Eli5: why the shareholders in a company are not liable to pay debts owed by the company?
In: 181
In the 1500s people started organizing ships to travel to India and Indonesia to buy spices (which were cheap in those places where they were produced and super expensive in Europe). Spices were seriously expensive, pepper sold for twice its weight in gold!
One of the innovations that came from this burst of economic activity was the concept that a voyage was a separate entity from its financial backers. If the ship sank or was lost, the people who financed the voyage wouldn’t need to make the other investors whole. That meant that rich people could finance smaller parts of many voyages (since their wealth wasn’t being put at risk by each one) which also meant there was a lot more money to build ships and hire crews to go buy spices which also meant that more spices came to Europe, too.
This was a generally good thing (more people got more spices they wanted at lower prices and more crews and shipbuilders were employed than previously) so the concept expanded to other parts of the economy.
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