Principles Lecture for Dr. William E. McCarthy
The first formal Sharealedger project effort was a presentation delivered for Michigan State University students under the direction of Dr. William E. McCarthy, the renowned researcher who originated the Resource, Event, and Agent (REA) economic accounting model.
Full Lecture: Principles Behind Sharealedger
Presentation given by Kip Twitchell exploring the historical constraints that shaped modern double-entry ledgers and how REA concepts enable multi-party shared ledgers.
Key Insights & Takeaways
- Ancient Origins to Manual Double-Entry: How the fundamental balance equation was codified centuries ago to fit physical quill-and-paper ledgers.
- The Trap of Early Automation: Because manual accounting was computerized early in the mainframe era, vendors focused on automating existing siloed processes rather than rethinking the cross-enterprise flow of financial data.
- Decoupling View from Event: How the REA model allows business transactions to be captured in an objective, perspective-independent manner before translating into debits, credits, or tax classifications.
Bookkeeping and AI: Why So Little Progress?
Following the MSU lecture, Dr. McCarthy referred Tom Hall, who authored an extensive paper exploring how to make understanding entities through accounting data more efficient. Over three recorded sessions, Kip and Tom explored why artificial intelligence has struggled with traditional bookkeeping data and how mathematical formalizations can enable true machine automation.
Session 1: The Entity and the Questions We Ask
Tom outlines the fundamental importance of an Entity (person, partnership, or corporation) and how standard historical accounting structures often fail to capture the questions modern organizations need to ask.
Session 2: Metric Engines vs. Search Engines
Kip and Tom compare search engines (which return individual documents/instances) to metric engines (which must calculate aggregate status over time). They discuss how true-up journal entries obscure underlying economic facts, and how preserving subledger key identifiers enhances enterprise-wide analysis.
Session 3: Mathematical Formulas for Automation
Tom reviews the specific mathematical formulas developed in his paper, explaining variables, relationship constraints, and how automated rule frameworks can interpret accounting activity with high transparency and ethical auditability.
Financial Systems: Time and Scope Discussions
Adeolu "Ade" Alao, Sandy Peresie, and Kip Twitchell engaged in extended discussions on the structural limitations of modern financial systems, predictive forecasting, and shared ledger simulation.
Core Concepts Explored
- Predictive Cash Flow from Structured Contracts: Current financial reporting is almost purely retrospective. By embedding machine-readable contract terms directly into transaction records, systems can compute precise forward-looking cash needs.
- Inside vs. Outside Existing Financial Institutions: Open Banking protocols focus mostly on transaction execution rather than shared access to underlying financial records. A genuine leap forward must develop outside legacy vendor silos.
- Capital Accumulation for Everyone: Re-examining the boundary between consumed expenses and capital assets (e.g. tools for ongoing production), enabling broader participation in wealth creation.
- Simple Simulation: Prototyping shared ledgers using dual-approved immutable records in cloud-shared sheets as a proof of concept.
Vision for a New Financial World
“To bring 1 billion people into the digital economy, not just through transaction payments and receipts, but with financial management capabilities that allow them to measure performance, contribute effectively, and prepare for the future.”
Overcoming Fragmentation
Today's financial data is held in proprietary silos by intermediaries. Categorization is treated as a post-transaction cleanup activity, and multi-party reconciliation consumes billions in wasted overhead.
Sharing financial data directly between authorized counterparties solves this at the root:
- Dual Verification: Actions taken by one party are immediately verified by the counterparty, eliminating the need for periodic reconciliation.
- Scale & Cost: Just as web search is organized around URLs and social media around posts, financial systems are organized around balances (point in time) and transactions (events over time). Building an ultra-low-cost, high-speed engine around this core allows universal participation.
The Journey Begins
“I wouldn't give a fig for the simplicity on this side of complexity; I would give my right arm for the simplicity on the far side of complexity.” — Oliver Wendell Holmes
Sharealedger was established to bring together experienced practitioners who understand existing system complexities and are committed to finding genuine simplicity on the other side.