I recently was asked to present for a second time about my career to a local high school freshman class, and wondered if I could make the subject matter interesting. So I spoke in the form of a proposed TED Talk on financial systems and ledgers.
I talked about how computers have changed the world in the course of my lifetime; I asked them for how they had changed communications in the life of their parents and they were able to give me many examples. I then asked them how they had changed the way we track our financial data: they were silent, as expected.
This graph give a sense of the growth in computing and the reduction in its cost over my life time.
But this graphic give a sense of how ledgers have changed, since they were first documented by Luca Pacioli in 1494.
Yet there have been a few changes in the last few years; perhaps the beginning of some significant changes, like all the hype about blockchain. What are those changes?
If we go back 40 years, nearly everyone kept some kind of personal ledger to track their money. The systems looked like this:
The Bank had a ledger, and everyone kept a check register, which was their personal ledger. Differences between them were reconciled monthly when one received the bank statement.
More recently though, our connected world has allowed people to do away with their personal ledgers, and simply rely upon the bank’s ledger as the only record of their transactions. Apps such as Mint, or Personal Capital give this ability.
But changes to company ledgers have been much slower in developing, partly because of the complexity but also the risk of relying upon another companies ledgers.
The idea of a shared ledger might change this; but blockchain as a technology is inadequate to making the change. If we go #BeyondBlockchain, the promise of lower costs recording of business performance may become a reality.
This is Episode 163 of of Conversations with Kip, the best financial system vlog there is. Literally learn more–about ledgers and financial systems–at LedgerLearning.com
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