April 21, 2018 Amsterdam

On Friday, I had a private tour of Amsterdam Stock Exchange for just myself (and three somewhat reluctant others traveling with me). They include a brief history lesson and a little trading simulation game and it was actually fun for everyone. Also the exchange building built in 1913 is architecturally interesting. Looking into the history of how equity shares first started trading in the 1600’s may seem irrelevant to today. But some of the very same mistakes and excess leverage and insider trading and naked short selling developed quite early on. Human nature and a tendency to gamble has not changed at all. I respect the history. And looking at trading in a simpler time can even help to illustrate the key essentials of how profitable investing should work.

The Dutch East Indian company was the first and for a long time just about the only company with shares that traded. The company was profitable and provided benefits to its suppliers (a market for the excess spices of the far away islands) and benefits to its customers (spice prices in Europe soon fell as availability increased) and benefits to its owners paying dividends that were eventually very large compared to the capital it raised. The Dutch East India company also engaged in many acts that we would consider despicable today, but as a business it made sense and worked well for close to 200 years.

Then, as now, the best companies succeed by deserving to succeed by benefiting customers, suppliers and owners. For example companies that figure out how to materially lower costs in any industry can benefit all three groups as well as their employees and governments. (Their competitors and their employees can often be casualties but the overall impact on society is beneficial).

The Dutch government granted the company a monopoly which was great. On the other hand, other sea-trading nations including notably Spain and England certainly did not recognize that monopoly and competition at that time often consisted of seizing your competitor’s ships!

As for Amsterdam and the Netherlands today, wow is the tourist trade ever booming. Amsterdam is jam packed this weekend and I am told that even when the weather is far less cooperative, the place is packed especially on weekends. It’s amazing how a relatively few key but excellent tourist draws (the canals, the historic buildings, the Red Light District, the legal Cannabis smoking, windmills and flowers to name perhaps the key ones) seems to have created a critical mass of tourism. People end up spending a good amount of time strolling along (and visiting) countless little shops and bars/ restaurants. The more that open it seems the more people come. Shops and restaurants exist almost everywhere but in most places it does not draw tourists anything close to what is seen in Amsterdam. There must be lessons for other tourist operators including government tourism boosters in other parts of the world. I would say, cheap prices are not part of the equation – quite the opposite.