Luca Pacioli: Father of Accounting

[BIRDS CHIRPING]

[BELLS RINGING]

It was a time like no other.

A time when human
vision changed focus.

[CHANTING]

And the world was viewed
from new perspectives.

From out of the dark
ages came enlightenment.

From out of the darkness--
light, color, dimension, depth,

invention.

It was a time when the writer
lent words to the scientist;

the mathematician gave
proportion to the artist.

It was the Renaissance--
the rebirth--

a time when science fueled art.

And art launched
the imagination.

And behind it all, were
the Renaissance men-- many

well known; others,
unsung heroes

who still touch our lives more
than 500 years later-- unsung

heroes like Luca Pacioli.

Most of us don't know who he is.

But all of us depend
on what he's given us.

He's the father of
accounting as we know it.

The unsung hero of
the Renaissance.

And this is his story.

[MUSIC PLAYING]

[CHURCH BELLS ]

To understand who
Luca Pacioli is,

understand where he came from--
here, where his life began over

500 years ago, in the
Italian province of Tuscany,

in the small quiet
town of Sansepolcro.

Today, there are adding
machines in Sansepolcro,

fax machines, computers.

But back in 1445 when
Luca Bartolomeo Pacioli

was born here, accounting was
neither an art nor a science.

But Pacioli's destiny
was to make it both.

As a child, Luca Pacioli played
on these same cobblestone

streets that we walk on today--
perhaps right here, where

this plaque now honors him.

[ROOSTER CROWING]

His family was poor,
his future predictably

unpromising-- until the boy grew
into a young man, determined

to redirect his life.

Little did he know--
did anyone know--

that this young man
would one day alter

the course of global
economic history.

The cultural renaissance
of Luca Pacioli's time

was fueled by an
economic renaissance.

Business was booming.

And this allowed the
arts to flourish.

Luca saw this
connection and realizes

if the two were to be taken
beyond Renaissance Italy,

that the mechanisms
of commerce had

to be put to paper,
taken to Europe,

taken to the rest of the world.

This was Luca's
Pacioli's contribution.

Luca Pacioli was an important
figure in the Renaissance,

and his life and work
underlines the essential

inter-relationship between
art, business, and science

of his time.

Without this relationship,
the Renaissance

could not have taken place.

The success of the personal
computer industry and Microsoft

is based on the spreadsheet.

And the spreadsheet
is a direct evolution

of the double-entry system,
published by Luca Pacioli.

At the time of
Pacioli's youth, it

was uncommon for anyone but
the wealthy or the noble

to continue their education
beyond the age of 16.

So Pacioli did what was expected
of him, but not for long.

In the Franciscan
monastery in Sansepolcro,

he took his religious
and mercantile training

from the friars.

Then he was apprenticed
to a local businessman,

as most young men were.

And that's when Pacioli decided
to take a different path, one

that brought him closer to the
subject he loved-- mathematics.

I've been interested in
the science and theology

of mathematics for as
long as I can remember.

It was this interest
that lead Pacioli

to abandon his
apprenticeship and take

a bold step in a new direction,
a step that would change

his life and work forever.

Pacioli was invited to study
with the renowned early

Renaissance painter,
Piero della Francesca,

right here in Sansepolcro.

[MUSIC PLAYING]

Piero was more than 25
years older than Pacioli.

Yet he saw great
promise in the boy.

And Pacioli saw
his mentor as one

who could unlock doors of
knowledge and experience

that might otherwise
stay closed to him.

To get on in life, make your
friends among older persons,

for only they are in
value of placing you

among people of consequence.

Piero della Francesca was
a Latin scholar, a poet,

and a cosmographer.

He wrote books on
perspective and form,

dabbled in architecture.

And his paintings--
his frescoes--

were a marvel of
tone and mathematics,

with heads and limbs as
variations of geometric

shapes-- cones,
spheres, cylinders.

A brilliant
mathematician, Francesca

shared all he knew about
the art of the science

with the young Luca Pacioli.

Piero introduced Pacioli to
his work and to his friends.

Grazie.

Salute.

That's how one learned
in Pacioli's time.

Together, the teacher
and his student

traveled over the rugged
Appennine Mountains

to the spectacular library
of Duke Federico of Urbino.

Pacioli was as impressed by
his travels to the library

as he was by the more
than 4,000 books in it.

And the friendship he
developed with the Duke's son,

Guidobaldo, was
one that prompted

Pacioli to later dedicate
his most famous treatise

to the young duke.

It was Piero della Francesca,
the king of painting,

who introduced me to
Federico, Duke of Urbino;

his son, Guidobaldo; and
their magnificent library.

And it was to Piero that
I first developed the idea

to bring mathematics
out of the library

and to put it into
practical daily use.

Exchanging ideas,
sharing information,

and making introductions
is what shaped

the lives of the Renaissance
men, including Pacioli.

The next important introduction
Piero della Francesca

gave young Luca Pacioli was to
the early Renaissance writer

and architect, Leon Battista.

Alberti-- a new
mentor and teacher,

who opened yet another
door for Pacioli,

a door that led
out of Sansepolcro,

to the glory of Venice.

[MUSIC PLAYING]

Leon Battista Alberti was
a writer and an architect,

an artist and a
scientist, author

of famous treatises on
sculpture, painting,

and architecture.

Alberti believed in the
religious significance

of numerical ratios.

What he called the "God-given
validity of mathematically

determined proportions," which
he applied to his own work,

proportions that shaped
the columns, arches,

foundations of the Renaissance.

It was Leon Battista
Alberti that

arranged for Pacioli's
first teaching assignment,

over there on the
island of Guidecca,

in the home of a wealthy
Venetian businessman, Ser

Antonio de Rompiasi, where
the young Pacioli was to tutor

the three Rompiasi boys.

Within their paternal
and fraternal shadow,

I found shelter in their house.

In Venice, Pacioli
divided his time

between tutoring
the [? Rompiasis ?],

teaching, and studying
mathematics with a scholar

Domenico Bragadino.

He also visited a
university environment

for the first time, the
university of Padua.

All the influences
in his life now

came together as the
20-year-old Pacioli

wrote his first
manuscript on algebra,

dedicated to his first students
in Venice, the Rompiasi

brothers.

And when the elder
Rompiasi died in 1470,

Pacioli left Venice to rejoin
his aging mentor, Leon Battista

Alberti.

The two soon moved to Rome,
where Alberti introduced

his young protege to a most
important man-- Pope Paul

II, who encouraged Luca
Paciolo to take the cloth.

And Alberti also encouraged
Pacioli to take his work

to the workplace.

Leon Battista Alberti urged me
to bring my work to more people

by writing in Italian-- to
apply my mathematical concepts

and techniques to
the marketplace,

to write in the
more common Italian

so every man can understand what
is in the mathematician's mind.

Per te, padre.

Grazie.

Prego.

And so the boy Pacioli grew
into a man with a strong desire

to teach and the belief
that mathematics, art,

and architecture are visible
examples of divine proportion,

divinely inspired.

[CHANTING]

And when his friend, Leon
Battista Alberti, died in 1472,

Pacioli took the
Pope's suggestion

and took the vows of
the Franciscan order.

So Luca Pacioli, the
mathematician, became a monk.

It is the purpose
of every merchant

to make an honest and
a legitimate profit

for his living.

And, wherefore,
they must begin will

their transactions
in the name of God,

and put his holy name
on every account.

"A sue laude et gloria," for
the praise and the glory of God.

In 1475, Pacioli, the monk
and the mathematician,

became the teacher
and the scholar,

the first lecturer to hold
a chair in mathematics

at the University in Perugia.

Pacioli stressed again
and again the importance

of putting theory
to practical use,

a principle that would guide
his life and his teachings.

Pacioli's emphasis on
the application of theory

made him unique among his peers.

Travelling and teaching
for the next two decades,

Pacioli became the 15th century
equivalent of a full professor.

While delivering lectures,
meeting with popes,

writing manuscripts,
and taking time out

to pose for portraits like Piero
della Francesca's "The Madonna

of the Egg."

By the time he was 49 years old,
Pacioli-- the mathematician,

monk, teacher,
scholar, and author--

would also become a celebrity.

With the publication
of his Summa,

Pacioli's place as a
major intellectual figure

of the Renaissance
was guaranteed.

The Summa was so
important, it was

one of the first
documents chosen

for printing here in Venice
by the new Gutenberg Press.

Today, nearly five
centuries later,

the Gutenberg-printed Summa
retains its color, texture,

and clarity.

Its full title speaks of
a book about mathematics--

the collected knowledge
of arithmetic, geometry,

proportions, and
proportionality.

But just one small
section within the book

is what changed the future of
business and economics forever.

It's the section that
earned Pacioli the title,

father of accounting.

Through the Summa, Pacioli
became the catalyst

that launched the
past into the future,

lifting the curtain on the
economics of the dark age

and lighting the way to
unprecedented economic growth

and change.

What Pacioli
explains in the Summa

is how to use double-entry
accounting to record business

transactions.

The Venetian or
double-entry method

may seem commonplace today.

But when Pacioli presented
it, it was state of the art.

Assets equal liabilities
plus owner's equity--

a simple equation
and yet the essence

of double-entry accounting.

Carried and copied
through the centuries,

the Summa was translated
into Dutch, German, French,

English, and Russian.

The Summa has been a
textbook for teachers,

a manual for merchants.

It's been hailed
as a masterpiece

by students of business,
geometry, and proportion,

and considered by some
to be the most widely

read mathematical
work in all of Italy--

but not just for the
mathematics of contains.

For the Summa is
also a compendium

of common business sense.

From my association with
merchants in various places,

I have learned three
things necessary to make

a merchant successful.

The first and most
important is cash.

But when merchants
do not possess cash,

they resort to the
use of credit--

doing business on the
basis of good faith.

Second, it is necessary
for a merchant

to be a ready mathematician.

And, third, a merchant
must be a good bookkeeper--

to keep his affairs
in an orderly way,

because where there is no
order, there is confusion.

After the Summa was
published, one artist

was so impressed
by it, he requested

Pacioli tutor him in
mathematics and proportion

here at the Court of Milan.

That artist was
Leonardo da Vinci.

And during the time Leonardo
and Pacioli were together,

two works of art
became masterpieces.

One of those was De
Divina Proportione--

of divine proportions--
the second major treatise

on mathematics written
by Luca Pacioli

and illustrated by
Leonardo da Vinci.

The order and
figure of this book,

together with all
the other bodies,

are from the hand of our
compatriot, Leonardo da

Vinci of Florence, whose
designs and figures

no man could ever surpass.

The second masterpiece completed
during Leonardo and Pacioli's

collaboration was
a mural painted

on the north wall of the
refectory of Santa Maria della

Grazie, a Dominican
cloister here in Milan.

It was to become the most famous
painting of the 15th century,

The Last Supper by Leonardo da
Vinci, a work that embellished

the advances in
perspective and proportion

Pacioli wrote about
in his Summa, advances

that he shared with Leonardo.

Pacioli's name is mentioned
frequently in Leonardo's notes.

While living in Milan, here
in the monastery of San

Simpliciano, Pacioli had
a substantial influence

on the divine geometry Leonardo
was known for, especially

in The Last Supper.

The relationship between
Leonardo and Pacioli,

which lasted seven years, was a
symbiotic one, a give and take.

Pacioli shared Piero della
Francesca's knowledge

of perspective with
Leonardo, perhaps even

helping Leonardo make the
transition to architecture.

And Leonardo shared his
ability with Pacioli ,

illustrating Of
Divine Proportions,

where Pacioli calculates
and constructs a system

of classical Roman letters--
Pacioli's artistic vision with

help from the gifted hand
of Leonardo da Vinci.

Collaboration is what
the Renaissance was all

about-- exchanging ideas,
sharing discoveries, melding

mathematical principles
with artistic ones--

the science of art, the art
of science, and accounting.

During and after his time
with Leonardo da Vinci,

Pacioli continued
to teach and write,

completing some 11 books on
algebra, geometry, mathematics,

military strategies, chess,
magic squares, card games,

and accounting.

By the 16th century,
Pacioli had become

a legend in his own time.

Lecture rooms were packed
wherever he spoke--

in Pisa, Florence, Venice.

In 1510, Pacioli
was named director

of the Franciscan
monastery in Sansepolcro.

And that's where he
returned to spend

the last years of his life,
among fellow friars who

weren't so pleased with
their famous associate.

In 1514, the 69-year-old
Pacioli was called away

from Sansepolcro by Pope
Leo X to teach mathematics

at the University of Rome.

The pope intended to
create a faculty that

was second to none.

That's why he called Pacioli.

But whether Pacioli was ever
to fulfill his assignment

is unknown, because there
is no record of Pacioli ever

having made it to the
university or to Rome.

Pacioli may have spent his
final days in Sansepolcro,

where he died in 1517.

Not much is known
about Pacioli's death.

Some say he's buried here
beneath the old church of San

Giovanni.

What is known is his life
and the contributions

he's made to the
quality of ours.

The Venetian method
of accounting,

today called
double-entry, is one

of the most enduring
intellectual creations

in post-Renaissance history.

An ingenious system
that gives the world

a way to record and summarize
commercial activity.

The double-entry system
of accounts described

in Pacioli's Summa
500 years ago is still

being used across
the globe today.

The Summa speaks to every
businessman, every accountant,

every scholar,
student, and merchant.

It transcends cultures
and countries, languages,

ideologies, generations.

The 15th century precepts put
forth in Pacioli's writings

can be found virtually
unchanged in today's

corporate annual reports,
business books, spreadsheets,

financial statements, cash-flow
projections, cost analysis.

Modern economic history began
with the Renaissance and Luca

Pacioli, who was
the first to publish

the method for recording,
summarizing, and conveying

that economic history.

He was the first to take
accounting into account.

Economic growth and
financial stability

depend on understandable,
reliable accounting practices.

It is believed that
without widespread adoption

of the accounting principles
set forth in the Summa,

many of the joint trade ventures
to the New World and Far East

would have run aground.

In the case of finding a more
direct water route to India,

it is generally believed
an accountant convinced

Queen Isabella to invest in
an exploratory venture that

ultimately reached the
shores of North America.

Aboard one of those ships was
a gentleman named Columbus,

and the accountant the queen
insisted accompany the voyage

to ensure a proper
accounting of her investment.

Who was Luca Pacioli?

He was a great man,
who walked and worked

with other great men--
Renaissance men like Leonardo

da Vinci, Leon Battista Alberti,
Frederico, duke of Urbino,

Piero della Francesca.

Luca Pacioli exchanged
and published

information that
generated new thought

and broadened the
world's perspective.

[MUSIC PLAYING]

Yet Pacioli's
greatest masterpiece

was not made of stone,
paint, or marble.

It was an idea, a
vision, an equation,

that found its way to ink
and parchment and the world.

He was a poor child
who lived a life

rich with invention and growth.

He was a mathematician
and a monk, an accountant

and an artist, who crossed
disciplines and mountains

in pursuit of knowledge.

He wrote, worshipped,
wandered, and wondered,

about the world around him.

And he gave that world
a financial model,

the tools to build a solid
economic foundation-- a future.

Who was Luca Pacioli?

He was the unsung hero
of the Renaissance.

And 500 years after he
died, he still teaches us.

He still touches our lives.

[MUSIC PLAYING]

May my teachings be
accessible to everyone,

so our world, through the
instrument of language,

will be enriched, for the
praise and glory of God.

[MUSIC PLAYING]