Second Best Innovation of the 18th Century
The best innovation in the past two centuries was: the steam engine. Can you guess what is the next best innovation?
Before I answer this question, I have another small quiz:
Can you guess the name of the company? This company was such a super hit that shareholders got compounding returns. Even the government could not control it at some point. They were very influential. This company determined the fate of countries and had a say on who is part of the government or not. Things weren’t rosy because of market changes. They had trouble and they sought the government’s help for a bailout.
Answer: It is not Facebook, as they are still in their prime. It is also not Lehmann Brothers.
Can you guess it? It is the British East India Company. It is a private company owned to a group of joint-stock owners called shareholders. It is a perfect example of a corrupt company with zero-corporate governance. It looted the country, India, which was then a thriving and established economy. Toppled governments, rewrote the borders of nations and starved millions of people to death. All in the name of profits and value for the shareholders.
The answer to my first question, the best innovation next to the steam engine, is the idea of Joint Stock Company.
What we call now as a private or a public company or a corporation was one of the best innovations. Why? It made common people own shares in a company. That, in turn, enabled the company to raise funds quickly and do things which needed the support of Kings or Queens earlier.
For the past two days, I am listening to the podcasts interviews with William Dalrymple. This one is the best. William is a brilliant historian. His new book, The Anarchy, is about the East India Company. I have heard of William but never read his work. His interviews are simply superb. The book’s blurb is very compelling:
It is the story of how the Mughal Empire-which dominated world trade and manufacturing and possessed almost unlimited resources-fell apart and was replaced by a multinational corporation based thousands of miles overseas, and answerable to shareholders, most of whom had never even seen India and no idea about the country whose wealth was providing their dividends.
British East India Company was truly the rogue company of its kind. They influenced the politician by bribing and lobbying. The executives were thugs and rowdies who rewrote the history in their favour. They starved people in one of the richest areas of an ancient country. They exploited their ruler’s weaknesses and used them for their benefits.
Funnily the company went bankrupt and now it is owned by an Indian. What an irony!