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The psychological birth of the stock exchange idea!

February 10, 2011

I created a little story for those of you who are from Africa, India, the Middle-East or China and want to become entrepreneurs and develop sound economies. If you are a minister of finance in an underdeveloped country, my next few stories will help you understand the main force behind economic development and develop a sound economy in your country. In the age of Facebook and Twitter people working and earning decent wages means security for you as a leader and  entrepreneur.

Once upon a time there was a wealthy merchant in Venice whose son had a poor friend who had a great idea for an electronic game but no money to implement it. The poor fellow sat in his beat up car in the garage, frustrated, “How can I hire people, manufacture my product, stock it, advertise, market, sell, my God, it’s impossible to start the good life when you are poor, even if you are smart,” he said to his friend. The son of the rich man decided to help his friend – and himself. Since he had only $100,000.00 himself, he called 9 of his father’s associates who knew the boy as mature and trusted him. “My friend and I need a million dollars to produce an incredible electronic game and sell it. Give me a $100,000.00 each at 20% cumulative interest per year and I promise you $207,36o.00 each at the end of 5 years.”

Five years have passed in a wink. The hard-working boys made 5 million dollars profit on sales of 20 million dollars, or 20%. They returned $207,360.00 to each of dad’s friends – now called investors –  and had $2,926400.00 left to themselves – now called entrepreneurs! A week later, the smartest of the investors called and said, “I talked to the other investors. We believe in the electronic games company you guys have registered. We would like to exchange $200,000.00 each for a piece of your company.” You liked the idea because it would allow you to expand your company. You print 100 fancy certificates and called them “$100,000.00 five year bonds,” each paying 20%.  The Venice Bond Exchange was born, the start of a modern economy. A week later the second smartest of the investors called and said, “We believe in your electronic product so much that we would like the bond certificate to be open-ended in Time and Interest. We believe we can make more money in less time that way.”  You agree to call these open-ended certificates Shares and issue a million of them. The Venice Share Exchange was born. A third investor suggested to call shares stocks.  A fourth investor suggested to give the private exchange company authority by naming it like an agency of government – the Venice stock Exchange was born! It went public and started selling its own shares.

The truth behind my fictional story is that the only reason Africa has economic problems is that African leaders don’t understand that they have to make strict laws to streamline the process of creating Stock Exchanges, necessary for expanding economies! If the 2 boys from Venice lived in Africa, their stock exchange would have stayed only a dream! (TBC).

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One Comment leave one →
  1. March 8, 2011 2:29 am

    My friend, you have to respond in English. I am curious what you thought about the birth of the stock exchange idea?

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