Transcript Trading in the Old World - Texas Council on Economic Education

Connecting Texas Economics
to the World
Jean Walker
Director, West Texas Center for Economic Education
College of Business
West Texas A&M University
Canyon, Texas
[email protected]
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Lesson 18:
Christopher Columbus,
Entrepreneur? Queen
Isabella,Venture Capitalist?
Lesson 20:
The Columbian Exchange
Connecting Texas to the World
through World History
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Workshop and Materials Funded
and/or Sponsored by:
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STARR World History Blueprint
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What do these people have in
common?
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They are both ENTREPRENEURS.
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What is an entrepreneur?
An entrepreneur has an idea for a
business venture (good or service) and
bears the risk of success or failure
associated with the venture.
 Why do this? To seek profits.
 What is profit? The income that remains
after a business pay all expenses.

Entrepreneur: from the French entreprendre – to undertake
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An entrepreneur has the vision to:
Discover or invent a new product (good)
 Create a new service
 Improve an existing good or service
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Better price
More choice
Better quality
More convenience
Offer a complement for existing goods or services
 Offer a substitute for existing goods or services
 Reorganize an existing market
 Solve a problem for a customer

New technologies may create these opportunities.
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How do entrepreneurs benefit society?

Increased employment
◦ (which expands economic opportunities for individuals)

Increased competition
◦ (which lowers prices and increases choices)

Increased economic growth
◦ (by encouraging new methods & technologies)
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Funding the dream . . .

How do entrepreneurs fund their dreams?
◦ Personal savings
◦ Borrowing
 Banks
 Friends and family
◦ Investments from others
 Venture capitalists
 Friends and family
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Back to these entrepreneurs:
How did each fund his enterprise?
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Facebook funding:
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Zuckerberg launched Facebook on February 4, 2004, using his own
money earned since middle school from programming jobs.
By the end of the semester, it had 100,000 users on 30 college
campuses.
A well-connected Harvard classmate took Zuckerberg to New
York and introduced him to a financier who offered him $10
million for the company. He declined.
That summer he decided to relocate the company to a house in
Palo Alto, California. (Why Palo Alto? See next slide.)
In Palo Alto, Zuckerberg met and became friends with Sean Parker,
who had launched Napster and Plaxo.
Over the summer, the number of users grew to 200,000.
When fall came, Zuckerberg realized he needed more money, so
Parker introduced him to Reid Hoffman, the founder of LinkedIn,
who arranged a meeting with Peter Thiel, PayPal’s founder, who
invests $500,000 for a 10.2% stake.
We would use the term VENTURE CAPITALIST to describe Thiel.
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Facebook funding:
June 2010 – Elevation Partners
invests $122 M
Feb. 2011 – Kleiner, Perkins, Caufield
& Byers invests $25M
Jan. 2012 – Hercules Technology
invests $9.6M
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How do venture capitalists work?
•
Venture capital (VC) is private equity capital used
to fund early-stage firms with attractive growth
prospects.
• Venture capitalists maintain strong oversight over the firms
they invest in and have clearly defined exit strategies.
• Typically the exit strategy involves taking the company
public, where the IPO gives a publicly traded value to the
shares.
•
Angel capitalists (angels) are wealthy individual
investors who invest in promising early-stage
companies in exchange for a portion of the firm’s
equity.
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Back to Columbus . . .
What do we actually know
about Columbus?
“Columbus sailed the ocean
blue in 1492”
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Christopher Columbus: Early Years
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Born in Genoa, Italy
Father: an Italian wool weaver who also owned a cheese
stand and then a tavern
3 brothers (Bartolomeo was a cartographer)
Columbus sailed on a Genoese ship
1473 – Columbus apprenticed as a business agent
In his business, Columbus traveled to the Aegean Sea,
northern Europe, England, Ireland, and Iceland
In Lisbon, he married the daughter of a Portuguese nobleman
and his son Diego was born
1482-1485: Columbus traded along the coasts of West Africa
He also knew Latin, Portuguese, and Castilian and read
widely about astronomy, geography, and history (including the
writings of Marco Polo)
He was interested in the Bible and Biblical prophecies
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Why was trade & exploration so
important?

Europeans searched for
spices, gold, and precious
stones (See Lesson 19 – “What’s the
Big Deal About Spices?”)
◦ The “Silk Road” to China and India
was a safe land passage years, bringing
silk, ceramics, gunpowder, and
magnetic compasses from China.
◦ Copper, dates, and finished goods
were accumulated along the way.
Gold was used for trades.

Silk Road
See Lesson 7 – “The Silk Road”
◦ When Constantinople fell to the
Ottoman Turks in 1453, passage
became more difficult.
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A sea route to Cathay
(China) to replace the Silk
Road was sought by traders
in many countries.
Travels of Marco Polo
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What was known about the world?
Genoese map, 1457
Fra Mauo map, 1459
MAPS of the era show that most
scholars did recognize the world
was round, not flat.
Pietro Vesconte’s World Map, 1321
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What did Columbus believe?
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Columbus focused on a map made by
Toscanelli:
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He believed ships could sail west to find
China and began to seek financing to
support his plan.
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Read Activity 18.2:
“Columbus Looks for a
Venture Capitalist,”
A Reader’s Theater
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Distribute Activity 18.3, telling
students they will use information
from Activity 18.1. Have students
fill in the charts.
(p. 285)
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LESSON 18 – CHRISTOPHER COLUMBUS, ENTREPRENEUR? QUEEN ISABELLA,
VENTURE CAPITALIST?
King Ferdinand and Queen Isabella,
Venture Capitalists?
Characteristics of
Venture Capitalists
Example from Columbus’ Voyage?
Invest in new
technologies
Sailing west to reach India or China was an untested idea.
Even though most people did not think the Earth was flat,
this journey presented new challenges.
Invest in risky ventures Many things could go wrong that would prevent Columbus
from returning to Spain: getting lost, starving, shipwreck,
illness and injury, etc. And Columbus—for all his passion—
might have been wrong.
Own a portion of the
company
Even after granting all Columbus’ demands, Spain still
retained seven-eighths of any returns from the first voyage,
and seven-eighths of the returns from
subsequent voyages.
FOCUS MIDDLE SCHOOL WORLD HISTORY © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
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LESSON 18 – CHRISTOPHER COLUMBUS, ENTREPRENEUR? QUEEN ISABELLA,
VENTURE CAPITALIST?
Columbus as Entrepreneur?
Characteristics of
Entrepreneurs
Example from Columbus’ Voyage?
Start new
businesses/
enterprises
Sailing west to reach India or China was an untested idea. Even
though most people did not think the Earth was flat, this journey
presented new challenges, mainly because the distances involved
were much longer than Columbus estimated.
Bear all the risks of
starting the
business
All Queen Isabella and Spain risked was investment capital.
Columbus was risking his life. Many things could go wrong that
would prevent Columbus from returning to Spain: getting lost,
starving, shipwreck, injury and illness, etc. If the venture had
failed, Columbus and his crew might be dead.
Invest some of own Columbus invested his time and resources. He also asked that he
be allowed to invest an amount equal to one-eighth the cost of
resources in the
additional journeys in return for one-eighth of the profits.
business
FOCUS MIDDLE SCHOOL WORLD HISTORY © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
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Cost/Benefit Analysis of Spain’s
investment in the voyage:
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Costs:
◦ 3 ships
◦ Crew & supplies
◦ % of profits to
Columbus
◦ Titles for Columbus
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Benefits:
◦ Vast riches (spices, gold,
precious stones)
◦ Glory of discovery
(finding new route to
China)
◦ Expansion of kingdom
◦ Spread of Christianity
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Why did Columbus need a royal
investor?
He needed the power of a throne to
defend any claims made to the territory
he discovered.
 That is why he focused on King John of
Portugal then King Ferdinand and Queen
Isabella.
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THE FOUR VOYAGES OF COLUMBUS:
1
3
2
4
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Results:
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Columbus was wrong about the
distance west from the Canary
Islands.
The greater distance was
mitigated by having “easterly”
winds which took his ships to
the Bahamas in 5 weeks.
Without the easterly winds, his
food and drink could have been
exhausted before he sighted
land.
By taking a more northern
route back to Spain, he caught
the “westerly winds” which also
made that trip shorter.
Columbus never realized he had
found a new continent—he
always believed Japan and China
were very close to where he
explored.
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What about the other entrepreneur?
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Facebook went public on May 18,
2012, @ $38/share.
That initially valued FB at $104
billion.
Zuckerberg sold shares worth
$1.2 billion, and the rest of his
stock was worth $19.1 billion.
Facebook stock has since dropped
to $27 a share, reducing the value
of the company and causing grief
for the Nasdaq, the subject of
lawsuits involving their inability to
support trading in a timely way on
the day of the IPO
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Lesson 20: The Columbian Exchange
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In this lesson, students learn that the Columbian Exchange resulted
in an enormous exchange of goods, resources, and institutions
between the Old World and the New World and that the results of
the Exchange were both positive and negative.
Students learn that Tenochtitlan, the capital city of the Aztec
civilization, had a relatively well-developed economy in the 15th
century despite the lack of capital resources such as iron tools,
wheels, and draft animals.
Students learn that the Aztecs adopted legal institutions that
protected property rights and supported a market economy.
The Spanish, who conquered the Aztecs in 1521, replaced these
with institutions that restricted the ability of the native population
of Mexico to produce and trade.
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LESSON 20 – THE COLUMBIAN EXCHANGE
Trading in the Old World–
New World Market: Activity 20.1, p. 343
Half of the students will be “New World
Consumers” and the other half will be
“Old World Consumers.”
 Each New World Consumer will be given two
New World food cards.
 Each Old World Consumer will be given two Old
World Food Cards.
 Students will have five minutes to trade their
cards.
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FOCUS MIDDLE SCHOOL WORLD HISTORY © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
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LESSON 20 – THE COLUMBIAN EXCHANGE
Trading in the Old World–
New World Market (Round 1)
New World Consumers may only trade with
other New World Consumers.
 Old World Consumers may only trade with
other Old World Consumers.
 If you prefer the cards you were given, you don’t
have to trade.

FOCUS MIDDLE SCHOOL WORLD HISTORY © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
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LESSON 20 – THE COLUMBIAN EXCHANGE
Trading in the Old World–
New World Market (Round 2)
Students will have another five minutes to trade
their cards.
 You can now trade with anyone in either the
New World or Old World.
 If you prefer the cards you were given, you don’t
have to trade.
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FOCUS MIDDLE SCHOOL WORLD HISTORY © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
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LESSON 20 – THE COLUMBIAN EXCHANGE
Trading in the Old World–
New World Market
(After Round 2)
Those with a card that has an “X” on the back
have been exposed to disease(s).
 Old World Consumers: You have immunity from
the disease(s).
 New World Consumers: You have no
immunity—you will perish!

FOCUS MIDDLE SCHOOL WORLD HISTORY © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
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LESSON 20 – THE COLUMBIAN EXCHANGE
Use the
complete list in
Activity 20.2 on
pages 348 and
349.
FOCUS MIDDLE SCHOOL WORLD HISTORY © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
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The Rise and Fall of Tenochtitlan
(Activity 20.3 – page 350-351)
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Tenochtitlan (now
Mexico City), the capital
of the Aztec empire, had
a population of 250,000
in 1492.
The city was located on
an island in Lake
Texcoco; canals and
caseways moved goods
and people; dikes
controlled flood waters
and aqueducts carried
water to the city.
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The Rise and Fall of Tenochtitlan
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The Aztecs had no iron
tools, wheels, or work
animals.
They specialized in
growing one crop or
making one good and
then traded.
Spanish explorers found
a central market visited
by 60,000 people per day
trading building
materials, clothing,
jewelry, and other goods.
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The Rise and Fall of Tenochtitlan
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The Aztecs’ legal system protected
property rights. People could own
and sell property.
They had rules against dishonest
trade, a population big enough to
support trade, and legal institutions
that allowed trade to grow.
Their govt. imposed steep taxes.
Tribes conquered by the Aztecs also
paid high taxes, so they fought with
Cortes against the Aztecs in 1521
when he conquered the Aztec
empire under Moctezuma I.
The Spanish had horses and steel
weapons, which helped them
conquer the Aztecs.
Diseases such as smallpox brought by
the Spanish caused sickness and
death.
Depiction of Marketplace
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The Rise and Fall of Tenochtitlan
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The Spanish conquistadores destroyed
Tenochtitland and filled in the lakes, rebuilding it
as Mexico City.
The conquistadores required all trade with
Spanish settlements in the New World to pass
through Seville and gave power over trade to a
small merchant guild in Mexico City, which only
allowed a small number of people to own land.
Limits were placed on the ability of Mexicans to
own their own businesses.
Legal institutions were exchanged as well as
goods in the Columbian Exchange.
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Jean Walker
Director, West Texas Center for Economic
Education
College of Business
West Texas A&M University
Canyon, Texas 79016
806-651-2515
[email protected]
39