If you read books about the Renaissance and Florence, eventually a name will come up that was not an artist but a benefactor. The name is Medici and their profession was banker. Florence is in the northern part of Italy and for a long time there was a healthy wool trade. There was sheep, shearing stations, the wool was made to cloth and fabrics to be shipped across Europe, the center was Florence, Italy. Part of the shipping of the wool was the need of a banker and various banks supplied the trade. This was the origins of the Medici Bank and to serve its customers had a operations across Europe, although the branches in Rome and Venice made the most profit. According to Paul Strathern author of the book The Medici – Godfathers of the Renaissance published by Vintage Books, London, UK, 2007 the secret to the bank was caution, do not overreach themselves or the bank. Some of the loans were to kings and when Kings went into debt, they often threatened the lives of bankers and did not pay their loans – loans were written off to start again because the King was the King. The Medici Bank never had a large expansion, unless they had clients already; they were steady bankers. The Medici Bank did not invent the bill of exchange, though they likely had a hand in the invention of the holding company. As the Medici Bank was profitable and remained one of the leading banks of Florence, it did have larger ambitions. In Italy at the time, the Pope and the Church were the leading income source for Europe was Christian. The Cardinals of the day lived similar to Hedge Fund Billionaires and the Medici Bank serviced the Cardinals. The big money was made if the bank was the banker to the Pope and the Church, however given the competition, the object was to ensure the Cardinal(s) the bank backed became Pope and thus would give the bank the lucrative job. The task was to ensure the Pope saw the bank was loyal in good and bad times. Eventually, the Medici’s backed many Popes and had the account for 20 years.

Another source of revenues was the control of Alum trade was is a mineral salt used in the textile industry to fix dyes on cloth. For many years, the principal supply was a mine in Asia Minor now Izmir originally controlled by the Genoese until the Ottoman Turks took control. They raised the price of the ore and papal authorities reacted by suggesting anyone dealing with the Turks would be excommucated from the Church. Eventually an amendment was found as the Alum mines were depriving the Turks of income, they were technically being used to further the cause of Christianity; the end justified the apparent illegal means and in this case monopoly trading was therefore not a sin. The Medici Bank gained the monopoly and imported Alum for the textile industry. The first thing the bank did was to double the price and for many years was guaranteed a source of income.

Linking to dividend paying stocks, the Medici Bank had many opportunities and exercising caution or saying no to the many opportunities is and was very hard to do. In your everyday life there are many opportunities but you can not say yes to everything. For the Medici is was to concentrate on what you know and add as time goes by. The Alum trade came about because the bank had offices in countries due to the textile trade. To gain the Alum trade, needed the Pope’s permission and the bank had backed him. The cards were in place to take advantage of the opportunity and perhaps that is the lesson.

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