Black Corporation: Joseon [EN]: Chapter 394

394. Small Changes (6)

The next morning, Sejong, seated in the Dang House [a government building], surveyed his ministers and began to speak.

“I’ve been reconsidering the matter, and I’m somewhat concerned about those who started new estates and subsequently failed.”

Understanding the implication of Sejong’s words, Hwang Hee promptly inquired,

“Do you wish to relax the loan criteria for the Jeonjang [government-run loan agency]?”

“Wouldn’t it be beneficial to consider a method that doesn’t impose excessive hardship? I feel sympathy for those striving for a better future.”

“Since Your Majesty is concerned, I will give it consideration.”

Hardly had Hwang Hee finished speaking when Heo Jo immediately countered.

“Absolutely not! Such leniency could erode the people’s trust in the nation!”

Hwang Hee raised his voice in response to Heo Jo’s objection.

“We deemed it impossible during the initial business establishment review, yet these individuals are determined to start businesses even with usurious private loans! If we simply abandon them, they will lament, ‘What has the country done for me?’ Are you not concerned about such sentiments?”

“We cannot undermine the credibility of the Jeonjang for the sake of a few!”

“Is it not the case that some individuals are already unable to repay their loans? Whether one out of ten borrowers defaults, or ten out of one hundred, the proportion remains the same, does it not?”

“Even a single failure is cause for concern, but ten failures constitute a significant problem!”

“Is it not more advantageous for Joseon if ninety people succeed, rather than merely nine?”

“Even if ninety people who borrowed ten silver coins succeed, the failure of ten who borrowed ten gold coins could be catastrophic! Do not reduce this to mere numerical games!”

Hyang, who had been quietly observing the meeting, muttered to himself as he watched their impassioned debate.

‘A debate between a rational optimist and a rational pessimist…’

Hwang Hee and Heo Jo shared a common trait: both analyzed national affairs with detached objectivity. However, following such analysis, Heo Jo tended to arrive at pessimistic conclusions, while Hwang Hee leaned towards optimistic ones.

The divergence stemmed from their values. Both were loyalists who prioritized royal authority over ministerial power and faithfully executed Sejong’s wishes. Yet, when confronted with problems, their approaches differed.

-If possible, he adheres to the king’s will, even if it is somewhat unreasonable.

This characterized Hwang Hee.

-He endeavors to dissuade the king from unreasonable actions.

This defined Heo Jo. He valued the nation’s survival as much as the king’s well-being.

And these two were now in conflict.

* * *

“Let us embrace a more positive outlook, as Grand Scholar Jo suggested earlier! Please!”

“We will ruin the country if we only live positively! We need to face reality!”

Hyang, who had been following their debate, stepped forward and addressed Sejong.

“Father, I have a matter to report.”

Hyang’s intervention caused Hwang Hee and Heo Jo to cease their debate and immediately focus their attention on the Crown Prince.

It wasn’t just Hwang Hee and Heo Jo. The eyes of all the ministers in the room were focused on Hyang.

‘What is it this time!’

‘Judging by his intervention, he clearly intends to influence this matter!’

‘Tsk! If things go awry, I’ll hear that clicking of the tongue again!’

Unlike the apprehensive ministers, Sejong regarded Hyang with a delighted expression.

“Yes! I grant permission! Speak without delay!”

“Thank you, Your Majesty.”

Expressing his gratitude for Sejong’s consent, Hyang cleared his throat and adjusted his voice.

“Ahem! Ahem! I apologize for interrupting, but an idea occurred to me while listening to your discussion.”

As Hyang apologized for the interruption, Hwang Hee and Heo Jo both shook their heads.

“No, you are not.”

“It’s alright.”

Having established that understanding, Hyang began to lay the groundwork for his proposal.

“First, the Minister of the General Affairs is correct. The funds within the Jeonjang are derived from the sweat and toil of the people, so it is only right that they cannot be used carelessly.”

Heo Jo’s face brightened at Hyang’s supportive words, and he nodded in agreement.

“Of course, of course!”

Stealing a glance at Heo Jo’s expression, Hyang continued.

“However, the Prime Minister’s suggestion to provide more opportunities and foster Joseon’s prosperity by enabling more people to succeed is also a valid point.”

This time, Hwang Hee’s face lit up, while the ministers exchanged puzzled glances.

‘What? This is right, and that is right? What is he talking about?’

Observing the ministers’ confusion, Hyang muttered to himself.

‘I apologize, Elder Hwang Hee. I’ll borrow it first.’

“Therefore, I would like to propose to Father the establishment of a ‘Venture Capital Bank (冒險資本金庫).'”

“Huh?”

“Eh?”

Sejong and the ministers all voiced their confusion at Hyang’s suggestion.

While they were analyzing the meaning of Hyang’s statement, Sejong and Kim Jeom were the first to grasp its essence.

“Crown Prince, are you suggesting that we create a separate loan department for those who do not meet the standards of the Business Establishment Review Department but still demonstrate potential?”

“That is correct.”

“Since you have labeled it venture capital, there must be a distinction from existing loans… Will you differentiate the interest rates?”

“Yes! You have perceived it accurately!”

Hyang elaborated in greater detail.

-It provides capital to support the establishment of estates that have not passed the screening criteria of the Business Establishment Review Department but still exhibit considerable potential.

-However, it does not offer unconditional support. The decision to provide support is based on the applicant’s experience or the relevance to the field they wish to enter. However, the criteria are only slightly more lenient.

-Given that it is a loan that acknowledges the possibility of failure, a relatively high interest rate is applied. The loan interest rate of the Business Establishment Review Department is 35% per annum, while venture capital applies an interest rate of 65% per annum.

-Because it is a considerable high rate, the applicant is given a choice.

Option A: Accept the application of an interest rate of 65% per annum.

Option B: Transfer ownership of the established estate. As a form of partnership, Jeonjang acquires 51% of the shares. If this option is selected, an interest rate of 30% per annum is applied.

“‘Taking shares’… Does that imply that we share in the profits if it succeeds later?”

Hyang nodded in response to Sejong’s question.

“That is correct. That is why we apply an interest rate of 30% per annum.”

“Hmm….”

As Sejong stroked his beard and pondered, Hyang added.

“The reason I included the word ‘bank’ is to designate it as a separate department within the Jeonjang.”

“Separate department?”

“From the borrowing of funds to its operation, it falls under the purview of the Jeonjang, but it operates independently from the Jeonjang’s other operations.”

Kim Jeom, who was intently focused on Hyang’s words, posed a question.

“Does operating the borrowing of funds separately mean that a higher interest rate is paid to those who provide the funds?”

“That is correct.”

At Hyang’s response, Kim Jeom muttered, diligently calculating profits and losses.

“Hmm…. If we do well….”

Sejong was similarly engaged, mentally calculating various scenarios above the Dang House.

“Hmm…. If we are successful, could we also absorb the wealth of those engaged in usurious private lending?”

“That is correct. On one hand, we vigorously suppress illegal usurious private loans, while on the other hand, we encourage them to invest in venture capital banks, which offer lower profits than usurious private loans but still exceed general savings rates, and are legal.”

‘Of course, underground finance will persist to some extent, but we must absorb as much as possible.’

“Hmm….”

Whether Hyang’s words were satisfactory, Sejong nodded with a slightly brighter countenance.

At that moment, Heo Jo raised a question.

“Would they not be concerned about losing their wealth by investing and failing, given that it is inherently an adventure?”

Hyang immediately addressed Heo Jo’s concern.

“Therefore, we will offer investors two options.”

Option A: Simply deposit the funds into the bank and entrust the investment selection to the bank.

Option B: Review the data on the estates evaluated by the bank and directly select the investment of the funds they have deposited.

“In the case of Option A, it is operated using a ‘one spoon each’ (십시일반) [collective contribution] method, so that even if it fails, losses are minimized. However, the profits returned to investors are reduced even if it succeeds. If you choose Option B, the risk increases, but the potential benefits to investors are significantly greater.”

Hwang Hee’s eyes twinkled at Hyang’s explanation.

“Regardless of the option chosen, the burden on the court and the Jeonjang will be greatly reduced?”

“Yes. That is our objective.”

Following Hwang Hee, Heo Jo also nodded.

“Whichever case they choose, it is their own decision, so it will be difficult to hold the court accountable. Hmm…. It seems acceptable.”

‘Well, if things go wrong, there will be many people who want to experience how strong the main pillar of their house is, how deep the reservoir in front of the village is, or how warm the water flowing in the Han River is [euphemisms for suicide].’

While Hyang was muttering to himself, Heo Jo reported to Sejong.

“I believe it is a sound plan. The burden on the court and the Jeonjang will be lessened, and more people will have the opportunity to start a business.”

“Do you concur, Gyeong?”

Sejong’s face brightened when Heo Jo, known for his meticulousness, expressed a positive reaction.

At that time, Minister of Education Jo Gye-saeng intervened.

“Your Majesty! It is a good plan, but we must never implement it in its current form!”

“Why?”

When Sejong inquired about the reason, Jo Gye-saeng explained.

“Humans are inherently greedy beings, and without considering the future…”

“There will be individuals who invest all their assets without considering the risk.”

Jo Gye-saeng, who had paused as Sejong completed his sentence, immediately nodded.

“That is correct.”

“Hmm….”

After pondering for a moment, Sejong turned to Hyang.

“Crown Prince, would a fixed amount (定額) be preferable, or a fixed rate (定率)?”

Hyang immediately responded to Sejong’s question.

“Both. It would be better to apply a fixed rate when wealthy individuals invest, and to accept only a fixed amount based on the size of their assets when people with limited wealth wish to invest.”

“Will people with limited wealth participate?”

“Because, as the Minister of Education stated, humans are inherently greedy beings.”

Sejong nodded at Hyang’s words.

“That is true. People are greedy beings. Minister of General Affairs.”

At Sejong’s inquiry, Heo Jo immediately responded.

“It requires further refinement, but I believe it is the best plan.”

“Prime Minister?”

“I also concur with the Minister of General Affairs.”

“Then, finally, what is the opinion of the Minister of Finance and Economy, who will be most central to this endeavor?”

At Sejong’s question, Kim Jeom immediately answered.

“It is a good plan, but few will come forward initially. Therefore, we should release more of the gold and silver we have accumulated to create initial capital (初度資本) and implement it. If the performance using that initial capital is favorable, then everything else will follow easily.”

“So be it.”

Sejong, who immediately accepted Kim Jeom’s words, looked around at the ministers.

“The more the people’s estates increase and the greater the economic management capacity of this Joseon, the stronger our Joseon will become, so I hope you will do your utmost for this initiative.”

“We shall obey your command!”

And thus, the world’s first venture capital financing—officially and with clear documented records—was born.