Civilisations, governments, and companies have always needed a way to get funding. The first ever bond recorded was on a piece of stone from 2400 B.C. in ancient Mesopotamia (present-day Iraq).  Temples were essentially handing out loans to farmers, which included guarantees of the payment of principal in the form of grain. Then came medieval Europe, where governments figured out they could borrow money from wealthy families and the burgeoning merchant class to fund wars and build fancy cathedrals. The Venetians led the way with something called prestiti, early government bonds that kept their economy (and navy warships) afloat. By 1693, the Bank of England issued the first official Sovereign bond, and turned bonds into a full-fledged system to bankroll everything from colonisation to military campaigns. 

At the same time, in 17th century Amsterdam, merchants were incredibly excited about the Dutch East India Company, which was then the world’s largest trading company sending ships laden with spices and silk to and from Europe and Asia. But these journeys were risky and required massive upfront cost, as it required ships and full crews out on months-long journeys. To solve this, the Dutch East India Company came up with an idea: why not let people pool their money to fund these high-risk journeys, and in return, they shared the profits (or losses). This was a win-win situation as no single individual had to bear the brunt of a ship sinking, and everyone got a slice of the pie when it made it back safely. To trade these shares, they set up the Amsterdam Stock Exchange, creating a centralised marketplace where buyers and sellers could meet – at that time, this was a literal marketplace, where people would gather and shout out the prices they were looking for. This was the start of the modern stock exchange, with a vibrant secondary market, as we know it today.  

Over time, this idea of pooling resources and risks evolved. By the 18th and 19th centuries, stock exchanges had popped up in places like London and New York, fuelling the Industrial Revolution. Railroads, steel, and electricity didn’t just magically appear. They were funded by a burgeoning capital market that connected resources to entrepreneurs with big ideas. 

At its core, the capital market is about bringing two groups together: 

1. People with money— this could range from small investors like you and me, to giant institutions managing pension funds;  
2. People who need money—businesses, governments, visionaries with ideas for The Next Big Thing 

But it’s not just about making a profit; it’s also about driving progress. Without capital markets, many of the innovations we rely on today might never have gotten off the ground. 

For example, while British scientist Warren de la Rue first developed an efficient light bulb in 1840, it never got off to commercial success due to the high costs involved with using platinum filaments. When Thomas Edison patented his version of the light bulb using carbon filaments, it became accessible enough to be commercially viable. However, he still needed funding to bring his ideas to the masses. With initial investors including J.P. Morgan and the Vanderbilt family, the Edison Electric Light Company eventually became General Electric as we know it today, and one of the first 12 companies to be listed on the Dow Jones in 1896. In modern day parlance, the light bulb as we know it came about due to early-stage funding from venture capitalists, and eventually publicly-listed on the main market. In fact, the advent of the modern-day venture capital and private equity ecosystem stemmed from the funding needs of the emerging semiconductor and computer industry in Silicon Valley in the 1970s.  

On the other side of the coin, capital markets also provide a means for everyday folk to grow their wealth. By taking on the risk to invest, rather than keeping their cash under the mattress, the ordinary man on the street gets the chance to make their money work for them. Whether it’s buying shares in a promising company, investing in fixed income or money market funds for stability, or through mandatory retirement schemes like EPF, capital markets offer opportunities to grow savings and build a more secure financial future. It’s a way for individuals to not just save, but to be part of the larger economy, supporting businesses and innovations while potentially reaping the rewards of those successes. 

When it works as it should, the capital market is a tool for sharing risks, funding dreams, and driving humanity forward, one investment at a time. 

But here’s the problem: somehow, somewhere along the line, things got… complicated. 

In theory, the capital market should be simple: Invest in things that create value. We can all agree that light bulbs and semiconductors bring value to our lives. But modern capital markets can often seem more like a game of “how much can we overcomplicate this?” Products like derivatives, that were originally intended to manage risks, have morphed into a multi-trillion-dollar market where people bet on bets on bets. The 2008 Global Financial Crisis highlighted how many investors and institutions themselves didn’t fully understand the risks they were taking on with increasingly complex products like mortgage-backed securities, collateralized debt obligations (CDOs), and credit default swaps that they themselves described as “toxic waste”. In recent year, the rise of “meme stocks” (remember the Gamestop rally in 2021?)  and new cryptocurrencies being launched daily (195,735 new crypto tokens were launched in March 2024 alone) makes a mockery of valuation.  

The capital market didn’t set out to be this way. The core idea—funding innovation and sharing risks—is still sound. The problem lies in how disconnected it has become from the real economy, and from real people. As the capital market grew, the focus shifted from helping businesses grow, to making money from the numbers on a screen for the sake of making money. As companies and governments raced to keep growing, it became irrational growth for growth’s sake, without anyone stopping to ask: what and who was the growth for? 

Ever since the introduction of Friedman’s shareholder doctrine in 1970 and the subsequent reign of Reaganomics in the 1980s, we’ve let short-term profits and unchecked speculation overshadow the bigger picture. Instead of focusing on long-term development and innovation, companies often prioritise quarterly earnings to keep investors happy. Instead of ensuring that the fruits of capitalism are equally distributed among all stakeholders, companies reward shareholders and higher management, causing almost unprecedented levels of income inequality. Economists have termed this “The Great Divergence”, where from a period starting in the late 1970s until now, income differences drastically increased in the United States and to some extent globally.  

For the period from 1978 to 2023, realized CEO compensation in the US increased 1,085%—77% faster than stock market growth (based on the growth of the S&P 500) and substantially faster than the 24% growth in the typical worker’s compensation over the same period. Where a CEO in 1970 made about 20 times the salary of an average worker, a CEO in 2022 made 290 times the salary of an average worker.  

When means of capital are not reinvested back into the core of the business, including the labour that helped make the business, they become tools for wealth accumulation rather than engines for progress. This relentless pursuit of financial returns at the expense of broader economic well-being has eroded trust in institutions and deepened social divides. The consequences are visible everywhere: stagnating wages, rising costs of living, and a financial system that seems to serve itself rather than the people it was meant to empower. 

If capitalism is to be a force for good, it must be reoriented towards sustainable, inclusive growth—one that values long-term investment over short-term speculation and prioritizes the well-being of workers, communities, and the environment. Reforming the capital markets is not about rejecting profit but about ensuring that prosperity is shared, innovation is meaningful, and economic growth serves a purpose beyond mere accumulation. 

This means rethinking how we define success in financial markets. Instead of measuring progress solely by share prices and quarterly earnings, we should consider broader economic and social outcomes: Are businesses reinvesting in their workforce and communities? Is technological advancement improving lives rather than just enriching a few? Are capital markets facilitating real innovation instead of fuelling speculative bubbles? By shifting incentives away from short-term gains and toward long-term value creation, we can rebuild a system that benefits more than just the top 1%. 

It won’t be easy, but change is possible. Governments can be strategic in introducing policies that encourage responsible investing and prioritise sustainable growth. Policymakers need to start looking at how we can incorporate different aspects of social finance and Islamic finance in innovative ways to benefit a broader base. Investors, too, have a role to play by demanding transparency and accountability from the businesses they support. And as individuals, we can choose where to put our money—supporting companies that align with our values and pushing for a financial system that serves people, not just profits. The capital market was always meant to be a tool for progress. It’s time we use it that way again.