Investing began about four thousand years ago as a clay-tablet deal that let one person fund another person’s trade, and every era since has added a new way to own the future and a new way to lose money doing it. The story runs from Assyrian caravans to the phone in your pocket. Along the way, merchants learned to split risk, Venice made government debt tradable, the Dutch invented the public company, and Wall Street financed a continent.
This article follows the five acts of the video: the world before the stock market, the birth of shares, the way investing built the modern world, the arrival of ordinary savers, and the era when markets moved onto screens.
Watch the full video here, or skip to the breakdown below.
The 5 acts of investing at a glance
- Intro: The merchant who sent his silver away (0:00)
- Before the stock market (1:34)
- The stock market is born (21:34)
- Investing builds the modern world (42:20)
- Investing reaches ordinary people (1:02:06)
- Investing becomes mainstream (1:21:44)
Intro: The merchant who sent his silver away
Nearly four thousand years ago, a merchant stood beside a caravan leaving the city of Ashur. The donkeys carried tin and cloth. Some of the silver traveling with him belonged to people who stayed behind, and their agreement was pressed into a clay tablet and marked by witnesses.
That small deal held the basic parts of investing. Someone had capital, someone else knew how to use it, and both accepted that the future might reward or ruin them. Over the centuries the caravan became a ship, the ship became a company, and the company was cut into shares.
Every new way to invest created a new way to lose.
1. Before the stock market
Ashur sat beside the Tigris, and its merchants hauled tin and textiles more than a thousand kilometres to Kanesh in Anatolia. A young merchant might know the route and the buyers but lack silver. Another person might have silver and no wish to spend months on a dangerous road. A partnership let each use what the other had. The investor supplied the capital, the traveler moved the goods, and a contract said how profit or loss would be shared.
Writing mattered because memory is weak. A sealed clay envelope protected the terms, and a court could break it open to check the original deal. The tablets also show women investing, lending silver and managing property while male relatives traveled. Some partnerships, called a naruqqum, pooled silver and used it across years of trade.
This was a real shift. Wealth had been tied to things an owner could see and control: land, animals, grain, tools. Now the owner surrendered control for a period and held a promise instead. Information also became valuable at once, because news moved at the speed of a caravan and an investor might wait months to learn that something had gone wrong.
Medieval ships brought the next idea. A single lost vessel could erase a family fortune, so merchants spread money across several voyages. In the commenda, one partner supplied the capital and another carried the goods, and the capital came back first before profit was divided. Place small amounts into five ventures and a storm sinks one ship without sinking the family. That is diversification in physical form.
The sea also produced the difference between a loan and an ownership stake. A lender expected a defined payment if the voyage worked. An equity partner took whatever profit remained. Insurance appeared too, because a risk could be measured, priced and handed to someone else. None of it made the sea safe. It made failure survivable.
Venice added liquidity. The city forced wealthy families to lend to the state, and each lender received a claim on future tax revenue. A family that needed cash could sell that claim to another buyer, who weighed the price against the chance Venice kept paying. A secondary market formed, and the price of Venetian debt became a public verdict on the state. Time itself was now something with a price.
Capital and work could belong to different people, and a promise could be sold before it was paid.
2. The stock market is born
In the spring of 1602, Dutch investors were offered a stake in a company that would send ships halfway around the world. The Dutch East India Company, the VOC, merged rival groups into one organization with a monopoly east of the Cape of Good Hope. It could build forts, sign treaties, wage war and run territory. Craftsmen, shopkeepers and domestic workers appear in the subscription records beside rich merchants.
Capital stayed inside the company for years instead of returning after one fleet. One share gave exposure to a whole system of ships and trading posts. It also separated ownership from consequence. The profits grew through monopoly power, military action and brutal control of the spice trade, and a shareholder in Amsterdam collected a dividend from events thousands of kilometres away. That gap is still a feature of global investing.
Governance problems came with it. Directors controlled the money and knew more than the owners. Dividends were sometimes paid in goods, which left an investor holding bags of pepper or nutmeg to sell. The question of whether a firm should pay out earnings or reinvest them started here and never went away.
Because life is impatient, shares had to be sellable. Ownership transfers were recorded in the company books, and Amsterdam, already full of merchants and banks, turned the VOC share into the first heavily traded stock. Prices became a summary of rumor, hope, fear and need. News arrived by ship, so people who watched the ports and spoke with sailors acted first.
Familiar tricks appeared quickly: forward contracts, options, borrowed shares and bets on falling prices. In 1609 Isaac Le Maire, a former VOC director, joined a plan to sell shares for future delivery and buy them back cheaper. The directors called it an attack and spread of harmful rumors, and the government restricted short selling. The argument remains. Supporters say short sellers expose weak companies, and critics say they profit from panic.
Joseph de la Vega described the exchange in a famous late seventeenth century account of options, manipulation and the emotional pressure of speculation. The tools were old, and the behavior sounds current. A useful detail: when you buy newly issued shares the company gets the money, but when you buy on an exchange your money goes to the seller. Secondary trading still helps the company, because investors give capital more readily when they expect an exit.
Britain then showed how to manufacture a bubble. The South Sea Company, formed in 1711, took over part of the government’s debt and received trading rights tied to Spanish America, a region where Spain held the territory and Britain’s access was limited. In 1720 it proposed to absorb much more of the national debt by swapping government claims for shares. The price climbed, the climb improved the offer, and the improved offer lifted the price again. A rising number was easier to understand than a trading monopoly, and each new high made earlier buyers look wise.
Partial payments and credit widened the crowd and made it more fragile. Other promoters launched grand schemes of their own. When the fall came, people who had praised the market during the rise described themselves as victims. Parliament punished promoters and tightened rules, because Britain still needed creditors and companies still needed capital. The pattern repeats after every crisis: condemn the excess, write new rules, rebuild the market.
A tradable share turned ownership into a price, and a price turned out to be easy to inflate.
3. Investing builds the modern world
Before bonds, a government could fight only as long as its collected treasure lasted. A bond let a state spend future tax revenue today, and the promise could be resold. That made credit a form of national power. A trusted state borrowed fast and cheap, and a state that ignored its debts paid more or lost access.
Britain built a deep debt market after the Glorious Revolution, with Parliament’s control of taxation giving creditors confidence and the Bank of England, founded in 1694, forming part of the structure. The key ingredient was institutional trust. Bond prices turned politics into numbers, and traders followed wars, budgets and harvests because all of them touched a state’s ability to pay. Banking houses placed bonds across countries, and the Rothschild brothers became the best known family in that network.
Inflation added a risk. A government could make every payment on time and still return money that bought far less, so currency stability became part of the investment. Default was only one way to hurt a lender. Heavy taxes, forced conversions and debased money did it too.
Railways soaked up the capital next. Land, surveys, tunnels, bridges and locomotives cost huge sums years before a route earned anything, so promoters sold shares. Britain had proof by the 1830s, with the Liverpool and Manchester line showing that rail could carry people and freight. The technology was visible, which made the investment story unusually powerful. In the 1840s proposals multiplied, and George Hudson, the Railway King, rose from the cloth trade to control a large network.
Shares could be reserved with a small deposit, with more due later at a capital call. In a rising market that felt efficient. It left investors holding commitments they could not meet when prices fell. The lesson sits beside the track: a railway could add miles every year and weaken its finances with each extension. A growing company is not automatically creating value for each owner.
In 1792 a group of brokers signed an agreement tied to a buttonwood tree on Wall Street, promising to trade with each other under shared rules. America needed capital that local savings could not supply, for canals, railroads, mines, telegraph lines and steel mills. The telegraph moved prices faster than trains, and tickers later printed trades inside brokerage offices.
Insiders knew more than outsiders and some used it. Jay Gould built fortunes through railroads and market campaigns, and Cornelius Vanderbilt fought rivals through prices, routes and share ownership. Panics kept exposing the fragility underneath. The answer was a market built on trust in accounts, auditors, exchanges, brokers and banks, with a weak link anywhere in the chain able to reach the final investor.
Bonds and railway shares financed the modern world, and each wave carried its own mania.
4. Investing reaches ordinary people
By the late 1920s an American with savings could watch the market arrive through the ticker, a machine that often ran behind the real prices. Factories made cars and radios at scale, electricity spread, and share prices rose. Newspapers printed market pages and stories about people who got rich on shares. Many bought on margin, paying a portion and borrowing the rest from the broker.
The arithmetic was seductive. Two thousand dollars of savings could control ten thousand dollars of stock, and a ten percent rise added a thousand dollars, a fifty percent gain on the cash. A ten percent fall wiped out half the cash. Radio Corporation of America rose from 85 in 1928 to 549 in 1929 while paying no dividend, so buyers were paying for growth and for the belief that others would keep paying.
In October 1929 selling intensified, the ticker fell behind, and margin calls forced investors to find cash on the spot. Those without it had positions sold, which pushed prices lower and triggered more calls. Borrowed money turned individual decisions into a chain reaction, because the loan had its own timetable regardless of the owner’s long-term belief.
The reforms were lasting. The Securities Exchange Act of 1934 created the Securities and Exchange Commission and brought federal oversight to exchanges, brokers and trading. Disclosure did not promise a good investment, since a company could publish honest numbers and still fail, but it gave investors material information and penalties for certain deceptions. Joseph Kennedy became the first chairman. Many households still preferred deposits, savings bonds, insurance and property for a generation, because experience shapes who trusts markets.
Pooling had already changed the product. In 1924 Massachusetts Investors Trust let savers place money in one fund that held a portfolio, so modest amounts could be spread across many securities. Customers no longer picked companies. They picked the people picking companies. The crash exposed abuse, with some sponsors using fund assets as personal financing, and the Investment Company Act of 1940 set stronger rules on custody, conflicts and reporting.
The next shift was an idea about skill. Harry Markowitz gave investors a framework for thinking about risk and diversification across a whole portfolio. There was also plain arithmetic: before costs, all investors together hold the market, and after fees, taxes and trading they receive less. Some beat the market, but each winner sits beside someone who gets less.
John Bogle lost his job as chief executive after a merger went badly, then created the organization that became Vanguard, structured so the funds owned the management company. In 1976 it launched the First Index Investment Trust, which tracked the S&P 500. The reception was weak, and competitors mocked it as an admission of failure, because the industry sold judgment and the chance to do better. Its goal was to capture the market return before costs removed a large part of it. Low turnover cut expenses and taxes, and the method was decided in advance. Indexing promised neither safety nor freedom from losses. It offered broad ownership at low cost, and it fell with the market as efficiently as it rose.
Pooling, rules and index funds turned investing from a rich person’s craft into a product ordinary savers could hold.
5. Investing becomes mainstream
For much of the twentieth century a secure retirement meant a pension, where the employer carried the investment problem. People who changed jobs often received less. Defined contribution plans moved the burden to the worker. The 401(k) grew from a section of the United States tax code added in 1978, and what began as a limited feature became central to American retirement saving.
The setup was simple: choose a percentage of salary, and each payday money moves into funds before it reaches the bank account. Millions of workers became regular market participants without calling a broker or studying a company. Automation solved a behavior problem, since saving means defending the future against the present, and payroll removes the monthly contest. Employer matching strengthened the incentive, and ignoring a match meant leaving pay unclaimed.
The same market fall means different things depending on when the money is needed. That produced the glide path and target-date funds, though no single path fits every household. Retirement investing is a planning problem, not a hunt for the top return.
The broker’s role shrank too. Fixed commissions ended in the United States in 1975, discount brokers appeared, and Nasdaq launched in 1971 as a computerized quotation system. In the 1990s an investor could open an online account and place a trade from a home computer, in the middle of a technology boom. Cheaper trades made frequent trading feel inexpensive, while the spread, taxes and poor timing stayed. Speed also carries risk. The 1987 crash and the flash crash of 2010 showed that fast systems pass stress along as efficiently as normal orders, which is why exchanges added circuit breakers and trading pauses.
Then the market entered the phone. A person can download an app, verify an identity, link a bank account and buy a fraction of a share before breakfast. Commission-free trading did not mean free: brokers can earn from interest on cash, subscriptions, securities lending, margin loans and payments tied to order routing. Fractional shares removed the price barrier, and tiny minimums made buying feel like tapping any consumer app. Social feeds now sit beside price alerts, and crypto trades around the clock.
In January 2021 GameStop, a struggling video-game retailer with heavy short interest, became the clearest case. Online investors argued that rising prices could force short sellers to buy, which would push prices higher, and options trading added another layer. The popular story was ordinary traders beating hedge funds. The full event also involved institutions, market makers and momentum traders. When several brokers limited purchases, users saw the buy button vanish, and many blamed protection of powerful firms. Behind the screen sat a clearing system with collateral requirements that can jump sharply in extreme volatility.
A user can also gain permission to trade options before understanding time decay, volatility or margin. The simplicity of the purchase says nothing about the simplicity of the risk. New entrances keep arriving, from tokenized assets to private credit products to automated advice. Each is presented as progress, and much of it may be.
Ask who built the door, what they earn when it opens, and what waits on the other side.
Why the history still matters
An investor can close an app today and still own pieces of businesses all over the world, plus government debt, property and funds holding thousands of securities. The system behind that account was built layer by layer. Merchants separated capital from work, partnerships divided risk, Venice made promises tradable, the VOC made enterprise permanent, and Amsterdam made a market around it.
Investing can fund a useful business, build a railway or prepare a household for retirement. It can also carry fraud, debt and stories that grow faster than the assets under them. The core choice has not changed since the clay tablet: give up the use of money today and accept uncertainty in return for a claim on tomorrow. The contract is no longer pressed into clay, and the waiting has never disappeared.
FAQ
When did investing begin?
The video traces it to about four thousand years ago in Ashur, where investors funded merchants on clay-tablet contracts and shared the profit or loss from caravan trade.
What was the first public company with tradable shares?
The Dutch East India Company, the VOC, formed in 1602. Its shares were registered in company books and sold between investors, which created a market price in Amsterdam.
What was the South Sea Bubble?
It was a 1720 frenzy around a British company that swapped government debt for shares. Rising prices improved the offer, which pushed prices higher until the fall, after which Parliament punished promoters and tightened rules.
Why did the stock market crash in 1929?
Many investors had bought on margin, so falling prices triggered margin calls, forced sales and more falling prices. Borrowed money turned individual decisions into a chain reaction.
Why was the first index fund mocked?
Vanguard’s 1976 fund tracked the S&P 500 instead of trying to beat it, and competitors saw average performance as an admission of failure. Its aim was to capture the market return before costs took a large share.
How did ordinary people start investing?
Mutual funds pooled small amounts, index funds cut costs, 401(k) plans automated saving from paychecks, and online brokers and phone apps lowered the cost and minimum to buy.
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