Why Everyone Missed the Most Important Invention in the Last 500 Years : Part 1

You’ve never heard of Yuji Ijiri. But back in 1989 he created something incredible.

It’s more revolutionary than the cotton gin, the steam engine, the PC and the smart phone combined.

When people look back hundreds of years from now, only the printing press and the Internet will have it beat for sheer mind-boggling impact on society. Both the net and the printing press enabled the democratization of information and single-handedly uplifted the collective knowledge of people all over the world.

So what am I talking about? What did Ijiri create that’s so amazing?

Triple-entry accounting.

Uh, what?

Yeah. I’m serious.

But don’t feel bad if you slept through the revolution. It wasn’t televised or posted on Reddit. When Professor Ijiri died in 2017, most people didn’t catch his obituary. His most famous book, Momentum Accounting & Triple-Entry Bookkeeping, has a grand total of zero reviews on Good Reads. So you’re not alone if you missed it.

Go ahead and Google “triple-entry accounting” and see what comes up. 232,000 results. In the age of Google that’s like not existing. Minor Instagram celebrities and memes invented last week have more hits.

The number two link is a Wikipedia article that’s barely a stub. The fourth down is a paper from 2005. Ijiri isn’t even mentioned on the first page.

So why is it so important if nobody knows about it?

Because the first application for it didn’t come along until 2008 and so it’s real impact is still to come. But make no mistake, it’s coming like a tsunami that will remake every aspect of our lives and societies.

How do I know?

To understand why, you just need to know a little about history’s sexiest subject.

Accounting: History’s Sexiest Subject

Here’s the thing: Without accounting, you wouldn’t be reading this article on your iPad, or driving to work in a new car or listening to music on Pandora. Without accounting there’s no commerce, no trade. Without commerce there would be no planes, no trains, no tractors, no steam engine, no skyscrapers or computers. There would be no nation states, no boats, no shipping containers traveling all over the world ferrying goods from the far corners of the Earth. In fact, without accounting you’d still be subsistence farming or hunting in the forest.

You see, there’s only been two accounting breakthroughs in the entire history of the world before now. Both of them presaged a massive uptick in human societal complexity and innovation.

The first breakthrough was single-entry accounting.

Before that we were running around the forest chasing animals, following the moon or farming. Our prospects were limited. You lived with your tribe or clan and you hunted and gathered. Your parents before you did the same thing and theirs before them and theirs before them in an endless cycle down through the years.

Accounting broke that cycle.

For the first time we had the ability to bootstrap ourselves into a different kind of life, one that didn’t involve every single person on the planet living hand to mouth.

The earliest examples of single entry accounting go back to the Sumerians about 5000 years ago on cuneiform tablets. Yeah, those Sumerians, the ones who gave us the Epic of Gilgamesh, the world’s oldest recorded story. These systems were simple but effective. You just put one note in a ledger. So-and-so owes me $50.

Once you can keep track of who owns what, trading starts to happen at a much larger scale. That’s why the kings and queens of ancient times could build castles and establish professional armies and create great wonders of the world.

But single-entry accounting isn’t very good. It can only take you so far. The only accountants back then were the king’s brother because you really had to trust that guy. All he had to do was wipe away a line in the ledger and that money no longer existed. There was no way to verify, no way to audit, no way for two people to agree.

That meant trade was a family affair. The kings and queens traded with the dukes and mostly they kept all the money for themselves and left the rest of us to starve. Powerful clans dominated the Earth.

Double-Entry to the Rescue

It wasn’t until the 1400's that the single-entry system really started to show its age though. For the first time, you had boats that could travel from near and far. That meant they could trade with people they’d never met. Since boats became the most important way to carry goods to distant lands, port city-states like Venice became the center of the ancient world and the nexus of world trade. But with so much trade going on, single-entry accounting showed even more cracks. It’s easy to make data entry errors. People’s books were soon a hopeless mess of conjecture and lost money. The more trades that stacked up, the more errors.

Multiple civilizations from the Italians in the 1300's, to the ancient Koreans, to the second Muslim Caliphate all developed versions of a double-entry system. The systems never caught on though. And that brings us full circle to the most important invention in the history of man: the printing press. Without it, knowledge remained siloed. People would develop a breakthrough in one area of the world, only to die off and leave no trace. The press allowed people to make hundreds of thousands of copies and that meant knowledge survived and circulated, instead of dying with its creator.

By the 1400’s, a Franciscan friar finally codified the double-entry system and it swiftly became the standard with Venetian merchants. All thanks to the preserving power of print.

This opened up world trade. Now goods could flow easily to all the empires of the old world.

Fast forward to today and we still use a double-entry system. If you do your taxes in TurboTax or keep your books in Quickbooks you’re using double-entry.

But now those systems are starting to show their age badly.

Take a company like Enron. They did all kinds of things to cook the books. They managed to hide billions in debt.

And that’s where Triple-entry Accounting comes in.

The Dawn of Triple-Entry

Most people missed Professor Ijiri’s breakthrough because it straddles two equally obscure and poorly understood fields: cryptography and accounting.

It’s rare enough to find a person who’s versed in one of those disciplines, never mind both. Without that kind of interdisciplinary understanding, it’s no surprise that his invention went over like a lead zeppelin.

There’s also the little problem that he was incredibly ahead of his time. Encryption had not yet entered the public consciousness. If you work in information technology you might remember the Clipper chip scandal, where the NSA tried to mandate a backdoor in all encryption. That was in 1993. Ijiri published his work in 1989. It passed mostly unacknowledged by the general public.
In 2005, came a more well-known example of a triple-entry accounting system, created by famed cryptographer Ian Grigg.

Then, in 2006/2007, a self-taught programmer likely stumbled on one or both of the systems. He was working on an alternative currency, with no centralized trust.

It was called Bitcoin...!

It was the first working example of triple-entry accounting.

Now I know what you’re thinking. Please not another story on how Bitcoin changed the world. But here’s the deal, whether Bitcoin survives or fails...

Please read part 2 of this article for more...trying to make it an easy read.