From the book Empire of Blue Water by Stephan Talty, Three Rivers Press, NY, 2007, one of the interesting management stories is the story about the Spanish myth. Spain received great amounts of gold and silver from Mexico and Peru as they had claimed those lands for their own. There is still gold and silver mines in those countries which you can buy shares in. For 150 years Spain controlled Central America and other countries generally left them alone. During that time – Spain had a centralized system which everything was reported to Spain and little was done without the approval of superiors. For many years the system worked well, but similar to all centralized controlled systems, there was little room for creative thinking outside of Spain or in its colonies. The people who became administrators knew how to satisfy the paperwork, but not necessarily how to defend the countries. The myth of the Spanish forces and their ability to defend the area and the mines grew, and similar to myths the affect was to keep away the other European countries.

When the King of England who had ambition but no money, decided to takeover Jamaica, it turned out to be easier than one would have thought it should be. This lead to the privateers and the raids of Henry Morgan. Although Captain Morgan benefited from being an excellent captain, he also benefited from the breaking the myth of the Spanish response. One would have expected Spain would throw vast resources to protect the mines and the gold, but there were other pressing items going on. The vast resources only came at the end of the Captain Morgan’s raids and through a clever deception they were beaten. The raids at Maracaibo and Panama showed the Spanish defenses as limited at best. Part of the reason was the privates were fighting for a large share of the treasure to be taken, while the Spanish soldiers were poorly paid, equipped and trained, and why risk your life for someone else’s treasurer?  The soldiers were at the posts, but would fear the pirates reputation, and soon the pirates would leave and things would return to normal. The myth of the Spanish empire was not the reality of it. After Morgan’s last raid, England and Spain agreed to a truce where Spain would not have a monopoly over trade in the Caribbean, England would keep Jamaica and Spain sent money to England to stop the pirates from operating. (it turned out in 1692 the place where the pirates were operating from – Port Royal in Jamaica was struck by an earthquake happened off the coast sending a tsunami (large waves from the sea at the town) and the town was destroyed.

Linking to dividend paying stocks, all companies which have enjoyed success are profitable and pay a dividend build a myth around them. The myth is the moat which keeps away the competition, many times the myth matches the reality but sometimes the myth and the reality do not match. When that happens the competition begins to take away market share, and soon it is easier to do. When that happens, the myth and the reality are a mismatch and the company will be in restructuring mode. As shareholders part of your task is to ensure the reasons why you bought the shares including paying a dividend remain a fact not a myth.

There are more questions than answers, till the next time – to raising questions.