How TRUST built an Empire

And changed the world forever

Today English is spoken almost everywhere…

In the 18th century however the world was different:

The struggle between two nations:

France was bigger with more population, large overseas territories, more local wealth and a larger, more experienced army. Its Livre was the coin of the New World.

Britain was struggling against its larger rival. Its smaller territories were less wealthy. It was an island nation with a small population. Its coin was the British Farthing.

On paper France should have won, but…

Struggling to recover from the extravagance of Luis XIV, the then King, Luis XV agreed to the shares of the Mississippi Company (established 1719) to be sold on the French Stock Exchange.

The Company, formed to take advantage of the ‘wealth’ of the lower Mississippi valley (home to alligators and swamps), floated shares valued at 500 Livres each.

By 1st August 1719 they were trading at 2,750 Livres and by 30th August they were worth 4,100 Livres each. France had its first bubble.

The results were predictable:The company’s shares were not backed by assets. As big investors got wise and got out at its peak they began to take small ones with them, causing a panic that caused a run.

The French central bank tried to stabilize prices by buying shares and printing out more and more money in order to continue to do so. Eventually it too, run out of resources.

Share prices collapsed. Millions of small stakeholders lost everything. The French economy imploded and the Mississippi Company closed down.

The real casualty was Trust

Investors realized the complicity of the French Government in the Mississippi Company scheme. As a result France found it difficult to borrow money and when it did the interest rate was crippling.

So crippling, in fact, that by 1789 50% of France’s GDP would go to service its loans, creating a chain of events that directly led to the French Revolution.

British merchants on the other hand found it easy to borrow money and establish joint-stock companies to colonize the New World.

The London Company, the Plymouth Company, the Dorchester Company and the Massachusetts Company established colonies around the time the British East India Company was colonizing India.

Increased trust led to easier financing and the establishment of the world’s greatest Empire

Leading to:• The predominance of English as the international language• The establishment of Roman Law• The close ties between science, government and commerce• The emergence of Capitalism • The rise of the military-scientific-industrial complex• The spread of democratic values as the primary means of establishing

trustworthy commercial environments

There were other ingredients of course• New business practices• Technological breakthroughs• The growth of city populations• Royal decrees to deal with population pressure• The inheritance laws favoring first sons in 17th century

BritainEach of these, led to developments that required the building of relationships that would have been impossible in a low-trust environment.

The importance of Trust was a lesson that many governments around the world, learnt But it has to be re-learnt in our times.

The 21st century is emerging as one of the most critical times to re-establish Trust because it simply affects: everything!Search Marketing

Branding

And it is not always easy to understand

Though, on that score, I obviously have some suggestions that would help

@davidamerland