A Strange Voyage

Search Engine - PJ Vogt

This episode explores SpaceX's record-breaking IPO through a historical lens, tracing the evolution of stock markets from 17th-century Amsterdam to today's speculative frenzy. It examines how financial innovation emerged accidentally and how modern investors today mirror past behaviors. The episode reflects on the role of belief, storytelling, and risk in driving market dynamics, especially around

Key takeaways

• SpaceX's $85B IPO is the largest in history.
• The Dutch East India Company pioneered modern stock market mechanics.
• Early markets relied on personal trust in tight-knit communities.

Transcript preview

Welcome to Search Engine, I'm PJ vote. This month SpaceX, SpaceX, Elon Musk's Rocket Chip Company, which also owns Starlink, his satellite internet company, and X.com and X-AI, went public. History made on Wall Street today, SpaceX going public, the biggest IPO ever launched. SpaceX stock blasted off in its debut, soaring more than 19% on the NASDAQ. At the closing bell, SpaceX is now worth over 2 trillion dollars. employees into millionaires and its CEO into a trillionaire. The largest initial public offering in all of human history. The company raised over 85 billion dollars. And it's been driven in an unprecedented way by retail investors. I just bought 50 shares of SpaceX at 172 per share and I'm never selling. Let's see what happens, baby. York Times in the week after SpaceX first began selling to the public retail investors have purchased a net of three hundred seventy million dollars worth of stock more at the time said than the net retail buying of invidia Microsoft alphabet meta and Amazon combined over the same period. Today SpaceX briefly became the fourth largest company in the world by market cap surpassing Amazon and Microsoft. How do you begin to think about something like this? a store that sells physical copies of video games up the leaderboards, that those same forces are now aimed at something much larger. At Elon Musk's promise that the future of AI sits with him, with him using rocket ships to launch data centers into orbit. What's actually going to happen? When the future confounds me, as it usually does, I look at the present. When the present confounds me, I said usually does, I look at the past. This week we were doing an extreme version of that. going to go all the way back. We're going to go back to the creation of the stock market, an accidental invention over 400 years ago. We are going to understand how and why that happened, how a tool for funding sea voyages has evolved into something somewhat different today. And by the time we're done, the present will make a little more sense to you, and the Netherlands will make a little more sense to you. Strap in, buckle up, this week a search engine, we're time traveling. My name is Laudec Paysham. I'm a historian and economist from the Netherlands. And why did you decide that you wanted to study the history of the stock market? Oh, that's interesting. So I was a student of economics here in Amsterdam and then I told my thesis supervisor, this is many years ago of course. I was also a student of history, early modern history and he said, well yeah, are you aware of the special situation that you're in the Netherlands, that there's so much financial history in the Netherlands in Amsterdam in Amsterdam in Amsterdam? So I'm currently right in the center of Amsterdam and when I look out the window here I see what is called East India House in Amsterdam which is the original headquarters of a company that was founded in the early 17th century the Dutch East India Company which from modern eyes was a really terrible company I mean it did so many hideous things in Asia but back then some more than 400 years ago people in Amsterdam they were really about making money, trading stuff from place A to place B, out competing, the English, the Spanish, the Portuguese, people were still exploring the world and as they were exploring the world, they were also trying to control the world. Historian Giles Milton in his book about this era, Nathaniel's Nutmeg, writes about how if you could get a ship to the Banda Islands, you buy 10 pounds of Nutmeg for less than an English penny. If you could get that ship back to Europe, you could sell the spice at a markup of something like 60,000 percent, assuming your ship didn't wreck, assuming all your men didn't die. The risk of a failed voyage was that it could ruin the person who funded it. were pretty much all funded either by one single person or a single person plus their family. That's how things had been, but because shipping was so expensive and risky, this had begun to change. In some Italian city states, people were founding these shipping companies. You'd raise money from a lot of people, not just your family, to fund a boat voyage. And this is working, but there's this funny inefficiency in the way they organized these companies, a limitation that people at the time cannot see. And that is that they founded these shipping companies always for the duration of just one expedition. So what they did was they founded a company, asked investors to invest some money, then they would buy a ship or have a fleet bill somewhere, I don't know. They would send out those ships to a foreign destination and when they got back they would liquidate the company again. And this was a way for them to quickly pay out the proceeds to... the investors and just be done with everything. So every shipping company was dissolved at the end of every voyage. You buy shares but it's shares in a project, not shares in an ongoing business the way we'd understand that today, which seems normal to everybody involved. Here's how that begins to change. In 1602 the Dutch government, which remember wants to beat its rivals in the trade wars, decides what if instead of having all these little Dutch shipping companies competing with each each? other, we just had one enormous one, the Dutch East India Company. They said, okay, we are going to find a company that's not just sending ships there once, but that's going to send ships there multiple times, and also build fortresses and wage war. And so that's when they went from the system of, you know, founding a company for just one expedition to one that would exist for a much longer period of time. on trade essentially throughout Asia. It's going to be an enormous venture. And it wants this new company to run multiple voyages, not just one, which raises a question. When will the investors get paid back? It is decided investors will be paid back after 21 years. Anybody in the Netherlands can buy a share of this new 21-year shipping company, and a couple decades later, they'll get their portion of all the money the Dutch East India company has made from its many voyages. like who's allowed to put money into this how are they finding people like what does an IPO look like hundreds and hundreds of years ago yeah yeah so what the duchy senior company did was they organized a public subscription to the initial capital of the company there was no limits or restriction of any kind so anyone could subscribe some money to the company and when that actually happens in August 1602 so there's this one month when the subscription books were opened and that took place in Amsterdam and also in five other cities in the Netherlands and what happened in Amsterdam I always find a somewhat peculiar story is that because the Dutch senior company was a newly founded company it didn't have an office building yet and there was also no investment bank involved in it there were no investment banks back then so one of the founding directors of the Dutch senior company he opened his house for this initial capital subscription which came to be another So during this one month people could pay a visit to his house and I always imagine that you end up I don't know in the kitchen or maybe in his living room you know and there must have been probably a large table there with the bookkeeper of the company sitting there and maybe one or two directors overseeing the whole process and what would happen is you would say your name and state the amount that you wanted to invest in the company. There were also no limits neither lower nor upper limits to the amount to the amount to that you could subscribe. Famously, the very last entry in the book is of the maids, of the bookkeeper, who subscribed 50 guilders to the initial capital of the company. But there's also a couple of merchants who subscribed several tens of thousands of guilders, which was really a huge amount of money back then to the companies. What did it felt to them, like one of things I'm trying to understand is like if this didn't exist before? Like I don't have the faith that if I personally put money into the stock market, I'll make the money back, but I have functions in a way where I didn't have faith in like cryptocurrency in 2021. The people who were putting their guilders into the duchy, India company, would they have felt like they were buying crypto? Would they have felt like they were buying crypto? Would they have felt like they were giving a wealthy friend they trusted money for a business venture? Like how much faith did they have in the enterprise they were creating as they were creating it? So they knew the persons who were involved in finding this new company and I think that was very important. So all the founding directors, they had been well-known know them, successful. They had all been involved in earlier companies that had sent ships to East Asia, to trade spices, and many of those companies have been very successful and very profitable. So I guess people were laying their faith in those aspects, right? So because of this personal touch and I think the sense that people were indeed giving their money to someone who they expected to... do well with, that was very important. So across six cities in the Netherlands, the Dutch East India Company goes out and offers these shares. It raises what is at the time an unfathomable sum, the equivalent of in today's US dollars, about 200 million bucks. The Dutch East India Company makes one final fateful choice, which seems to have almost been an afterthought. Somebody reasons that 21 years is a long time for these shareholders to have their money locked up in a single investment. And since the company wants to make investing as attractive as possible, somebody makes up this rule. If you're a shareholder and you don't want to wait all that time to get your money back, you can come back to the bookkeeper and just sell someone else your share at any time. They put a tiny little cause in the official document. It was just a very simple line, by the way, which said something like any shares in this company can be transferred from one person to another. that's where they accidentally advanced stock trading. Yes. But they weren't like, they weren't imagining you don't think at that point, oh, this is going to create a market and speculation. It was more, there's going to be some people who are like, hey, I need some way to back my money out of this earlier because 21 years is a huge amount of time. So we'll just give this as an option. But they did not understand the feature would become kind of the whole game. No. I don't think so. It's. ever sat down at a table and thought I'm now going to invent the stock market. It evolved, right? So people were trying to solve various questions, various issues and along the way they happened to invent the stock market. But this, I think only when looking back after a century maybe someone for the first time realized, oh, maybe we invented the stock market there. How much of human invention is just like this. tools we build, not entirely understanding what they're even for yet. We're trying to solve one problem, and we build something that solves and creates so many more. These Dutch shareholders had founded an entirely new kind of market, a market for stocks. They were not thinking about the 500 years of history they just enabled. They couldn't imagine us. They were thinking about their boats. What are people starting to do now they have these shares out there? Like what are the people? I forgot that there's a word which is shareholders. What are the shareholders doing over these decades with their shares? Like is there a behavior with these shares starting to resemble modern stock market behavior? Like what's happening? Yeah, so there's a few stages. So after the IPO was done in 1602, first there was a couple of months of nothing basically because people had not actually paid up their investment when they went to this house of one of the founding directors. They had just written down their names and they had just written down their names and their names and they had just written down their names. an amount of money that they wanted to invest in the company. But only after a couple of months, the first installment of that money was called up, so only then people actually had to pay up the first bit of money. And interestingly, immediately after that moment, you see the first shared transactions appeared. Lodvig says that very quickly this primitive Dutch stock market starts to somewhat resemble hours. There's derivatives trading, including what they call forward transactions, which look a lot like. our trading futures. The thing we do where we don't simply just buy and sell shares in companies, we also make complicated bets about the future price of those shares as we have selling and buying insurance. That's already happening on a bridge in Amsterdam, a hundred years before the invention of the piano. But like I guess what I don't understand is you had described how if I wanted to buy or transfer a share I would have to go to the local office of the Dutch East Indies. trading company and they would have a big book and I would say like I'm PJ Vote and I want to transfer this to you know Garrett Graham and that would happen. Once they're entering into this quick period of honestly like modern sounding financial innovation I mean they're not logging on to their e-trade accounts how are you buying