The Sword of Jupiter (Imperium #1) - Chapter 17

While the games took up most of the afternoon, Ky’s day was far from  over. The Emperor and his advisors had begun setting up meetings with  some of the people that Ky would need to deal with to enact various  parts of his plans.

This afternoon’s meeting had been set up by  Hortensius, the businessman and blacksmith who ran the large ‘foundries’  in Devnum. Ky had not seen the foundries yet but, from the AI’s data,  what the Romans described as a foundry was very different than what  someone in his time would have thought of.

While important, the  state of Roman metallurgy was not what today’s meeting was about. Before  he could start changing that industry, and pretty much any of the  others on his list, the first thing he needed was a way to pay for it.  That had actually been a surprise to Ky.

When he began his plan,  he had assumed that the government itself could fund everything that  needed to be done. He had even accounted for the strain he assumed it  would put on the government with the idea of the patents, which he could  then give to the government itself to help raise funds, as well as  changes in the current taxes.

While in the long run, those would  be part of what the Empire would use to grow, it would not be all of it.  Rome’s economy was much more advanced than Ky had imagined when he had  started his plan. He originally had the idea that much of Rome’s wealth  was owned by the government itself or at least pooled into the hands of  local lords, who used that to govern particular regions.

Rome’s  governmental system was much more centralized than that, with cities run  by mayors and provinces when Rome had been large enough to have those,  run by regional governors. Everyone was answerable back to the Central  government, originally the Senate and now the Emperor and, to a lesser  degree, the Senate. The upper classes of Rome, which included the  Emperor, kept their wealth tied up in large landed estates focused  almost entirely on agriculture.

Industry was almost entirely held  in the hands of the equites. They would not be anything like what more  modern people would consider a middle class, and many had much more  wealth than the senatorial class, just without the accompanying status.

What  this meant for Ky was that most of the industry he needed to change,  was in the hands of private citizens. While Ky did intend to upend the  society, centralizing all industry in the hands of the government was  not part of that plan.

Working with private businesses would also  have issues. Private industry, no matter how wealthy it’s merchants, was  not going to be able to meet the capital requirements needed for the  tasks ahead. He had spent some time thinking about how to get government  resources into private industry and he thought he had a plan, but even  with the AI’s databases and all the documents they had accessed, Ky  still did not know enough to unilaterally make changes to how the Roman  economy was going to operate. At least he did not have enough  information to make those changes being confident they would not crash  the Roman economy.

On the march back from the stadium, Ky called  Carus to walk with him. He was still confused about the spy’s presence  at the games. Carus’s detail took the third shift guarding and assisting  Ky since that would be the easiest time for Carus to disappear to deal  with the various assets he was putting in place as well as finding time  to meet with Ky. Ky had seen him early that morning in fact, as he  handed off duties to Sellic, who was in charge of the first third of  each day.

“Why are you here?” Ky asked when Carus fell into step next to him.

“I  wanted to see the tests, and I had some suspicions of what your  performance would consist of, and I thought I might help with it.”

“We’ll  get to that in a second. My first problem is that you have been awake  all night. Sellic is about to hand off his detail to Strabo, meaning  you’ll be on in just eight hours. We’re just getting started, I don’t  need you dropping from exhaustion.”

“Eight hours is more than  enough sleep, I normally get much less than that. I can promise I won’t  do this normally. Your position is still very fragile and, while the  Emperor clearly has the acumen to know how to get you accepted by the  people, he has a lot to deal with besides you. This performance was an  excellent idea, but he put too much faith in your ability to wow the  crowds on your own and discounted the downsides if your performance was  less than it needed to be. As it turned out, my fears were justified.”

“How so?”

“Everyone  was very impressed with how you handled the first challenger since the  average citizen has only heard rumors of your ability. After him,  however, you started losing the crowd. Partly because the crowd could  recognize these challengers wouldn’t pose a serious challenge to an  average soldier or gladiator, and partly because without the sense of  danger posed to you, it became boring. The mobs’ attention is fickle. I  arranged for you to have challengers who the crowd would believe posed a  real danger to you.”

“You didn’t feel the need to talk to me first before putting me in real danger?”

“I  didn’t think I had put you in real danger, just that the crowd would  believe that you were in danger. I spoke with Strabo and several of the  other men who were close enough during the battle to see you in action.  If even a part of what they said is true, nothing you faced today would  have been a problem.”

“What if what you heard was less than half true?”

“Then  you aren’t the man the Emperor believes you are and aren’t going to  help save our empire from anything. I’m not sure what’s bothering you. I  watched the contests, and you dealt with them efficiently.”

Ky  sighed again and said, “I know I said I was giving you a wide latitude  to set everything up, but next time if it involves me, even if you think  your idea is perfectly safe, I want you to at least run it by me. While  I managed to deal with both of your surprises, some warning would have  been helpful.”

“As you say, Consul.”

Ky had the distinct  impression that Carus had absolutely no plans to follow through with  that agreement, but he let it drop, instead sending the spymaster off to  get some much-needed rest.

Ky broke from the Emperor’s entourage,  making a brief stop back at his assigned quarters to let Sellic’s  detail switch off with Strabo’s. It was during the changing of the  guards that Ky realized how useful the lictores were going to be.  Hortensius had sent word the night before that he had arranged for this  meeting after the games, but Ky had been so wrapped up in what he would  have to do during the games that he had not thought to find out where,  exactly, he was meeting the businessman.

Thankfully, Strabo had  kept it in mind. The Emperor had said the lictores were going to be as  much adjutants as actual guards. It had not occurred to Ky what that  would entail, but with everything that he had lined up before him,  having someone to help manage the details was going to be useful.

Ky  followed Strabo into one of the imperial meeting rooms, finding  Hortensius along with several men he did not recognize already gathered  around a set of stools. That was one thing Ky found unusual about Roman  customs. While they kept tables for eating and when required, like  looking over maps, most business was done sitting on stools, lounging on  reclined couches, or in the bathhouses.

While Ky realized he  would have to forgo the luxury of conference rooms filled with tables  lined by projection screens and built-in terminals, he had not thought  the table itself would be one of the things he would have to forgo.

“Consul, I hear good things about your performance in the games,” Hortensius said.

While  he sat up straighter, the Roman did not come towards Ky or extend his  hand. He had noticed this a few times before and had queried the AI  about it. In his time, handshakes were one of the more common forms of  casual greetings. The same was apparently not true of this era. He was  not clear on the rules for when a handshake was appropriate, but it  seemed something more common among soldiers or close friends. It was not  found at business meetings, as the AI’s research suggested it would be  seen as somewhat strange behavior.

“Let me introduce you to some  of my colleagues,” Hortensius continued. “This is Paulus Rutilius  Laetinianus, the chief mensarii, and Sisenna Viducius Planta, one of the  more prolific argentarii in Devnum. When it comes to the flow of money  through Rome, Laetinianus and Planta are the two most influential men in  Devnum.”

Ky had spent a fair amount of time with the AI puzzling  over the Roman banking system. While it was more advanced than he would  have first guessed with banks, the sale of portions of a business for  capital, and a set system of loans, it was also incredibly confusing.  From his understanding, the mensarii and the argentarii were two sides  of the same coin. Both ran what counted as banks in the Roman world and  provided services such as changing currency, holding deposits, and  lending money. The main difference was the mensarii were lenders  employed and funded by the state, while argentarii were private  citizens.

Ky was leery of the argentarii, who regularly forced  those who could not repay their loans into slavery. From what Ky could  tell, the practice was disturbingly common.

“Good to meet you both. Has Hortensius told you anything about what I’ve already discussed with him?”

“A little,” Laetinianus said.

“There  wasn’t much I could tell them,” Hortensius added. “I explained to them  that you were looking at strategies to grow our manufacturing base, but  beyond that, we never discussed details. My understanding is that, aside  from the changes to taxes you mentioned, there would be a need to find  capital to do some of this expansion.”

“That is exactly what we  need. From what I’ve seen, Rome has two large financial roadblocks, one  on the ability to distribute capital and the other on the amount of  capital available to distribute. Both of these problems can be solved by  one solution, which involves a change in the way money lending is done.  You actually already have the basic practices in place, all that’s  needed is to expand them. While I can give you the ideas needed to  change the current system, I need your help in turning these ideas into a  reality, and your acceptance of these changes.”

All three men leaned forward on their stools, interested.

“I’ll  take the second problem first. Am I correct that the amount of money  you have to lend is limited by the amount of money you have personally,  or that’s made available by the treasury in Laetinianus’s case, and what  money’s given to you by citizens to hold?”

“Yes,” Laetinianus  said. “Although we mostly lend out money from our own reserves, since  current law does not allow us to pay interest to people who deposit  money with us, something the argentarii are still allowed to do.”

“On  the other hand,” Planta added, “There have been enough less than  forthright argentarii to make many citizens wary of giving us their  money to control, for fear of their money being stolen from them, or  lost in unwise lending. That has sent many of the depositors back to the  mensarii and forced us to raise the interest we payout to retain  clients.”

“While I’m not going to address that today,” Ky said.  “There are things that can be done there, such as the Empire  guaranteeing deposits held by argentarii in exchange for agreements on  restrictions on what could be done with that money and regular  inspections of the argentarii records. It would probably become involved  enough that it would require the Senate to pass legislation to fund and  maintain it, but there are options.”

“I’m not sure you’ll be able  to convince a lot of Senators of the wisdom of that kind of thing, but  if the details are right, I could see how it might work,” Hortensius  said.

“That’s something we can discuss, but like I said, it’s not  what I’m here to discuss now. Especially if it involved additional  legislation. Back to my initial point that one limiting factor on how  much any one lender, be they argentarii or mensarii, is the amount of  money they have available to them at any given time to put into a  company.”

“That is essentially correct,” Laetinianus said.

“The  second problem is how you get that money to businesses. Currently, you  lend money to a business for a fixed amount of time based on the  collateral they can put up for it. In most cases, that is the land that  their business sits on. If they don’t pay the loan back in enough time,  then you take that land or whatever you agreed to for collateral. This  has the effect of limiting the value you are willing to loan to whatever  the value of the land being offered up for collateral is, which in turn  has pushed most of the available cash flow towards estate holders and  away from more industrial businesses that might use less land but have  just as high, or higher, capital needs. Does that sound about right?”

“Yes,” Hortensius said with a grimace, giving a side glance to the other two men.

This was clearly an old point of contention between them since neither of the other two men tried to meet the gaze.

Ky  drew their attention back to him by saying, “Our problem is that most  of the investment needed for these new expansions will be industrial,  not agricultural. There will be some changes to farming, but nothing  that will compare to both the changes to existing industries like  smithing and forging, and the creation of whole new industries.”

“While  there are several changes we will eventually make to solve these two  problems, the one that will address both the fastest is fractional  investment. While a lot of what I’m going to say will be handled through  the mensarii, there are several ways the argentarii will be able to  take advantage of this system.”

“The way this works is that when a  company needs investment, they offer up a share of the ownership of  their company. I know you do that now, but it goes further than that.  They would register the percentage of the ownership they are offering  with the mensarii. They would tell the mensarii how much they wanted for  that portion of the business and, importantly, allow a clerk from the  mensarii’s office access to their business. That clerk would put  together a listing of all the costs, revenue, and debts of the company.  Using that information, the clerk can put together a historical rate of  growth, projected rate of growth, and other information that would be  valuable for someone looking to invest in the company. Once all that  information is put together, they’d bundle it together in a single  document available in the mensarii’s offices. Where I’m from this would  be called a ‘prospectus.’ Anyone, be it the argentarii or just average  citizens with a few extra sesterces, could come and buy a portion of  that offered amount, and the mensarii would list the sale in their  records.”

“How would that work?” Hortensius asked. “I sell a  portion of my business to the mensarii, and they then sell it up for  pieces? Do they profit from those pieces? Why would I do that instead of  just bringing on a business partner and giving them that part of my  business?”

“The mensarii aren’t buying any part of your business,  they’re simply an agent to facilitate the selling and buying of shares  of a business. You still own any portion of the business not purchased,  and the money from purchases of shares are given to you by the mensarii  as they are purchased. For example, say a company wants ten-thousand  sesterces and are willing to offer fifty percent of their business for  it. Each sesterce would be worth five ten-thousandth of a percent of the  company. Each month, or quarter, or year, the company would give  fifty-percent of their net profit to the mensarii, who would then divide  that money among the shareholders, based on the amount of that they  were owed. This would allow the pool of available capital able to be  invested to be increased from just what a mensarii had available to  funds from all the people of Rome, and even to people outside of Rome if  they can get back to Rome to receive their payment, which my people  call a dividend. The mensarii would again send out a clerk to ensure  that the business is reporting their earnings fairly and accurately.”

“We would have to raise additional taxes to pay all those clerks to do that work.”

“There  would be a small fee with every purchase of shares, say two percent of  the purchase price. That could, of course, change over time if it turned  out to not be enough.”

“What about if things don’t go well and the company goes out of business?”

“It’s  the same risk as if you were to loan the total sum of money to a  company, and they go out of business. That is one of the ways an  argentarii could still offer services. They would have the expertise to  understand the business records and know if an investment is a good deal  or if the business is either asking too much for their share or the  investment is ill-advised. They could charge a small fee on top of the  mensarii fee in exchange for that expertise.”

“That might work,” Planta said.

“It  actually goes further than that. People could also sell their shares to  someone else for whatever they can convince the other people to buy it  for. If a business is doing very well, you could find someone willing to  pay more for your share than you paid for it. Eventually, there will be  groups who buy shares of a company that people are interested in, wait  until people are willing to pay more for that share, and then sell it to  someone else, making money not only off of the ownership of the  company, but off the perceived value of the share itself as well. The  owner of the business, if things are going well, can even try and buy  back shares of their company they previously sold. We will need to put  in a series of rules into place to keep people from cheating the system  or others, such as driving up interest in the shares of a business to  make its shares worth more artificially and leaving the value of those  shares to plummet once the original seller manages to sell them all.  That’s just one example. We will have to sit with senators and get rules  in place to prohibit artificially profiting off of this kind of market  at the expense of others through various forms of deceit.”

“Besides  money lenders and Roman citizens, we will also be able to sell some of  these shares to foreign traders. Of course, first, we have to convince  them Rome is not about to be crushed by the Carthaginians, but once they  are sure Rome is here to stay, and if we sell it to foreign traders and  businessmen, we will have capital from outside of Rome coming into  Rome. I understand some of these foreigners sometimes change their  business from trading to raiding Roman coastal villages. Having  investments in Roman businesses will make some of them think twice since  some targets could actually hurt the income they get off their  investments.

“I know something like this will face challenges,” Ky  continued, holding up his hand and ticking off each point. “We have to  get the word to businesses to actually agree to do this. We have to get  the word out to people that this opportunity exists. We have to get the  clerks in place and trained to understand what they’re doing, including  the new system for writing numbers I discussed with Hortensius yesterday  and another new idea that I will get to later called double-entry  bookkeeping. Finally, we have to make people believe this is a good  idea.”

“If we can meet those challenges, though, it will not only  make enough capital available to more companies, but it will strengthen  Rome as a whole. A system like this will allow more money to find its  way to citizens who decided to buy shares of companies. Citizens with  more money can buy more things from merchants, creating a cycle that  will lift Rome as a whole.”

“I will be honest,” Laetinianus said.  “I’m not convinced this will work. I’m willing to go along with it, but I  can’t see the average citizen taking their money and putting it into  something like one of these shares rather than using any extra money  they have for luxuries or drink.”

“Have some faith Laetinianus,”  Hortensius said. “I like the idea. I’ve had to take out loans in the  past, and the process was far from agreeable. Speaking as a businessman,  this is something I think could work. In fact, I’m willing to put up  thirty percent of my foundries as the first shares available.”

Laetinianus’s  eyebrows rose in surprise, “I asked you just last week to buy part of  those. You said you didn’t need an investor and didn’t want a business  partner.”

“At the time, I didn’t. Beyond what we’re seeing today,  Ky has said he has some changes to the way we currently produce metal  that will revolutionize the industry. On top of that are all the new  weapons and material the Empire is planning on purchasing for the  legions as they get ready to take the fight to the Carthaginians. Change  is coming to Devnum, and I plan on getting ready for it.”

While  Ky had never said anything in their previous conversation was secret, so  far everything Ky had offered up had been to a select few people. It  was clear from the way the two money lenders looked at each other that  it was news to them. While Ky wasn’t overly concerned about the changes  getting out, he wondered if everyone would see them as favorably as  Hortensius clearly did.

For now, though, Hortensius’s offer pushed  both men into action, with their meeting being sidetracked for over an  hour while they discussed how much each man wanted to buy of  Hortensius’s business. Ky had to remind them that it would be best, in  the interest of promoting this new market for investing, to allow a good  portion of Hortensius’s shares to remain available for other argentarii  and average citizens.

Eventually, Ky got the three men back on  track and they worked late into the night going over the details of what  needed to be done to put a system like this in place. There would be  problems, of course, and when the other three started to fade from  exhaustion, Ky let them break up. Ky knew that what he had just  unleashed would undoubtedly cause problems in the future. He had studied  much of the AI’s records of the history of financial markets and knew  that, in time, Romans would figure out things like the ‘pump-and-dump’  and Ponzi schemes, just to name a few of the financial crimes that did  not currently exist.

On the other hand, ideas like these had  revolutionized Europe and helped pull it towards the industrial age, as  waves of capital found its way into the hands of inventors and  businesses, allowing them to take advantage of everything that was  happening around them. There was no way to be certain this would work,  of course, but it was the only path Ky and the AI could see to  jump-start the industrial revolution fifteen hundred years early.