Not Going Down With the Ship

There are things that connect our modern world with the ancient Greeks in surprising ways.

Recent inventions that seem all too modern like the computer have their roots in the Hellenistic world of 2000 years ago, and attempts to unify all of physics go back even further. The idea of an indivisible atom was first proposed around 2200 years ago in Greece, and modern physics and math owes a huge debt to ancient Greek thinkers and philosophers.

Even something as mundane as the limited liability company (LLC), a type of corporation designed to minimize the damage to the owners and to encourage modern entrepreneurship, has a strong connection with the ancient Greek world.

Like many Greek ideas, this concept was centered around the common pond that was the center of the world as far as the Greeks were concerned:

Maritime law—commonly referred to as the law of the sea—had been dealing with trade between kingdoms for literal millennia, but the most notable effort in the Mediterranean was called the Rhodian Sea Law. Compiled over several centuries from perhaps the 8th century BCE onwards, this lawbook became universally recognized within the Roman Empire, who standardized so many of the things we use today.

You might imagine that the crew was the main focus, but the most well-known laws were about the cargo. Property, not people, ultimately shaped these laws into existence, and there were good reasons for this.

The rules around jettisoning—dumping cargo in order to keep the ship from sinking—tell us a lot about these concerns, and they were the most famous of all the Rhodian Sea Laws. The idea was that if something was thrown overboard, everyone on board would share equally in the loss.

As was the case with mathematics, legal frameworks, and countless other fields, the Romans took what the Greeks had thought about and tried to make it practical. They spread the idea around everywhere, just as they had spread Greek culture and art. The Latin alphabet derives from the Greeks, along with the religion of the Romans (clones of Greek gods) and even the clothing and architectural styles.

It’s tempting to say the Greeks were the real contributors to the modern world since they came up with so many of these ideas and institutions, but as is so often the case, it was the Romans who figured out how to use these concepts practically and widely.

Greek and Roman ideas were so intertwined that people started calling them Greco-Roman during the Renaissance period, when people were trying to look back at history and figure out where the ideas first originated. These concepts were powerful forces in transforming the ancient and medieval world, and creating so many modern institutions that create our global framework today.

Now, I’ve formed a few LLCs over the years. If you want to run a business in the modern world, you’ve got to think about how to limit your risk, and the LLC is an excellent invention that serves this purpose well.

While those Victorian captains would often famously go down with their ships, they were making the ultimate sacrifice in order to pay for a mistake they had made, for a venture that had gone south. They were ultimately responsible for the loss of the ship, and so they had to pay the ultimate price.

If company bankruptcy led to execution, I’m not so sure I would have ever started a company, much less several of them. I’m grateful that the limited liability company has given me the opportunity to try and fail, or at least not to worry about terrible consequences from failure (the economic consequences were more than enough to keep me on my toes!). Nobody died from these ventures, including me, as far as I know.

Anyway, I’m glad the LLC exists today, but there were some notable and important steps in between the Rhodian Sea Law and today’s modern limited liability company that gave me this ability to take a chance… but not the ultimate chance. Rhodian did give us the idea of splitting the risk of loss among multiple people, though, and that alone was a noteworthy innovation.

pic by Dana

Even more notably, if you put 500 drachmas into this venture, but something much more valuable was thrown overboard (or stolen by pirates), the most you could lose was 500 drachmas. This limited the loss of any one individual, no matter how crazy the voyage got.

This idea of separating the risk of the person from the risk of the venture was the key to the adoption of the idea throughout the Roman world, and subsequently throughout much of medieval Europe. By the time of the Age of Exploration, much more expensive ventures were being made across oceans and continents.

This demanded a new structure called the joint stock company, where the company could be sued. So could the individual owners, but this protective layer was a new layer of protection that would develop considerably over the next few centuries.

Ultimately, today’s limited liability companies seek to tap into entrepreneurship, a human superpower that has allowed us to reach out ever further into the world. By limiting personal risk, the LLC gives business owners the freedom to try to make something that’s never been made before.

As a society, we really want these folks to do their thing. We want them to go out there and take some risk on behalf of the rest of us, because the whole world stands to gain from more innovation. We need individual groups to go out there and take some risk so that these new ideas propagate, but we need them to know we’ve got their back as a society.