frightful vagaries that Hobbes had in mind, as expressed in the full quote from his Leviathan:
In such condition there is no place for industry, because the fruit thereof is uncertain: and consequently no culture of the earth; no navigation, nor use of the commodities that may be imported by sea; no commodious building; no instruments of moving and removing such things as require much force; no knowledge of the face of the earth; no account of time; no arts; no letters; no society; and which is worst of all, continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short.
If you wander around Amsterdam’s fabled canals, especially the Prinsengracht, the outermost central canal, which was specifically designated for commerce, you’ll note that a lot of the gabled brick buildings that line them have shuttered windows right in the middle of each story. These were warehouses. Indeed, in a sense the whole city became a warehouse. A trader kept his office on the ground floor of his house, the room that connected to the street. His family lived behind. And the upper floors were packed with whatever goods he dealt in. If you turn your gaze upward, you will see a beam jutting right out from the top of each canal house, with a metal hook hanging down from it. Hoist beams are still used, though mostly for moving furniture. In the seventeenth century, you worked a rope and pulley to haul your crates of goods to the upper floors. Particularly in the case of spices, being able to store quantities kept prices from fluctuating wildly, which was good for everybody.
How vast an enterprise was this? As a snapshot: in 1625, VOC warehouses in the Netherlands contained almost four million pounds of pepper. The year after, thanks to especially successful
voyages, there were nearly six million pounds of pepper packed into the quaint little canal-side buildings of the city’s middlemen, not to mention warehouse upon warehouse filled with cinnamon, stockfish, tea, whale oil, sugar, salt, soap, sail cloth, silk, beer, tobacco, and other goods, waiting to ship out again. A generation later, when Cosimo III de’ Medici traveled to Amsterdam, his gushing observations suggested an awareness that Italy’s own grandeur, that of the high Renaissance over which his grandfather and namesake held sway, was a thing of the past and that what he saw in this city of business was the future: “Greater trade is done in Amsterdam than in any other city in the world. Foreigners are astounded when they first see it, and it appears that the four quarters of the world have despoiled themselves to enrich her and to bring their rarest and most curious treasures into her port. Anyone who considers the present state of Amsterdam … will be amazed that the city with such small beginnings and in such a short time has become enriched to such a degree of greatness, beauty, and magnificence.”
Before this could happen, before the city could become the world’s emporium, it had to grow. The Amsterdam in which Dirck van Os opened his house to subscribers to the VOC, the Amsterdam of Agneta Cock, was still a small medieval city hunkered inside its walls, surrounded by a moat: far too small for its ambitions. Its size had been restricted by legal decree. There was still a war on, and it was feared that any outlying buildings could be taken over by the Spanish and used as bases for attack. Thus it was against the law to build outside the city walls.
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