Blog Post

Grand Admiral of the Ocean Seas Christoforo Colombo, the legendary, or infamous depending on your point of view., explorer/ mariner who discovered the New World and gave genesis to the expansion of Western Civilization. But today, we will celebrate him as one of the first capitalists to use one of the great levers of the world—other People’s Money.

Columbus hailed from the Republic of Genoa, now Genoa, Italy. Columbus had a bodacious vision to find a shortcut to bring spices from the Far East back to Europe. A radical idea at the time was to brave the high seas with a small number of wooden ships, with a genuine chance even today that could easily be fatal.

Today capitalism and industry act similarly to find a more effective and efficient way of doing things, and more importantly, getting paid for accomplishing it. A crazy idea with an even crazier entrepreneur willing to bet big on an idea can alter the course of history or the market. Columbus was a man of action and more of a businessman than a mariner, but he knew that an idea is just that, an idea. No matter how powerful or world-changing the concept, it is nothing without executing the vision. So Columbus had to find some investors before he could get his ships underway.

They were not many banks, let alone venture capitalists and private equity, to provide a source of capital. However, the bankers who operated often had access to what every startup venture needs in the initial steed money and connections. Columbus sought out powerful banker Luis de Santangel, The Royal Treasurer and confidant to the Spanish Crown. Luis provided Columbus his initial investment of 1,140,000 maravedis for his voyage. Still, more importantly, he provided the introduction to two influential individuals. These investors had deep pockets and the total weight and support of the sovereign state, and a mighty military to protect their investment. Columbus would need Spain’s Queen Isabella and King Ferdinand to stake him on this world-changing endeavor. He was rebuffed multiple times. But then, in 1492, Columbus went one more time. The timing was right, and the King and Queen agreed to back the voyage. His first attempt pitch at royalty was King John II of Portugal, a main rival of Spain. It’s is likely that the King and Queen had some reservations about his prior dealing with King John, so they gave him what we would call today a lock-up deal to keep him on the royal payroll. This was to prevent him from seeking out other European nobility to finance his expeditions. There is a lesson here; sometimes, you might have the right idea, but the timing isn’t right, but you have to be ready and wait for the opportunity and seize it.

In January 1492, the Catholic Castilian Royals retook Granada from the Muslim Moors. For years the Moors and Spaniards were engaged in brutal warfare to control Iberia. Columbus pitched them on access to new trade routes and claimed any new lands for the Crown and Christ. The traditional trade routes along the original Silk Road and the Red Sea were closed off by the Moors and their Ottoman allies. The demand for spices and resources (i.e., gold) increased, and the likelihood of war breaking out was very real. The Royals needed a new trade route, and fast, Columbus was just the businessman and mariner who had the hutzpah to put throw his hat in the ring.

Columbus demanded and negotiated very generous terms, but given the risks associated with this investment, they were not preposterous. He wanted to be commissioned as an Admiral (Grand Admiral), nobility title, the right to govern any discovered lands. But most importantly, he wanted 10% on all new riches.

The Crown agreed to his proposal. However, they did make Columbus put up a third of the money. Sound a lot like most banks today. After his father died, Columbus’s son would later admit that many did not expect he would come back to Spain alive.

On August 3, 1492, Columbus and his small armada set sail south towards the Azores. They sighted landfall in the New World on October 12, 1492, in the modern-day Bahamas. This was quite a navigational feat since there was no reliable way to determine longitude at that time. Let alone technologies we take for granted today, such as GPS and radar. It would take hundreds of years later, in 1728, when John Harrison invented the modern marine chronometer to solve the British Royal Challenge of “The Longitude Problem.” Columbus even made some of the first documented works on magnetic variation, which is the difference between magnetic north and true north depending on your location in the world.

Contrary to popular belief back not all people thought the earth was flat. However, early scientists and astronomers did start developing the idea that it was indeed not round. Today we know the earth is shaped as an oblate spheroid. Today it is astonishing, with full access to the worlds acknowledge available to most of the population that some people still believe in the flat earth nonsense. We should all take notice that because the available information doesn’t equate to people accurately using, as they say, you can lead a horse to water. Still, you can’t make him drink it.

              Columbus made four more voyages to the New World, and the rest is history or was it. Historians would later discover that Leif Erikson, an Icelandic Viking, likely discovered America 500 years before Columbus. After hearing the story of a strange land from another Viking, he launched a voyage that did not set foot ashore in North America. Erickson and Columbus were both gamblers and risk-takers and set sail for exploring and for riches. The only difference is Columbus had a better publicist, the Spanish Crown. What’s the point in winning if the world doesn’t know about it? So the Crown spread the word far and wide that they backed a winner who discovered a new world that the Spanish flag would soon cast a shadow over, and with that, the exploration race began.  

               Today people say we should have an honest account of Columbus’s action in the world. We agree he supported slavery, a vicious and despicable practice. A practice that is still in place in many places around the world. The New World was not a land of milk and honey as some commentators would like to make it out to be. Violence and force built some of the mightiest empires in history in North and South America. The Aztec Empire was an alive and well-expanded empire that they conquered through force. The consequences of losing on the battlefield to the Aztec, was likely a brutal human sacrifice if they were still alive. After all, it wasn’t’ too hard for Herman Corte’s 500 men to find some willing allies to take on the 500,000 Aztec solid armies.

               So how much money did Columbus receive for his endeavors? Research, economic historian Earl J. Hamilton 16,887 tons of silver alone were discovered in the world. Gold estimates were much less, but we likely never know the precise amount due to the losses of Spanish ships at sea. Let’s do some math 16,887 tons (we using U.S. short tons) is 540, 384, 00 ounces. At silver, trading around $22 an ounce comes out to $11,888,448,000. So Columbus, with his contract of 10% with king and queen, would come to $1,188,844,800 in silver earnings alone! Talk about the power of using one of the greatest levers in human history, other people’s money, to reap a windfall. However, Columbus would only receive a fraction of that during his final years in Genoa. The lesson here makes sure you have excellent attorneys to draft up some iron-clad contracts. After all, the world and beyond belongs to risk-taker.

At the end of the day, Columbus gets the publicized credit for discovering the “New World.” Now people today want to tear down statues of him because of his misdeeds. That is a misuse of energy, which is an investment, in our view. Better use of energy and focus would be to fight against the modern-day forms of slavery impacting untold misery upon millions of human beings worldwide. On the other hand, Columbus did expand Western Civilization. Today they are more people living free and practicing capitalism in countries with Western-style democracies than at any time in human history.

 So on this day, in honor of an explorer, we should go out and explore the world and see all the good and, unfortunately, some of the bad it has to offer. Let us teach the next generation to be explorers and go serve humanity. Let’s show them how to navigate the market and how to navigate around the world, preferably without their phone. Let us teach how to leverage their environment, resources, and, most critically, their mind. Because it is the risk-takers of the world, who advance humanity. So go out today and take some risks. You just might advance civilization, or at least your wallet.  

 To Freedom and Capitalism,

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Links/Sources for more info:

1492: An Ongoing Voyage Exhibition Home  <https://www.loc.gov/exhibits/1492/>

“Letter of Columbus to Luis De Santangel, Dated 15 February 1493.” NYPL Digital Collections,

https://digitalcollections.nypl.org/items/7fbc3989-f804-30a9-e040-e00a18067752

American Journeys Background on Letter from Columbus to Luis De Santangel, https://www.americanjourneys.org/aj-

063/summary/index.asp.

Christopher-Columbus – <https://www.britannica.com/biography/Christopher-Columbus>

Spain’s Lesson in Hubris: Tracing Spain’s Financial Collapse to the Beginning of its New World Empire <https://theclassicjournal.uga.edu/index.php/2020/05/07/spains-lesson-in-hubris-tracing-spains-financial-collapse-to-the-beginning-of-its-new-world-empire/>

The Viking Explorer Who Beat Columbus to America <https://www.history.com/news/the-viking-explorer-who-beat-columbus-to-america>

Earl J. Hamilton’s Imports of American Gold and Silver into Spain, 1503–1660

<https://academic.oup.com/qje/article-abstract/43/3/436/1866764?redirectedFrom=fulltext>