London - Capital of England

The micro-foundations of the early London capital market: Bank of England shareholders during and after the South Sea Bubble, 1720–251 By ANN M. CARLOS AND LARRY NEAL SUMMARY Using two sources, Bank of England Transfer Books and Stock Ledgers, this article explores the nature of the ‘customer base’ for Bank shares during and after the South Sea Bubble. This examination uncovers the nature of individual participation in this early capital market. The Transfer Ledgers record roughly 7,000 transfers during 1720, while the Ledger Books from 1720–25 record over 8,000 individuals holding stock. The analysis finds the customer base had breadth and depth, comprising individuals from across the social spectrum, from all over England and Europe. The market was diverse and liquid. Activity during the Bubble came from those living in and around London, with most traders participating in the market only twice at most. While the majority of participants were men, there was a sizeable female presence. Men as a group lost money from their market activity, but women made money. In the five years after the Bubble, the customer base was sustained. The analysis argues that the secondary market in financial assets cannot be dismissed as mere gambling devices, and that the basis for a mutually productive interaction between the financial sector and the real sector of the economy was already in existence and was sustained through the shock of the South Sea Bubble and its collapse. I iscussions of the development of English capital markets generate an interesting and unresolved tension between the disruptive and possibly irrational South Sea bubble in 1720 on the one hand, and the strength, 1 A very early draft of this paper was presented at the Economic History Society meeting 2002. This paper has benefited greatly from comments and suggestions by the anonymous referees and participants in workshops at Trinity College Dublin, University of Oxford, University of British Columbia, and University of California, Los Angeles. The authors gratefully acknowledge the financial support of the National Science Foundation. We must acknowledge the help and expertise of the Bank of England archivists, especially Henry Gillett and Sarah Millard. All errors unfortunately remain our own. D EARLY LONDON CAPITAL MARKET FOUNDATIONS 499 © Economic History Society 2005 Economic History Review, LIX, 3 (2006) durability, and sheer vitality of eighteenth-century English public finance on the other. Indeed, the role of the South Sea bubble in the long-run development of modern financial markets, and especially of the London stock market, remains an open issue, both for historians and economists. The first historian of the episode, Adam Anderson, hoped that his chronicle might ‘serve for a perpetual memento to the legislators and ministers of our own nation, never to leave it in the power of any, hereafter, to hoodwink mankind into so shameful and baneful an imposition on the credulity of the people, thereby diverted from their lawful industry’.2 The most recently published account of the South Sea Bubble ‘claims no more than to have reaffirmed Anderson’s cautionary conclusion that from time to time markets can go mad’.3 Yet, even Adam Anderson acknowledged that no lasting damage was done to the development of the British financial sector, and virtually all subsequent treatments of the South Sea episode have confirmed Anderson’s implicit assessment.4 The absence of impact of the bubble episode, especially in relation to the subsequent development of the public capital market, raises what we consider to be two contrasting views. Was the British economy so backward in 1720 that a financial shock of the magnitude of the South Sea Bubble affected but a small sliver of the economy, as some argue?5 Or was it possible that the institutional framework of the British financial sector had, even by 1720, acquired the resiliency necessary to withstand such a shock and recover quickly? In this article we argue that the financial sector was resilient and so able to absorb the price movements across 1720.6 Our investigation, focusing on the market for Bank of England stock, provides measures of the depth and breadth of the capital market during and after 1720. We focus on Bank stock that was widely understood at the time to be the least speculative stock among the major joint-stock companies whose shares were available to investors.7 Our examination uncovers the nature of individual participation in this early capital market, what stock market specialists today call the ‘customer base’. We are impressed with the characteristics of this early customer base, unique in Europe for its diversity and size, and with 2 Anderson, Historical and chronological deduction, pp. 91–2. 3 Dale, First crash, p. 183. 4 At least, that is our reading of Andreades, History; Brewer, Sinews of power; Carswell, South Sea Bubble; Clapham, Bank of England; Dickson, Financial revolution; Harris, Industrializing English law; and Scott, Constitution and finance. Even Anderson, Historical and chronological deduction, omits further mention of the South Sea when he moves on to the years after 1723, when the final breakup of the Company was accomplished. 5 Hoppit, ‘Myths’. 6 For a contrasting view, see Ibid., who concludes ‘Fundamentally, the Bubble was about high politics, high finance, and high society’, p. 158. His assessment is based on the participation of investors in the South Sea Company at the time, while ours is based on an analysis of the entire range of investors in the Bank of England. 7 Over the previous five years of increasingly active stock market activity, the coefficient of variation of Bank of England stock was only 7.8%, compared to 19.0% for East India Company stock and 9.9% for South Sea Company stock. (Calculations from ICPSR Study 1008, COEDAILY.dat, available at: http://webapp.icpsr.umich.edu/cocoon/ICPSR-PRA/01008.xml).

Character Power

A Character Boost can be used on any character on your Battle.net® account that isn't already level 90—even a brand new one.

Note: The character must not have a WoW Token in their inventory, bank, or mailbox.

World of Warcraft®: Warlords of Draenor includes a Level 90 Character Boost for one character on the upgraded game account. 

How It Works

After you get a Character Boost for your account, whether it's the boost included with Warlords of Draenor or through the World of Warcraft Shop, you'll see the option to boost a character when you log in to the game and visit your character selection screen.

The Level 90 Character Boost icon will appear near the top of your character list. When you click it, the game will walk you through boosting a character and choosing their talent specialization.

Note: You can't change factions or transfer your character to a new realm for 72 hours after the boost. You'll see Error 20078 if you try to buy a faction change or transfer for a recently boosted character.

What You Get

Gear, Gold, and Bags

After you boost a character to 90, they'll receive a set of spec-appropriate gear, a set of bags, and some gold to get started. Any gear the character already had will be moved to their bags. If there isn't enough space in their bags, their old gear will be mailed to them instead.

CHARACTER ARMOR CLASS	PROFESSIONS GRANTED
Cloth	Enchanting Tailoring
Leather/Mail	Leatherworking Skinning
Plate	Blacksmithing Mining

Professions

If the character is at least level 60 before the boost, their primary professions and First Aid will be leveled up to rank 600. Other secondary professions will not be affected. If the character is at least level 60 and doesn't have primary professions, they'll be given class-appropriate professions according to the table on the right.

If the character you choose to boost is not at least level 60, their professions will not be leveled up.

Note: Characters whose professions are leveled up from a Level 90 Character Boost must learn recipes from a profession trainer in-game.

Mounts and Riding Skill

After completing the introductory questline, boosted characters will receive all riding skills up to Artisan (up to 280% flying speed) and all regional riding skills up to Pandaria (Cold Weather Flying, Flight Master's License, etc.).

If your Battle.net account doesn't have any flying mounts, your boosted character will receive their faction's basic flying mount (gryphon for Alliance, wyvern for Horde).

What Happens Next

Your character will be placed in Tanaan if you've upgraded to Warlords of Draenor. If you haven't, they will be placed in Blasted Lands. Your action bar will be populated with the most essential skills for their class and spec. If it seems like you're missing skills, don't worry. You will unlock more skills as you progress through the introductory questline. Your character's quest log will be cleared during the boost, and any quest progress will be lost. When the boost is done processing, they will be ready to play immediately.

Note: Boosted characters are unable to enter dungeons and raids from previous expansions for 24 hours.

If you're a returning player, welcome back! We have a guide available for new, returning, and veteran players alike who want to know more about World of Warcraft:

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Hotel - Building function

In a previous column, I explained innovation is fundamentally about finding ways to deliver superior value. I also explained value equals the benefits received minus the costs incurred in obtaining the benefits. In short: Value = Benefits – Costs. In this column I will expand on the concept of benefits and describe some ways to think more systematically about them.

 

First, it’s important to understand the distinction between a feature, function and benefit. As illustrated below, a useful way to think about the distinction is to describe a feature in terms of what it is, a function in terms of what the feature does, and a benefit in terms of what the function does for the customer. 

 

For example, a feature of a hotel might be its location next to an office building. The function of this feature is to reduce travel time to and from the office building. For hotel guests who have morning meetings in the adjacent office building, a benefit of the function is that it enables them to wake up later in the morning.

 

 

Examining the framework

After making the distinction between a feature, function and benefit, you next want to consider the following:

 

1. A feature can have more than one function. For example, a second function of having the hotel located next to the office building is that the hotel and office can share some parking space. 

 

2. A function can provide multiple benefits to the same customer. Additional benefits associated with reducing the travel time between the hotel and office are that guests can return to their hotel rooms between meetings, and they avoid the cost and aggravation of driving to their meetings.

 

3. A function that benefits one type of customer does not necessarily benefit another type of customer. Quick access to the adjacent office building is of no benefit to commercial travelers who are doing business someplace other than the office building. Also, it is of no benefit to leisure travelers.

 

4. The same function can benefit different customers. Consider, for example, that the reduced travel time between the office building and hotel also has value for the office tenants, who benefit by being able to walk to the hotel for lunch rather than having to spend the time and money to drive elsewhere.

 

The feature-function-benefit framework is one way of thinking more systematically about benefits. A more comprehensive approach is to create a hierarchy of features, starting with the most general and progressively working to the most specific. 

 

For example, you could start with a hotel and subdivide it into its rooms, food and beverage, lobby, and meeting room features. You can then subdivide each of these into more specific features, and so on until you reach a level of specificity that is appropriate to the task at hand. 

 

The next step, after you’ve specified all of the features, is to identify the function(s) of each feature and, in turn, the benefit(s) associated with each function. When doing so, you should systematically consider each of the four characteristics described above. 

 

Types of benefits

Another useful thing to know is there are four kinds of benefits. Following is a brief description of each.

 

1. Practical benefits are those that accrue from the outcomes of a function. For example, as mentioned above, being able to sleep later is a practical benefit of the reduced travel time between the hotel and office building.

 

2. Emotional benefits pertain to how a feature-function affects a person’s mood. Turning on soothing music as part of a hotel’s turn down service, for example, has the emotional benefit of making guests feel more relaxed.

 

3. Symbolic benefits pertain to what a feature-function means to a customer or what the customer thinks it says about him or her. An example of the latter sort of symbolism is the guest who benefits from staying at a luxury-branded hotel (such as a Ritz-Carlton Hotel) because it signifies to others that he or she is well-off.

 

4. Cost benefits pertain to reductions in monetary or psychological costs. An easy-to-use radio alarm clock, for example, reduces the aggravation (psychological cost) associated with figuring out how to use it. The same goes for simpler versions of the shower handles and TV remote control units that require an engineering degree to figure them out. 

 

Do you think delivering more and better customer benefits is critical to the success of your business? Which method do you think will enable you to identify more and better benefits—generating them randomly and haphazardly or using a systematic framework such as the one presented here? 

 

Kevin Holt is the president of Co. Innovation Consulting, a lodging industry strategy and innovation consultancy. The company uses cutting-edge methods and technology to help hotels and industry organizations gain competitive advantage. Its services include hotel market studies, market segmentation studies, and design research and workshops and innovation initiatives pertaining to competitive and innovation strategy, B2B sales strategy, lodging concept design, service and customer experience design, and performance improvement. For more information, go to www.coinnovationconsulting.com. Or you can contact Kevin by calling 602-510-8080 or emailing kholt@coinnovationconsulting.com.

 

The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Columnists published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.