Luca Pacioli and Leonardo DaVinci – men of the Renaissance – were both mathematical geniuses. Leonardo leaned more towards military engineering, while Luca leaned towards abstract and pure mathematics. When Pacioli included “double-entry bookkeeping” in his textbook, Summary of Arithmeticwhich he published in 1494 (two years after Christopher Columbus landed in Santo Domingo), little did he know that he would change the world.
Leonardo Da Vinci and a monk named Luca Pacioli – the inventor of accounting (debit and credit) lived together for many years. Luca’s math textbook contained the basic concepts that accountants follow today: assets equal liabilities plus equity (A=L + OE).
Both were college professors who traveled together and stayed at different universities together.
Sigmund Freud ignored this fact in his study of Leonardo’s homosexuality. Too bad, because Freud would have produced factual evidence based on his psychoanalytic techniques rather than wild speculation. Leonardo, who is much younger than Luca, has always been described as Luca’s protégé.
Looking back, we can understand that they probably had some kind of domestic partnership. In 1495 they lived together in Milan and Venice. Art historians have well documented that Leonardo was summoned to court to bring charges of homosexuality against him. However, since the accuser failed to show up, the charges were later dropped.
The diagrams and figures seen in Luca’a Summa were DaVinci’a drawings. They worked together as equal partners rather than the master-apprentice relationships of the time.
Billions of people have populated the earth, most living in the shadow of survival and mediocrity, the odd, quirky and eccentric are those who make the most invaluable contribution to improving human living conditions. These two eccentrics made tangible contributions to humanity.
While Leonardo’s achievements have been well recorded and documented in our time – even Bill Gates couldn’t resist owning Leonardo’s original manuscripts – Luca’s contributions are less well known. Like our American composer Aaron Copland, I will play a fanfare for the common man: Luca, through his brilliant explanation of the double-entry bookkeeping system, made international trade possible and opened the floodgates of what we now call “the global economy”.
Business was no longer confined to borders as banks, financial institutions, entrepreneurs and corporations traded, bartered and made profits across borders. This was followed by the standardization of financial statements so that balance sheets, profit and loss accounts and cash flows can be read and interpreted without major obstacles across Europe.
With capital formation in full swing, the capital needed for factories became available, fueling the advent of the European industrial revolution. By 1750 Europe was already industrialized, and by 1860 (after the Civil War) America was becoming an industrial power.
Yes, it was a leap of imagination to design debit (left side) and credit (right side) as an information system. You write the assets on the left side of the equation and the claims to those assets on the right side.
In more than ten thousand years of recorded history, no one in mankind had attempted to keep business records by double entry. The Babylonians, Phoenicians, Persians, Egyptians, Greeks, Romans and other ancient civilizations recorded their transactions on a cash basis and by a single entry; That is, businessmen made lists of items bought and sold.
As a result, companies remained small, doomed to remain small as the lack of an orderly system prevented growth. Whether on papyrus, sheepskin parchment, or brick, all business records were endless bulletins and catalogs that offered little discrimination in measuring profit or loss.
Pacioli changed all that.
To believe that a humble discovery like double-entry bookkeeping can change the fate of mankind challenges credibility. But given that duplicate entries allow not only an orderly classification of accounts, journals, and ledgers, but also measurements of liquidity and profitability, it is not surprising that capitalism flourished.
In economies where capitalism reigns supreme, with corporations providing health insurance and retirement plans as the primary employers, men and women can now enjoy the latest technologies, enabling them to live longer and in good health.
One can well imagine Luca and Leonardo discussing symmetries, contrasts, dichotomies, dualities, binary opposites, polarities, antitheses and other opposites:
“Physical nature has all these dualities: day and night, narrow and wide, fast and slow,” Luca used to say, “and so does human nature.”
“We carry good and evil, love and hate in our minds and bodies – or as Heraclytus used to say, ‘The way up is the way down, narrow and wide’,” answered Leonardo.
“What about Preacher, Leonardo – didn’t he say…?
a time to be born and a time to die; a time for planting and a time for uprooting; a time to kill and a time to heal; a time to tear down and a time to build up; a time to weep and a time to laugh; a time to mourn and a time to dance; …
Observing these doubles as a knowledge system allowed Luca to expand it into the accounting equation, where what’s on the left must equal what’s on the right (assets = liabilities + equity). Accountants later realized that another duality was required: income, which represents an increase in equity, and expenses, which decrease; the difference is nothing but wins or losses.
After debit and credit were fairly established as a system of classification, writers such as Descartes, Cervantes, Shakespeare, and Dickens introduced it into literature and philosophy through antithesis.
Descartes So I think I amis the synthesis of a duality: mind and body.
In A Tale of Two Citites, Dickens opens his novel with a detailed series of antheses:
It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of folly, it was the age of faith, it was the age of unbelief, it was the time of light, it was the season of darkness, it was the spring of hope, it was the winter of despair, we had everything ahead of us, we had nothing ahead of us, we all went straight to heaven, we all went straight the other way –
Although philosophers like Hegel and Karl Marx tried to discard the system of duality, replacing it with a triad: thesis, antithesis, synthesis. they failed; and we can understand why: Hegel professed state power, Marx professed communism. We now know the chaotic consequences of National Socialism and Communism.
The natural tendency is duality, as evidenced by the second law of thermodynamics: order and chaos (enthropy). Although nature tends toward chaos, human nature creates order; the mind invents patterns of understanding.
The double-entry bookkeeping system is a triumph of reason over the chaotic activities of commercial people. Double Entry not only spawned a new economic system, but also the beginning of a new way of thinking: modernity. And modernity dispelled the mists of superstition, monsters, magic, witches, ogres, dwarfs, giants, marvels, chimeras, unicorns, centaurs, sirens and other impossible figures of the supernatural.
The Middle Ages and feudalism gave way to modern times.
Luca Pacioli’s legacy – the accounting system – to the business world is order. It contains: balance, wholeness and radiance, because its system is dovetailed with democracy, with entrepreneurial freedom; a system that coincides with Adam Smith’s pillars of capitalism: laissez-faire (free enterprise), competition (invisible hand), and division of labor (the innate human propensity to create wealth for all).
This is my fanfare for the common man, the humble monk – Luca Pacioli