Joseph de la Vega (also known as Josep Penso) was a businessman, writer, and philanthropist who lived in 17th century Amsterdam in a community of Portuguese Jews whose ancestors had fled the Spanish Inquisition. He wrote his first play, Pardes Shoshannim, when only 18 and went on to become a respected merchant, and a Spanish poet. He became famous for his masterpiece, Confusion of Confusions, the oldest book ever written about stock exchanges. He was elected to several posts in the Jewish, and in the financial communities, including the honorar offices of President of the Academia de los Sitibundos, and Secretary of the Academia de los Floridos. He maintained an extensive correspondence with a number of sovereigns, and other prominent contemporaries.
De la Vega’s best-known work, Confusion of Confusions, consists of a series of dialogues between a philosopher, a merchant, and a shareholder, describing the workings of the Amsterdam Stock Exchange, the world’s first stock exchange.
It provides a context and understanding of the market participants, the intricacies of speculation and trading, and the financial instruments used at the time, while displaying an affection for the market and its greedy speculators.
He presents four rules of speculation that are still relevant today: never advise anyone to buy or sell shares; accept both your profits and losses; profits from share dealing never last; you need both money and patience.
Confusion of Confusions was one of the first analytical attempts to describe the different kinds of financial operations taking place at the time. It explores the impact of crowd behavior, and trading trickery on the financial markets.
Describes the diverse tactics and schemes used by investors playing the Amsterdam market, even though there were only two stocks being traded—the Dutch East India Company and the Dutch West India Company—businesses that depended on risk-laden expedition around the world.
He shows that, even then, there were bulls, bears, panics, bubbles, short selling, margin trading, and most of the other features of modern exchanges.
Discusses trading operations that were complex, involving both options and forward trades; such trading was used both to hedge, and to speculate.
Shows how many facets of investing are timeless, as he recognizes the value of information and analysis, and how speculators tend to be either optimists or pessimists; de la Vega’s advice is to maintain a balance between the two.
Explains how government regulation banned short selling, but that this was ignored as short sellers were often needed to make markets.
“What really matters is an awareness of how greed and fear can drive rational people to behave in strange ways when they gather in the marketplace.”Joseph de la Vega