Without going too far back into the antiquity, let us start our journey at the Silk Route of the Middle Ages. At its peak, the Silk Route extended nearly 4000 miles from the coast of China through the territories of China, Central Asia, India, Persia and Assyria to the Mediterranean coast of Levant and onwards by sea to the fabled city of Venice and beyond. The term Silk Road creates an image of a road, perhaps even a boulevard traversed by a camel train laden with expensive cargoes, well protected by security. The truth is, however, far more complex. In reality, it was a complex network of caravans, camel trains, serais, traders, money lenders and ships extending across the known world of the time to carry merchandise as diverse as silk, spices, wool, fabrics, tea, porcelain, carpets, ivory and other items of high value. Each of the main cities in this network - Kashgar, Samarkand, Turfan, Baghdad, Tyre, Aleppo and Alexandria was a veritable hub of activities related to trade facilitation. The participants in this network - whether a Sugd merchant a Chinese caravan owner, or a Florentine ship captain - were handsomely rewarded for their enterprise and ability to work their part in harnessing the power of the network.
Let us look at how the network was organized in practice. In the agrarian society of the Middle Ages, the most precious commodity traded by the Business Network was spice. Before the advent of refrigeration, spices were necessary to preserve food as well as mask the flavor of spoilt or rancid food. Many of these spices such as pepper, cloves, mace and cumin, ginger, nutmeg, cinnamon and saffron traded for margins up to 3000 per cent and some of these were regularly sold for prices more than their weight in gold. With such high margins, obviously demand was never a constraint, but supply route security and extent was. It was usual for the goods to change ownership more than 25 times between the producers in the East and the eventual consumer in the West. Each middleman added his own margin as well as embellishment to the story. For example, Arab merchants told their European buyers that the cloves were netted out of the river Nile and cinnamon came from the birds.
Without any central command, the entire network was organized towards one end - production, collection and transportation of the spices and similar produce to destinations in Europe. Numerous middlemen - camel caravan owners, merchants, ship owners, and financiers participated in this chain - each within their own territory and with their own margin. It is estimated that the middlemen's share of the profit in this enterprise was more than 90 per cent.
No wonder, then, that the Venetian merchants - the middlemen closest to the end customers and with the most visibility of the entire network - moved to take greater control of the network. In the late Middle Ages, the bankers, merchants, and ship owners of Venice controlled the trade into Europe. At the peak of its power, the Venetian Republic had a fleet of ships exceeding 3000 and controlled all trade from the eastern shore of the Mediterranean Sea to Europe. To assure security of the supply network the Venetian republic controlled territories on the Adriatic coast so that pirates could not attack their ships coming from the east. Using their financial power, the Venetian merchants guild began to dis-intermediate the middlemen in the entire supply chain. The simultaneous rise of strong Arab empires with central command first in Baghdad, and later in Cairo controlling a vast territory, aided this process of dis-intermediation as the caravans could traverse a much greater distance and were assured relatively more security in their travels.
A key feature of the Venetian Business Network was the role of political power, as well as finance, in shaping desirable business outcomes and securing these outcomes for the key participants in these networks. Evidently the network had become a lot more formal in its form and functioning (or possibly more records are available to give us an impression that it had become more formal). It should not surprise us that consolidation of political power made the Business Network more effective and efficient at the same time. There are ample historic records as well as anecdotal writings - from Shakespear’s “The Merchant of Venice” to Horatio Brown's historical reviews - that make great reading about the Business Network centered around the Venetian merchants of the later Middle Ages.