A short history of finance tools

What if the chalk on the blackboard could do math on its own?

This was the question that Dan Bricklin, sitting in class at Harvard, implicitly asked when he came up with the idea for VisiCalc—widely known as the world’s first spreadsheet software. VisiCalc led to Lotus, which led to Excel, which led to most of the finance tools you are likely familiar with today.

But people have been dealing with finance for a lot longer than we’ve had computers. And while tools like Excel are the primary window of experience most of us have into the finance world, there are thousands of years of human history that brought us to where we are today. This essay is a short history of finance tools: what came before, what we have now, and what is still yet to come.

How does a business run without a spreadsheet?

It is hard to imagine running almost anything—a business, a society, a government—without spreadsheets and technology like them. After all, a spreadsheet can be so many things all at once. A spreadsheet can tell us whether we’re going to be profitable by the end of the year, how much we’re spending on payroll, and whether your marketing initiatives are paying off. A spreadsheet can help us build conviction in important decisions about our businesses. When we want to understand the impact of a new initiative, we may ask our finance teams to play around with the spreadsheet and give you an answer. A spreadsheet, wielded properly, can be the difference between success and failure. 

Thousands of years before the Common Era, though, people still had societies to run. In Sumer, like in so many other parts of the world, the financial building blocks of society revolved mostly around food: how much food you had, how much you were trading, and so on. The ceiling for how much of this you can do without financial tools is very low—not being able to keep track of things in any real sense makes it difficult for a society to progress.

And so, before long, the Sumerians began using clay tokens to keep track of goods.

Clay tokens were the first real abstraction in financial technology: they abstracted physical goods, which you could see, into a smaller representation. Tokens were powerful both because they were easy to make and because anybody could use them. You did not need to be a mathematician in order to keep track of your crops with tokens, trade with tokens, and plan for the future with tokens.

But there were limits to the clay token system. 

Imagine you’re leading a village with 20 farmers in it, and each of those farmers pays you tribute. You soon realize it would be useful to group the tokens by farmer, or by type of crop, so you can keep track of who contributed what. You also realize that this would be a lot of tokens: if you start assigning large amounts of crops to single tokens you lose precision, but if you represent small amounts of crops with single tokens you have mountains of tokens. To solve this, you organize tokens by placing them into envelopes. Counting the tokens in the envelopes is time-consuming, though, so you start to make markings on the envelopes to indicate which tokens are inside and how many of them there are. 

And, in doing so, you create writing.

The Sumerians weren’t the only ones creating finance tools during this part of human history, though. Thousands of miles away, the Incas developed the Quipu: a knotted tallies and cords system they used for accounting. They used it to answer the same questions the Sumerians did, like: How many resources do we have? How should we allocate those resources? Are we going to survive the winter? Who has produced the most crops for us this year? Inherently finance-related questions like these were the ones that civilizations like the Inca used their tools to to answer.

On yet another part of the planet, the Chinese were using a number of finance methods and tools—one of them being Sanzhu Jiesuan, also known as the three-pillars balancing method. The equation was simple:

Ru (In) - Chu (Out) = Yu (Balance)

All of these new tools were upstream of societal advancement—you generally can’t go on to build a great, thriving empire if you are not able to keep track of things, trade, and plan for the future. Better yet, the tools around during this part of human history were accessible to anyone. There was no software that required years to master; just basic tools that drove society forward.

As societies grew and became more complex, though, they placed more demands on their tools and accounting methods.

A new way to keep track of numbers

Milan was a happening place in the 1400s. The Duomo was under construction, humanist studies flourished at La Pavia university, Leonardo da Vinci was painting and inventing. And one of Da Vinci’s friends, Luca Pacioli, was working on perhaps the most important project of all: a book.

Pacioli’s ambitious goal was to summarize all commercial mathematics known at the time. The book spanned algebra, business, trigonometry, and more—but its best-known contribution was its explanation of double-entry bookkeeping. The concept is something you may be familiar with on an intuitive level: every financial transaction involves both a credit and a debit. A credit increases liabilities or decreases assets, while a debit decreases liabilities or increases assets. 

Double-entry bookkeeping satisfies the accounting equation: Assets = Equity + Liability

A fishmonger in 1400s Milan, for example, may take out a 100 ducat loan to purchase a fishing boat. In single-entry accounting, he may simply record this loan as income for his business, perhaps making a mental note that he needs to pay back the loan later. In double-entry accounting, where he has both a credits and a debits column, he would record ‘Loans Payable’ as a credit (100 ducats) and ‘Cash’ as a debit (100 ducats). In doing so, he helpfully separates the increase in cash from the increase in debt. This approach allows the fishmonger to recognize two things at once: he has received money by increasing his cash, but he also owes money due to an increase in liabilities. In the accounting equation, his assets are $0.

The impact of double-entry bookkeeping is hard to overstate. It introduced unprecedented accuracy and error-detection in financial records. Merchants could now confidently track their inventory, sales, and debts—every transaction was accounted for. This system also allowed for a more nuanced understanding of a business's financial position. And, perhaps most important, it changed how people thought about business. By introducing the idea of capital as a dynamic and self-expanding value rather than a static possession, double-entry bookkeeping laid the groundwork for modern capitalism. 

Without Pacioli’s contributions, it would be hard to build a financial model. It would be hard to make good decisions about the future of your business. It would be hard to make what came next.

Spreadsheets!

Dan Bricklin had seen the idea for a mouse at a conference by legendary engineer Doug Engelbart, and likely also on the Xerox Alto (one of the first personal computers ever made). And it was in a Harvard classroom during the spring of 1978 that he wondered to himself: “Imagine if my calculator had a ball in its back, like a mouse…”, which was this idea that sparked what would eventually become VisiCalc.

Dan wanted a “heads-up display, like in a fighter plane,” where he could see an image hanging in the air in front of him. Then, he could just move his mouse around on the table, “punch in a few numbers, circle them to get a sum, do some calculations.” 

The next few years were a blur. Dan and his friend Bob Frankston partnered up to build VisiCalc, the world’s first well-known piece of spreadsheet software. And what they ended up with was something that the Ancient Chinese and Sumerian and Incan finance people would have probably considered magical (if not literally, then figuratively): the modern spreadsheet. While the idea of a grid with numbers was not new, the way that VisiCalc worked added new abstractions and capabilities that marked a real change in the way you were able to handle finance. 

For one, VisiCalc abstracted the actual doing of calculations to an automatic, invisible calculator. No more manual calculations. It also abstracted individual numbers to cells, which meant you could now practically build models by writing detailed formulas that would update automatically. One formula could reference a few cells (like A1 and B7), and the values of those cells might themselves have been generated by other formulas referencing other cells.

It wasn’t perfect—VisiCalc was not the end state of all financial software—but it was a major step forward for the financial backend of companies everywhere.

Microsoft Excel and its successors

It’s 1981, and developer Doug Klunder is having Shakey’s Pizza for lunch—with Bill Gates and Steve Ballmer . Having watched from the sidelines as VisiCalc took off, Gates and Ballmer had decided it was time to build a spreadsheet software of their own. Gates and Ballmer interviewed Klunder, hired him, and within weeks he was working on building the first Microsoft spreadsheet.

Just one year later, Microsoft had their first spreadsheet software. Only it wasn’t called Excel—it was called Multiplan. And it looked like this.

Had Multiplan released before VisiCalc, it may have marked history as a revolutionary piece of software. But it did not release before VisiCalc, and instead it was simply a VisiCalc competitor that did not generate the buzz, or revenue, that Microsoft hoped it would.

The team went back to the drawing board and, as Klunder told the Daily Beast, hid themselves away for three days in a small Red Lion Inn hotel room in Bellevue, Washington, to decide what Microsoft’s next iteration of spreadsheet software would look like. The conversations must have gone well, because Microsoft’s next major release was perhaps the most influential software of all time: Excel.

Excel improved on VisiCalc and Multiplan in a number of ways: it was faster, the user interface was better, you could create charts and graphs, spreadsheets were much larger, more functions were included, and so on.

As you’d expect, Excel improved over the decades. Excel 2.0 added support for Intel (prior to this, it only worked in Apple computers), Excel 3.0 added things like 3D charts, Excel 4.0 added autofill, Excel ‘95 featured a Doom-style minigame—the features just kept coming. Around this time, Excel also dethroned Lotus 1-2-3, the product of the company that purchased VisiCalc, and in doing so became the default tool you’d see finance people using almost anywhere.

It is both a testament to Excel’s good-ness and an indictment of the current software landscape that Excel is still one of the default tools for finance people.

And yet, Microsoft Excel is not actually a finance tool. It is often used for finance, yes, but its application-agnostic approach also meant that there was room for people to build finance-specific software on top of the tools that Excel had created. Excel was good, but it wasn’t always efficient: imagine taking revenue data from the place you track cash flow (like Quickbooks), sending it to your models in Excel, then taking that data and turning it into a comprehensive report for the CEO. That’s three pieces of software to accomplish one pretty simple thing.

So, people built finance-specific tools. One of the earliest of these products was Hyperion (first IMRS, later Hyperion Pillar). Tools like this made the Excel framework even more exciting for finance people by adding finance-specific structure to the sandbox that Excel, VisiCalc, and others had created. 

But the next real step towards the finance software we know today wasn’t finance software at all.

How the internet reshaped finance collaboration

While dozens of companies were working on new and improved finance tools, a separate development was about to change what the next generations of tools would look like: the internet.

Nowadays, it’s commonplace to get a link to a report from the Head of Finance. But the mere act of sending someone a link to a financial report or model to collaborate on, from anywhere in the world, is quite new. A few decades ago, real-time collaboration wasn’t exactly possible with finance software. If you wanted to share a model you’d built, you could either:

• Show it to someone, in person, in the office.
• Download the file and then send it to someone.

There were obvious downsides to this approach: it was full of friction, things took forever, and if anything got updated then you’d have to send everything all over again.

In the mid-2000s, however, things started to change. Google Sheets released in 2006, which was kind of like a version of Excel where you could share links and collaborate in real-time. Anaplan, which also released in 2006, had real-time online collaboration baked-in from the start. And Microsoft Office 365, which launched in 2011, brought that same degree of online collaboration to the old-school classic—Excel.

Increasingly complex societies required more than physical clay tokens. An economy driven by the internet required planning tools that could move as fast as transactions, and collaboration became table stakes to facilitate that. With online collaboration, you could now work in real-time on as many devices at once as you wanted. But though we say “you” could work in real-time to collaborate on finance, the reality is that finance tools have generally made it easier for one specific type of person to collaborate: the finance person, on a finance team. It seems unlikely, however, that the future will remain so exclusive.

What’s coming next

As magical as finance software is—and as impressive as it is that humans went from clay tokens to VisiCalc to Excel and its successors—there is still a huge gap in how finance works at businesses today:

Nobody outside of finance understands it.

They may have understood it back in ancient Sumer, when finance was just clay tablets and envelopes. But as our world has become more complex, so have our finance tools. Using Excel effectively isn’t something that you could intuitively do on day one. Instead, it is the kind of thing that people list as a skill on their resumes, the kind of thing that people spend years learning.

But finance is not the sort of thing that should be siloed, sheltered in a walled-off garden only the subject matter experts are allowed to enter. Finance tells the story of a company, informs and drives how people make decisions, and helps people to understand the impact of the work. It’s much harder to know that what you are doing is helping—or hurting—the success of a company if you do not understand finance. Yet most people do not know what is going on with their company’s finances, or how their work is contributing to the equation of the business.

It seems probable that the next generation of finance tools will bridge this gap in understanding. By making finance understandable and accessible for everyone, each individual on the team will be able to visualize their impact and use data to build conviction in decisions. Finance is, after all, at the center of a company. It’s only right that everyone should actually understand it.