Sharing risk in financial ventures is a practice that can no doubt be found on many occasions in the historical record. However, the origins of the capitalist system that burgeoned into the economic system that dominates the world today can be found in the Mediterranean world of the thirteenth century.

The Mediterranean System and the Silk Road

It was during this time that two significant things occurred. First, ship owners and captains began encouraging outside investments on their entrepreneurial endeavors, selling or leasing space or “loca” in their ships into which “stock” was placed to be transported for sale. Second, for the first time goods from the Silk Road could be found in northwest Europe, and the linen cloth produced by the Flemish and Walloon peoples found its way to the Silk Road. A trading network extending from China to the medieval towns of Bruges and Ghent in modern Belgium was established and people all along the route became accustomed to having access to the goods on this network.

The selling of “loca” on board Mediterranean trading vessels proceeded in different ways. Sometimes a deal was made between the ship’s captain and the “silent” owners of the vessel; perhaps the captain was cut in on one-third of the profits or some such arrangement. But the truly radical innovation was when ship captains and owners solicited investments in the “loca” or actual physical spaces on the ship, into which the trading “stock” would be placed. The profits made from this stock would belong to the investor after a cut off the top for the ship’s captain and owners, which in some cases were the same persons.

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