Celestial Navigation, Insurance and the Joint Stock Company

Posted by PITHOCRATES - July 10th, 2013

Technology 101

(Originally published November 30th, 2011)

Despite Precise Celestial Navigation a lot of Ships and Valuable Cargoes still got Lost at Sea

Open sea navigation was once very perilous.  It took a long time before ships ventured from sight of the shoreline.  And a lot of technology.  Boats used to go the long way across the Mediterranean Sea.  Because being in open water at night without any visible landmarks was very dangerous.  So they hugged the coastline.  Adding days to every voyage.  And more danger.  Because the longer at sea the greater the risk there was of sinking.  Especially when you were skirting the rock-infested shallows of the shoreline.

The Sumerians charted the stars.  The Greeks continued this work, producing charts that could tell you what latitude (north/south position) you were at by looking at the stars and planets.  By measuring the angle of the stars and planets above the horizon.  The Arabs created one of the first tools to measure these angles.  The kamal.  Knowing this angle you could do a little math and look at a pre-calculated table of values.  And get your latitude.  Better instruments followed.  The cross-staff.  The astrolabe.   And then the sextant.  The gold standard of angle measuring until the advent of Global Positioning Satellites (GPS).  Calculating longitude (east/west position) was a bit more complicated.  Because the earth rotated.  Which required some more skillful measuring and more calculations.  And/or a reliable and accurate clock.  To adjust your results by the time of day.  As the time as well as the stars moved from east to west as the planet rotated.

The Chinese developed the magnetic compass.  A helmsman steered his ship by the compass.  The navigator checked the angles of celestial bodies (sun, moon, stars and planets), checked time and the ship’s speed to fix the ship’s position.  By determining latitude and longitude.  The navigator fed course headings and course corrections to the helmsman.  Armed with these skills, tools, celestial charts and tables, the navigator could do a little math and navigate a ship across a vast ocean day or night to any port in the world.  Transporting valuable cargoes safely and timely across the globe.  Pretty impressive for the time.  But despite this precise celestial navigation, a lot of ships still got lost at sea.  As well as their valuable cargoes.

The Joint-Stock Company and Insurance Reduced the High Risks of Transoceanic Shipping

No matter how well a navigator could fix a ship’s position there were some things he just couldn’t do.  Such as avoid an uncharted reef.  Prevent a mutiny.  Fend off pirates.  Fend off enemy warships.  Make storms go away.  Or even see through dense fog.  Simply put being on a small wooden ship in the middle of an ocean was very dangerous.  Which poised quite the problem for early global trade.

It was a huge investment to put a ship to sea.  It took another huge investment to fill a ship with valuable cargo.  And if that ship didn’t make it back to sell that cargo it was very bad news for the investor.  A lost ship could financially ruin them.  So not only could you get rich in this new global trade you could become impoverished.  Which made rich people reluctant to finance this early trade.  Because it was so risky.  Two things helped to reduce this risk to manageable levels.  Insurance.  And the joint-stock company.

A group of investors could buy stock into a company that was going to make numerous voyages on various ships.  In exchange for a share of the profits from this trade each investor paid a share of its cost.  Thus the joint-stock company spread the risk to multiple investors, reducing the risk to any one person.  So one lost ship would not cause financial ruin to any one investor.  Thus encouraging investment into this lucrative new trade of transoceanic shipping.  And with the advent of insurance, shippers could insure each voyage for a small affordable fee.  By collecting this small fee on every voyage the insurer could pay for the few ships and cargoes lost at sea.  Not the investors.  Thus further encouraging investment into this very risky endeavor.

Celestial Navigation, Insurance and the Joint-Stock Company made Transoceanic Shipping Possible

The smartphone you can’t live without today most likely came to you via a large container ship from a port across some ocean.  It made a long and perilous voyage to get to you.  Which wouldn’t have been possible without celestial navigation, insurance and the joint-stock company.  The things that made transoceanic shipping possible.  Most of which are still in use today.  As they were when brave mariners took to the open seas in those small wooden ships of yesteryear.

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Celestial Navigation, Insurance and the Joint Stock Company

Posted by PITHOCRATES - November 30th, 2011

Technology 101

Despite Precise Celestial Navigation a lot of Ships and Valuable Cargoes still got Lost at Sea

Open sea navigation was once very perilous.  It took a long time before ships ventured from sight of the shoreline.  And a lot of technology.  Boats used to go the long way across the Mediterranean Sea.  Because being in open water at night without any visible landmarks was very dangerous.  So they hugged the coastline.  Adding days to every voyage.  And more danger.  Because the longer at sea the greater the risk there was of sinking.  Especially when you were skirting the rock-infested shallows of the shoreline.

The Sumerians charted the stars.  The Greeks continued this work, producing charts that could tell you what latitude (north/south position) you were at by looking at the stars and planets.  By measuring the angle of the stars and planets above the horizon.  The Arabs created one of the first tools to measure these angles.  The kamal.  Knowing this angle you could do a little math and look at a pre-calculated table of values.  And get your latitude.  Better instruments followed.  The cross-staff.  The astrolabe.   And then the sextant.  The gold standard of angle measuring until the advent of Global Positioning Satellites (GPS).  Calculating longitude (east/west position) was a bit more complicated.  Because the earth rotated.  Which required some more skillful measuring and more calculations.  And/or a reliable and accurate clock.  To adjust your results by the time of day.  As the time as well as the stars moved from east to west as the planet rotated.

The Chinese developed the magnetic compass.  A helmsman steered his ship by the compass.  The navigator checked the angles of celestial bodies (sun, moon, stars and planets), checked time and the ship’s speed to fix the ship’s position.  By determining latitude and longitude.  The navigator fed course headings and course corrections to the helmsman.  Armed with these skills, tools, celestial charts and tables, the navigator could do a little math and navigate a ship across a vast ocean day or night to any port in the world.  Transporting valuable cargoes safely and timely across the globe.  Pretty impressive for the time.  But despite this precise celestial navigation, a lot of ships still got lost at sea.  As well as their valuable cargoes.

The Joint-Stock Company and Insurance Reduced the High Risks of Transoceanic Shipping

No matter how well a navigator could fix a ship’s position there were some things he just couldn’t do.  Such as avoid an uncharted reef.  Prevent a mutiny.  Fend off pirates.  Fend off enemy warships.  Make storms go away.  Or even see through dense fog.  Simply put being on a small wooden ship in the middle of an ocean was very dangerous.  Which poised quite the problem for early global trade.

It was a huge investment to put a ship to sea.  It took another huge investment to fill a ship with valuable cargo.  And if that ship didn’t make it back to sell that cargo it was very bad news for the investor.  A lost ship could financially ruin them.  So not only could you get rich in this new global trade you could become impoverished.  Which made rich people reluctant to finance this early trade.  Because it was so risky.  Two things helped to reduce this risk to manageable levels.  Insurance.  And the joint-stock company.

A group of investors could buy stock into a company that was going to make numerous voyages on various ships.  In exchange for a share of the profits from this trade each investor paid a share of its cost.  Thus the joint-stock company spread the risk to multiple investors, reducing the risk to any one person.  So one lost ship would not cause financial ruin to any one investor.  Thus encouraging investment into this lucrative new trade of transoceanic shipping.  And with the advent of insurance, shippers could insure each voyage for a small affordable fee.  By collecting this small fee on every voyage the insurer could pay for the few ships and cargoes lost at sea.  Not the investors.  Thus further encouraging investment into this very risky endeavor.

Celestial Navigation, Insurance and the Joint-Stock Company made Transoceanic Shipping Possible

The smartphone you can’t live without today most likely came to you via a large container ship from a port across some ocean.  It made a long and perilous voyage to get to you.  Which wouldn’t have been possible without celestial navigation, insurance and the joint-stock company.  The things that made transoceanic shipping possible.  Most of which are still in use today.  As they were when brave mariners took to the open seas in those small wooden ships of yesteryear.

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Weights and Measures

Posted by PITHOCRATES - November 9th, 2011

Technology 101

Flying Airplanes Require Careful Calculations and Exacting Measurements

How do you buy your gasoline?  Well, if you’re in the U.S., you buy it by the gallon.  And you choose your gas station by the price per gallon.  Typically choosing the cheapest price per gallon you can find.  Even if it means 20 minutes of additional drive time.  Because you want to get as much value as you can when you spend your money.  But have you ever wondered how much gas you’re really getting?

Actually the chances are pretty good that you’re getting what you’re paying for.  The next time you pump gas take a look at the pump.  You should see a tag from the Department of Weights and Measures.  This tag says an inspector filled up a 5-gallon test can and verified the pump metering.  If you see this tag you should be getting what you paid for.  And you should see this tag.  Because they test every gas pump.

Have you ever flown in an airplane?  If you’re a regular flier you probably notice that ticket prices go up when oil prices do.  Why?  Because jet fuel is the greatest expense of flying.  For it takes a lot of jet fuel to make those heavy planes fly.  And one of the heaviest things on a plane is that fuel.  So they try to carry as little fuel as possible.  Which requires some careful calculations.  And some exacting measurements.  Because a jet plane running out fuel while flying can’t continue to fly for much longer.

Egypt, Sumer and Harappa Developed a System of Weights and Measures to Build and Trade

Life as we know it would be pretty difficult without a reliable system of weights and measures.  Something we take for granted these days.  I’m sure you don’t give it a second thought when you pump your gas.  Or sit in an airplane accelerating down a runway.  But none of this would be possible without weights and measures.

There would be no economic activity, either.  Without being able to measure lengths, areas or volumes there would be no building.  And one thing we’ve learned from the Subprime Mortgage Crisis is that building houses IS the U.S. economy.  But it would be hard to build a house if different suppliers sold 2X4s in different lengths.  Or if there were no standard sizes of hot water tanks.  Or if there was no standard size of drywall.  Or no way to measure how much water to mix with gypsum to make wet plaster.

Of course, we would never have gotten to the building process.  Because we couldn’t trade without weights and measures.  We have to measure raw materials before we can trade them.  And assign a unit price.  Calculating prices per unit goes back to the beginning of civilization.  All the way back to Egypt.  Sumer.  And Harappa.  Who all developed systems of weights and measures to build.  And to trade.

Setting Unit Prices for Raw Materials and Finished Goods made Trade Possible and Efficient

Money made trade easier.  But without a system of weights and measures trade would not have been possible.  Even with money.  Because you can’t count everything.  You don’t count grain.  You weigh it in bulk.  You don’t count olive oil.  You measure it by volume.  And you don’t count seed-holes.  You calculate how much seed by weight is required to sow a field based on the calculated area of that field.

Setting unit prices for these goods made trade possible.  And efficient.  It allowed traders to find the best value.  By comparing unit prices.  Much like we do today when choosing a gas station.  All thanks to those reliable weights and measures.

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