In the 1450s, the world was introduced to one of the greatest innovations in history, the metal moveable-type printing press. Johannes Guttenberg and his invention did more to democratize information access than any technology before, and it was a crucial technology underpinning the Renaissance. At the same time that the printing press gained widescale acceptance, another technology started to gain traction, but in contrast to the very public nature of the printing press, this innovation was a closely guarded secret for years.
Secret financial technologies
Logically, financial technologies are often jealously guarded among those possessing them, often for generations, and such was the case with this information technology, called “the Venetian method” by its practitioners. It transformed shopkeepers into merchant princes and facilitated wealth creation more rapidly than any other information technology before it, accomplishing this by allowing for data to be reliably recorded and “reasoned with.” Accordingly, the use of the Venetian method was called “ragioneria” (ratiocination in English), and those trained in it were called “auditori” (auditors in English) because they were only taught this valuable method by word of mouth (auditor means he who listens).
This was the state of things with merchant princes hoarding their wealth and knowledge until the public printing technology and secret financial technology were married in 1494 by Leonardo da Vinci’s mathematics tutor, Luca Pacioli. Pacioli was not just da Vinci’s mentor, but he was also the first professor of mathematics in Western Europe, teaching at the University of Perugia. Pacioli believed that it was not right to have a monopoly on such essential knowledge, so he published an account of the Venetian method in his textbook, the Summa de arithmetica. The Summa was a textbook that contained theoretical equations and proofs, mathematical and cryptographic games, and interesting applied systems like its account of the Venetian method.
Almost immediately, the section in the Summa on the Venetian method, otherwise known as double-entry accounting, became a bestseller in Italy and facilitated the widespread adoption of the printing press, it was eventually translated into every language in Europe and used by every shopkeeper who sought to become the next merchant prince. While not all the shopkeepers became merchant princes, there were enough that their wealth helped to keep driving the Renaissance forward for more than another hundred years.
We are about to witness a change as big as the Renaissance, with the coming “Second Renaissance” enabled by the Internet, open-source software, blockchain, and related technologies. Great things will come from unexpected quarters, and applications will be varied and far-reaching. As we reflect on this, I wish to recount an experience I had almost three decades ago in Perugia, Pacioli’s former university town.
Finding Common ground
Almost 30 years ago, I was living in Perugia. Right before arriving in Italy, I had studied graduate economics under one of the most prominent economics professors in the former Soviet Union who had worked in Moscow with Mikhail Gorbachev to dismantle communism, a process called Perestroika. Within a month of arriving in Perugia, I found myself across the table from an erudite economics professor from the University of Perugia. Within minutes of the meeting, the conversation turned to economics, and particularly the failings of Communism. Soon my companion invited me to address a group of his friends at a local senior center. I agreed, and he seemed particularly pleased. He told me I was to speak for the American system of capitalism. One of Antonio Negri’s followers, who was also an economics professor, would then speak for Communism.
For those of you who don’t know, there are two Communist Parties in Italy, and Negri’s was the hardcore one. At that time, Negri was still in exile in France because he was widely acknowledged to have been the person who successfully planned the bombing of capitalist factories and the kidnapping and assassination of Aldo Moro, the Italian Prime Minister. I agreed, picturing in my mind a small grouping of five senior citizens where I could have a spirited debate with one of Negri’s students, using all my detailed knowledge of the failings of Communism to support my points.
When I arrived at the address I was given, it was not as I had expected. The “senior center” was a huge convention center, and the few “friends” numbered about five thousand. It was, in fact, a rally for the hardcore wing of the Italian Communist Party. In one of the most foolish or bold things of my life, I walked up to the podium without prepared remarks and, knowing I had to find common ground even to survive the encounter, as I walked, my mind went to Pacioli.
The Long Shadow of Pacioli and the Markets
To the jeers of the crowd, I began saying that I wanted to start by addressing their hometown and then explained it was in Perugia where the first professor of math facilitated a different kind of revolution than they were talking discussing that day, but one that shared the same objective they had of producing a better economic environment for all. This revolution was started by the professor publishing a book revealing a capitalist secret.
I explained that the book contained a technology that had only been available to the plutocrats before. It made the markets more transparent, the prices lower, and all of humanity better. It introduced accountability. I explained the ancient use of the word auditor, but how it had changed to now be synonymous with public accountability. I explained that their city, Perugia, had facilitated this technology coming to the world. Their merchants had not only allowed it, but they also sponsored the professor in his research and publication.
I said it was the wealth that had been concentrated among Perugia’s merchant princes that allowed them to sponsor such work. It was also that wealth that had allowed them to resist the power of Cesare Borgia, the archetype of the vicious ruler described by Nicolo Machiavelli in his work The Prince. Without that capitalist power, everyone in the city would have been slaughtered by Borgia.
I said that the wealth that the book helped to create was Perugia’s gift to the world and that wealth entered the world by the action of the public markets. That wealth allowed all of Italy and Europe to throw off the shackles that had enslaved humanity for millennia. I said much more that day, speaking about technology and innovation, citing Schumpeter’s “creative destruction.” I closed by saying it would be not bombs and violence that would bring about a paradise on earth, but technology and innovation. By the end of my talk, the jeers had long ceased, and there were many an eye wet with civic pride.
Common ground going forward
As we enter these last few days before this election, I hope we all embrace the message of that day. Our Utopia, New Atlantis, or Workers’ Paradise will come from knowledge and technology properly applied. Regardless of our political beliefs, my hope is that we can all embrace this idea after this election is over. We stand at the beginning of a new Golden Age facilitated by the Internet, open-source technology, blockchain, and a host of related technologies such as AI—my hope is that we embrace this vision and work to bring it about.