The Richest Company in History (maybe)
Featuring: the invention of the stock exchange, the dodo, espionage, serious abuses of power and a whole lot of spice
I want to introduce you to the Vereenigde Oostindische Compagnie - also known as the United East India Company or the Dutch East India Company. You can call it the VOC.
It’s understandably very difficult to compare the value of a trading company from the 1600s that didn’t publish accounts and carried out a lot of its other operations distinctly not-by-the-book, with modern-day companies like Apple, Saudi Aramco, Microsoft and Nvidia. For that reason, there’s considerable contention about the VOC’s actual size. Some believe it was the largest company ever, worth as much as $8 trillion in today’s money, dwarfing even our multi-trillion dollar companies of today, whilst others contend that it came nowhere even remotely close to that market valuation and not even close to the market cap. of companies like Apple. Either way, whether the VOC was the richest company to ever grace the Earth, or simply a behemoth that’s subsequently been bested by oil and the digital age, the VOC’s story is one worth knowing.
The VOC was founded in 1602 and grew into a monster that dominated the Asian spice trade for the best part of the subsequent 200 years, reaping profits for the Dutch and sowing terror across the globe.
It might be hyperbole to say the VOC is responsible for the modern-day prosperity of the Netherlands, for the fact that the Netherlands is still afloat above water, for the foundation of the modern economy and for the destruction of the beloved dodo. But it isn’t too far off. Let’s dig in.
The birth of a juggernaut
Having lived under the repressive Habsburg rule for two hundred years, the declaration of Dutch independence in 1581 meant the Dutch were no longer aligned with the pioneers of international trade, the Portuguese. The Netherlands had severed access to the established trade routes and no longer had a share in the riches of international trade.
The Portuguese however, were struggling to meet the insatiable European demand for Asia’s exotic spices, such as pepper, ginger and cinnamon, causing significant disruption to the European supply chain and a sharp escalation in prices.
Enter the Dutch.
The Dutch at this stage were short on spices and in need of money to finance their perpetual battle with the North Sea - solidifying existing land foundations and reclaiming new territory from the hungry tides. So they built themselves a fleet fit to wage commercial warfare against their European foes, stole secrets from the Portuguese in a ten year espionage mission to learn where to find these hidden lands of abundant spice and how to navigate to them, and financed it all through the creation of the world’s first stock exchange.
The creation of the first stock exchange
The VOC was a private corporation by name, but possessed an almighty tranche of powers that had them operating almost as an independent arm of the government. The VOC conscripted its own army of some ten thousand soldiers, which it was fully entitled to put to use in waging war in the name of the Netherlands, establishing colonies and imprisoning, enslaving and executing ‘convicts’ (i.e. anyone that disobeyed the VOC) as they saw fit. Not only that, but the VOC had the powers to mint its own coins, conduct diplomacy on behalf of the Republic and the silver bullet of a state-sponsored monopoly on all trade in Asia.
The final piece of the jigsaw was funding, because the company needed a lot of ships and a lot of people to conduct such a vast operation. Over the course of the near-200 year operating life of the company, almost 5,000 ships set sail flying the Dutch tricolour on company service, close to double the number of ships its main competitor the British East India Company operated during the same timeframe. The novel way they managed to secure such vast funding was through giving the Dutch people the opportunity to invest in the venture through the purchase of shares that promised the holder an handsome dividend in return. Some of the early independent Dutch voyages out to Asia before the VOC had been incorporated had already returned profits of up to 400%. This was not a hard sell for the VOC.
Over the course of the VOC’s 200-year existence the annual dividend for shareholders averaged about 18% of capital, with the annual dividend as high as 75% of capital in some years. With such magical returns on offer, it’s not hard to see how the advent of a ‘stock exchange’ came about. Those that had missed the boat on purchasing shares, or those that wanted to add more shares to their existing holding needed a way to purchase them. A secondary market for VOC shares was created in Amsterdam, the first of its kind in the world and the progenitor of today’s Amsterdam Stock Exchange.
‘The Golden Age’
With the blessing and powers of the state, the stolen intel of the East, an overflowing war chest, a full fleet and its own private army, the VOC set-off on its road to riches. It was quick to establish trading posts in Indonesia; first in Banten in 1603 and then establishing headquarters for its Asian operations in Batavia (modern-day Jakarta) in 1611. From there the VOC was able to squeeze out the Portuguese and become the dominant traders in Asia. Pepper dominated the spice trade, but the Dutch were also able to establish monopolies over nutmeg, mace and cloves, giving them the ability to trade back in Europe anywhere between 14 and 300 times the purchase price.
Elsewhere the Dutch traded silk, cotton, porcelain and textiles with the other major powers in Asia; the Mughal Empire and the Ming Dynasty in China, and were the only nation permitted to trade with the isolationist Japan. The trade with Japan primarily involved silver and copper and was conducted purely through a tiny, Trafalgar Square sized, artificial island called Dejima off the mainland of Nagasaki.
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For 200 years the VOC ran the trade routes from Europe to Asia, making an ungodly profit. But it’s not so golden as it sounds. As with most European ventures of the age, the VOC was rotten to the core.
In the case of its nutmeg monopoly, this was secured through the invasion of the Indonesian Banda Islands and the genocide of its 15,000 people, all for the purpose of granting the VOC exclusive control over nutmeg and therefore the ability to dictate the sale price. Later in the company’s history, the VOC was also responsible for the Batavia Massacre in which at least 10,000 Chinese residents lost their lives.
The Dutch also perpetuated the slave trade across Asia and parts of Africa too, enslaving people from the likes of Madagascar and Mauritius to work on plantations in Indonesia, farming their precious spices.
The dodo was the Dutch too. Yep, the extinction of everybody’s long-lost bird is also attributed to Dutch sailors from the VOC. Firstly through hunting and then through the destruction caused to their habitats by invasive species the Dutch introduced to the island; mainly pigs and macaques.
Tarnishes the golden age somewhat, all of that, doesn’t it?
The decline of the VOC
The end comes for us all - even the richest company the world had ever seen wasn’t immune from that fate. The fortunes of the company hit an irreversible decline through the second half of the 18th Century, with a gradual dwindling of its profitability and viability. The list of problems is long, but can largely be categorised into three areas; poor management of the company, market factors and war.
The company was poorly managed, both operationally and financially. The VOC relied heavily on debt to finance its operation after its initial stock offering and eventually ended-up going bankrupt after stretching its debts too far. The company was also guilty of continuing to pay excessively healthy dividends almost until the end, which better, more meticulous bookkeeping might have helped highlight were grossly unsustainable. The VOC was also plagued with incompetent and corrupt officials right through the ranks, but for a long time they could get away with it due to the monopoly on trade and the sheer profitability of the enterprise. But this inevitably caught-up with the company in the end, particularly when the markets began shifting. The phrase vergaan onder corruptie (perished under corruption) can be very fittingly abbreviated to VOC, perfectly encapsulating the company’s fate.
Over the 200 years of the company’s operation, the Asian markets that it so heavily relied upon for exploitation were eventually able to push back and squeeze out the VOC. At the same time, trade shifted from spices to tea and sugar which the Dutch were unable to nimbly pivot to - the way the company organised itself and operated in Asia that had for so long been key to its dominance, now proved far too inefficient for enabling them to make a successful pivot to the tea trade.
The outbreak of, and subsequent defeat in, the Fourth Anglo-Dutch War for the Netherlands ultimately sealed the fate of the VOC, and established maritime and colonial supremacy of the British. During the war, the Dutch suffered the loss of cargo out at sea, the occupation of their trading outposts and the destruction of their trade agreements.
So despite reigning supreme for almost two centuries, all of these ailments conspired to ensure the VOC would not live to see the dawn of the 19th Century. But if you keep an eye out you’ll see markers of its presence everywhere, both hidden and in plain sight.