My first experience of travel, true travel that broadened my mind, was a 3-month backpacking trip around Europe. I was nineteen with one carry-on, one backpack, and one baseball cap. I bounced around some famous cities, staying in cheap hostels and taking in everything: the flamingos that flaunt so casually in the parks of Amsterdam; the Eiffel Tower flashing white at midnight; the long paths in Barcelona, winding up the hill to a view of the city from above. But what I remember most were the squares of Florence and the tower houses built by the Medici family.
The Medici family are known by history as Italian bankers and patrons of art. Before transitioning into banking, they were wool merchants importing goods from England. Cosimo Medici realized that transferring, lending, and insuring money was more profitable than buying and selling. Under Cosimoʼs leadership, the Medici family opened banks in London, France, Spain, and Belgium. They became crucial players in those foreign economies and, in so doing, helped create an interdependent international economy.
Research shows the Medici banks made their money in a few ways. With branches across Europe, the Medici banks could profit from bills of exchange. For example, if a merchant from Florence sold carrots to a buyer in London, the buyer could sign a bill of exchange, transferring payment responsibilities to the Medici branch in London. Regardless of the location of the merchant, the buyer could pay his debt at the London branch and the merchant could get reimbursed at the Florentine branch. Merchants did this for two reasons: safety and grace. Carrying gold over the sea was risky; a bill of exchange avoided that. And it also allowed payment at a later time.
The Medici banks also issued letters of credit—assurances that a buyer could withdraw money at a foreign Medici branch without carrying a dime across borders. Through a deposit, a letter of credit could be issued in Florence and honored in London so the buyer could purchase goods without the risk of transporting money. The banks also lent on credit and traded goods themselves.
The Medici banks, backed by reputation and trust, eased the minds of merchants when it came to international trade. They made it simpler and safer. Their presence in foreign countries allowed for a seamless flow of goods between nations, and with the flow of goods came the flow of ideas and art. The Renaissance was ushered in shortly thereafter—that is no coincidence.
I returned from my travels with hair down to my shoulders and a faint stench from having barely showered in months. In my motherʼs words, I looked “worldly.” Looking back, I’m encouraged by the way traveling helped me mature. I thought people in faraway lands were somehow different from the people back home. Traveling questioned that assumption.
It also sparked an interest in the relationship between banking and internationalization. I spoke with Alberto Sutton, CEO of Middlegate Securities, to learn more. Middlegate Securities is a financial services and securities investment firm with a global credit division serving as an investment bank focusing on emerging markets.
Investment banks emerged from the merchant banks of the 18th and 19th centuries. Much like Cosimo de Medici, merchant bankers such as the Rothschilds and JP Morgan realized issuing securities offered more profit than buying and selling goods. They became intermediaries between companies and investors—underwriting and issuing securities, advising on loans, and placing securities through their trader networks.
For example, in the late 19th century, Argentina, a rapidly developing country, needed foreign capital. They called on Boring Brothers to raise money through government bonds. Boring underwrote Argentine government bonds, advised on loan structuring, and placed securities with their network of primary market traders and investors. In this way, they raised capital for a government that would eventually default and damage the global economy.
Over the next 150 years, investment banks continued similar tasks—pricing and issuing securities while leveraging relationships and insider knowledge. From the 1960s onward, they expanded into M&A, restructurings, private equity, structured finance, and even proprietary trading—activities that sparked controversy around conflicts of interest and fraud.
The Global Credit Division of Middlegate Securities focuses on emerging markets. They acquire mandates to help loan and debt issuers access foreign capital, arrange capital investment into foreign governments, companies, and projects, and facilitate the purchase of commodities and distressed credit.
I like to see Middlegate’s Global Credit division as a modern extension of what the Medicis did in the 14th century—making the flow of capital between borders seamless. Yet global ambitions come with challenges. Alberto cited differing business practices as the biggest hurdle: “Some of these places do business in a different way. You have to rely a little bit on trust.” In investment banking, where relationships and networks signify value, trust is everything—and due diligence is mandatory.
Two weeks ago, on my honeymoon trip with my wife, I found myself back in Italy; this time, I traveled the coast of Sicily, stopping at villages nestled on the Mediterranean coast. Much like my first trip to Europe, I was reminded of the similarities between people everywhere. This is especially true in business. Alberto put it nicely: “Whatever you see in the press, what they say about you, is rarely reflected when youʼre doing business.”
Maybe business is the best bridge between countries because it strips away our differences. “You visit these places, talk to these people, and you realize weʼre all on the same page. We all want the same things.”
Although it’s rarely spoken about, maybe global investment banks can help usher in a new Renaissance—where the flow of goods and capital is followed by the exchange of ideas and culture, helping us realize we all want the same things. At heart, this is what international businesses do: they break down walls, and in their stead, they build bridges.