From sole proprietorships, family businesses and partnerships to joint stock limited liability companies, the scope and form of commerce has been shaped by the organization and disclosure of information.
The history of the production and exchange of goods is also the history of the production and exchange of information.
Double-entry bookkeeping, the printing press, and financial statements are milestones in that history, a timeline dominated by the marriage of information and the legal innovation of limited liability to create the joint stock limited liability company.
Information organized capital into new forms, and information created the knowledge to make that capital more productive: a self-reinforcing feedback loop that drove the Industrial Revolution.
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Machines replaced many jobs, but information technology created many others, filled by specialists who applied technical knowledge to the processes of production and exchange, and decision sciences to guide the overall enterprise.
It was less information revolution than evolution. Innovations and technologies took time to work their way through the economy and society; longstanding practices and vested interests stood in the way.
The Companies Act of 1862 called for the annual presentation of audited balance sheets, but forty years would elapse before it became customary in Britain.
Meanwhile, over the course of a century, the focus of auditors shifted from detecting fraud, to verifying financial statements, to reviewing internal controls, and back to detecting fraud.
Just as the evolution of information in the mercantile era changed the balance of power among nations, the evolution of information in the industrial era changed the balance of power among business enterprises, and within them.
Those who created and understood information technology, and those who knew best how to exploit information, gained the upper hand, and a greater share of the spoils.
The fees to be earned from advising business enterprises on how to do this turned accountants into consultants, and changed the world of auditing.
But while the forms of commerce and the size and complexity of commercial enterprises changed over time, the logic of commerce did not.
Businesses today, as before, strive to increase productivity, expand operations to maximize economies of scale and enter new markets, innovate and create new products, and fend off competitors.
And they strive to obtain the financial resources to do it.
While governments can borrow to raise the funds they need, and levy taxes and tariffs to repay lenders, businesses must make do without such powers.
As such, they are often better served by permanent capital, in the form of retained earnings, or equity investment.
Since potential investors in equity markets, whether private or public, will seek to value a company before they commit to buy its shares, those who would issue shares must first issue information.
If investors today, no less than investors in eighteenth century Amsterdam, prefer to swim in deeper, more liquid and more transparent capital markets, then ambitious business enterprises seeking capital might well look to the stock markets in New York or London, Sidney or Singapore.
To make headway in these markets, however, these enterprises have to excel not only at their core business operations, but also at organizing, documenting and communicating information.
They have to manage the complexity, the potential conflicts of interest, and the incentives to misrepresent and mislead.
Business enterprises that can rise to this challenge, that can credibly describe and quantify what they do, how they finance their operations, the costs they face, and why they make profits, will be best placed to pass muster with investors and regulators in the global equity markets.
In short, those who fare best will be those who can tell their story. And to do that, they will need more than business literacy, more than book reading.
They will need bookkeeping.
The author is a writer and researcher in Dhaka, who previously worked as an investment banker in London and New York
