Sunday, 31 August 2014

The art of happiness and psychological strength

I have been often accused of being too optimistic. People frequently tell me that I see things in a too positive way, and that I fail to realize how serious some problems are. I am also often told that my theories are unworkable, that there is no way anyone can maintain his mental balance when everything turns against him. Yet, I must smile when I receive this kind of criticism, since I know very well that I am being misunderstood.

Indeed, rational optimism is counter-intuitive. Our natural reaction to problems is to feel stressed, and focus exclusively on our most pressing concerns. It is part of human nature that, when someone is facing severe difficulties, he blows his problems out of proportion, and becomes blind to opportunity.

I know that this happens all the time because it used to happen to me. It takes substantial effort to train yourself to maintain an objective look of reality, and not fall prey to the temptation of focusing exclusively on the problem of the hour. It is only by the increasing your knowledge that you can learn to react adequately to difficulties, lower your stress, and increase your effectiveness.

An interesting intellectual problem

Paradoxically, the strengthening of human serenity is an intellectual problem that has more to do with accounting that with psychology. The fact that people tend to overlook that there is plenty of light in the darkness has more to do with their failure to perform correct calculations than with any psychological impairment.

Yes, I believe that there is plenty of light in the darkness, even in the most profound discouragement and despondency. However, you will only be able to see the light if you maintain an objective view of the situation.

This is why I am fond of comparing psychological processes with accounting problems. If people learned to put their emotions aside, and view their problems in a businesslike manner, they would be able to see, not only their liabilities, but also their assets. If a correct accounting of the facts was done, the mental resiliency of most people would be incomparably higher. Nonetheless, I am aware that this is very difficult to do.

The accounting approach to solving problems, all kind of problems, only began in the 15th century. It started as part of the Renaissance culture, in particular as expressed in the works of Luca Bartolomeo Pacioli (1445-1518).

Pacioli was born on Borgo San Sepolcro, which was just a mid-sized village at that time, although it has in the meantime grown to become a substantial town. Borgo San Sepolcro, or San Sepolcro for short, is located 60 km north of Perugia, a large city south of Venice, in Italy.

With time, Pacioli grew to become one the most-in-demand teachers of his time, partly because of his own talent, and partly because of his friendship with Piero della Francesca (1420-1492). It was Della Francesca who had helped established the new fashion of painting portraits and landscapes by using a consistent perspective.

Not only did Della Francesca produce amazing paintings, but he also wrote two treatises on the subject. In his books “Perspective in Painting” and “The Five Regular Bodies,” he defended the theory that beauty andharmony primary depend on the adoption of a consistent perspective, from the point of view of the artist and the viewer.

Taking old ideas and expanding their scope

Della Francesca was a great theorist in the field of art, and but it was Pacioli who took these ideas and began to apply them to other areas of human knowledge. Piero della Francesca was 25 years older than Pacioli, but both lived in San Sepolcro at the same point in time, and became close friends.

It was also Della Francesca who introduced the young Pacioli to the Count of Urbino, who then granted Pacioli access to his library. As the legend goes, the Count of Urbino had accumulated six hundred volumes on different subjects, mostly copies of ancient Roman and Greek works, but I must hasten to add that Urbino's library did not primarily consist of printed books. Most volumes in his collection were texts copied by hand on parchment, and then bounded in leather.

Pacioli's access to Urbino's library had the effect of awakening his intellectual ambitions, and enabled him to conceive wide-ranging abstractions. Pacioli did not just want to learn mathematics, but was also interested in philosophy. He wanted to find the principles that govern everything in the universe. In this sense, he went much farther than Della Francesca, who was mainly interested in painting.

Initially, Pacioli set out to be a merchant. He received basic bookkeeping instruction in San Sepolcro, and then found a job as private tutor through the intervention of Della Francesca. The job involved moving from San Sepolcro to Venice, to the prestigious island of the Giudeca, where Pacioli became the tutor of the two sons of merchant Antonio Rompiasi.

The job provided Pacioli not only with a source of income, but also with the opportunity to meet all sorts of learned people in Venice, as well as to continue to read extensively, and expand his knowledge of mathematics, geometry, and business practices.

By the time the sons of Antonio Rompiasi entered adulthood, Pacioli had become a well-rounded intellectual, widely read in accounting and mathematics. In fact, he had by then acquired a small-celebrity status in Venice, and this procured him letters of introduction to look for a teaching position in Rome.

Opening new possibilities

Whether Pacioli arrived in Rome, he was 23 years old. He was introduced to several cardinals, and eventually also to the Pope. Nevertheless, he was not offered the teaching position he was looking for, since he was neither a Catholic priest nor a member of a Catholic order.

The advice he received from the cardinals and the Pope was that he should join a Catholic order, so that he could devote his life to teaching and learning. Pacioli reflected on the matter for a month, and agreed to join the Franciscan order. For that purpose, he spent a year and a half studying theology in Rome, and then became a Franciscan monk shortly after his 25th birthday.

This step opened him a wide array of possibilities, professional and intellectual. It allowed him sufficient time to read and write, and enabled him to find teaching positions all around Italy. Franciscan monks were supposed to be poor, and have no personal possessions, but this did not prevent the Franciscan Order from owning a network of houses all around the country, and exerting a strong influence on the appointment of professors in Italian universities.

It was thanks to his status of Franciscan monk that Pacioli then managed, during the next 40 years, to occupy a succession of teaching positions in Florence, Venice, Perugia, Croatia, Naples, Urbino, Milan, and Bologna.

The travelling involved in his teaching activities enabled Pacioli to meet practically all intellectuals of the Italian Renaissance. Amongst others, he met Leonardo da Vinci in Florence, in the period from 1497 to 1498. Pacioli and Leonardo then became such close friends, that Leonardo later provided the drawings to illustrate one of Pacioli's publications.

All that has remained from Pacioli are his writings, from which two books are particularly important, from the point of view of accounting, and from the point of view of philosophy. First, he wrote a “Handbook of Arithmetic, Geometry, Proportion, and Proportionality,” which was published in 1493, and a decade later, “On the Divine Proportion,” which was published in 1503.

The work of a man of genius

The Handbook was the first treatise ever published on algebra, geometry, and bookkeeping for financial purposes. As far as we know, Pacioli was not an innovator in what he wrote, but he was a great compiler and generaliser.

He took the mathematical knowledge of his time, organized it, and drew conclusions for its application in other areas. Making such a compilation was the work of a man of genius. The effort to understand a field of knowledge in depth, and condense its general principles is a major intellectual undertaking. It requires patience, reflection, and long-term intellectual ambition, a combination of qualities that no mathematician in Europe had displayed before Pacioli.

Pacioli's Handbook of Arithmetic, Geometry, Proportion, and Proportionality contains a chapter exclusively dedicated to bookkeeping. This chapter is titled “Particularis de computis et scripturis,” which means, “On the particulars of financial calculation and accounting.”

In this chapter, Pacioli presents in an organised way the bookkeeping practices that Venetian merchants were using in their businesses. Of course, Pacioli had learned those practices during the period when he had been working as a private tutor of the sons of Antonio Rompiasi, a leading Venetian merchant.

For the first time in history, Pacioli put on paper a method that allowed to record mathematically all transactions involving goods or services. Pacioli explained in great detail the process used by Venetian merchants to keep track of large numbers of purchases, items in storage, and sales to customers located not only in Venice, but also in Germany, France, Belgium, and the Middle East; sales made not only in Venetian currency, but also in other currencies.

Pacioli's explanations were so clear and comprehensive that his work became the most widely used accounting textbook in Europe for the next three hundred years, which is a remarkable feat. The way in which Pacioli presents accounting problems is also rather philosophical. He says that, if you follow the process he describes to establish a balance sheet, you will never lose track of the situation of your business.

Never lose track of the big picture

“A conscientious businessman,” he writes, “records his transactions every day, regularly calculates his profits and losses, and never loses track of his overall financial position, since this is the only way to prevent serious mistakes.”

Pacioli's work presents the complete accounting cycle, starting with the daily records, and ending with the annual accounts. On the one hand, he describes the techniques for keeping track of profits and losses, indicating how to record sales and inventory movements, and write off damaged items. On the other hand, he explains how to consolidate the transactions performed over a period of time into a balance sheet that shows the assets and liabilities, and provides an overview of a merchant's financial situation.

The balance sheet structure described by Pacioli in 1493 is still used in the 21st century. The distinction between the different types of assets, such as buildings, cash, receivables, and inventory has remained the same, and Pacioli's recommendation to split liabilities into short-term and long-term debts still constitutes the way accountants work in our days.

His recommendation to draw a profit-and-loss calculation together with a balance sheet every quarter, and also at the end of each calendar year, is exactly the way companies continue to operate all around the world five centuries after Pacioli published his Handbook.

Pacioli later expanded his theories in his work “On the Divine Proportion,” where he propounds the existence of a divine, natural proportion in all aspects of life. In a way, Pacioli was now trying to apply his concepts of profit-and-loss, assets, and liabilities to all areas of human activity.

The same equilibrium that can be expected in a balance sheet, the same matching of assets and liabilities, should now apply to medicine, law, grammar, architecture, painting, sculpture, music, and literature.

Every area of human action should be governed by the search of harmonious proportions, thus preventing the use of excessive resources to attain a goal, and ensuring a fair allocation of efforts amongst desirable objectives.

By following this reasoning, physicians must assess the favourable and unfavourable aspects of their patients' situation before making a diagnosis and prescribing a treatment. Similarly, lawyers must review the advantages and disadvantages of their clients' legal position before advising them how to proceed.

Universal balance and proportion

Pacioli developed the idea of universal balance and proportion in a series of lectures he gave during the last ten years of his life. His work “On the Divine Proportion” had mostly dealt with painting and architecture, but during his teaching activity in the early 16th century, he proposed the application of the same principle to medicine, law, grammar, sculpture, music, and literature.

And this leads me to the areas of psychology and philosophy. If Pacioli propounded that all human actions should be guided by a sense of proportion, by a fair balance between assets and liabilities, it is because he understood that you cannot achieve good results if you lose the overview of your situation.

In his handbook published in 1493, he described how Venetian merchants recorded in simple terms extremely complex transactions involving barters, loans, purchases, investments, transportation, and insurance, and in ways that allow them to keep track of those transactions without losing visibility of their overall financial position. Conversely, when people become extremely pessimistic about their future and the future of the world, they tend to focus on just a few elements, and forget about the bigpicture.

Two decades before Pacioli, Piero della Francesca had already arrived at the conclusion that only paintings that have the right proportions can be regarded as beautiful and harmonious. Leonardo da Vinci, who had learned the principles of proportionality from Pacioli in 1497, incorporated those in his masterpiece “The Last Supper.” Proportion andbalance constitute two essential requirements for success.

How to remain optimistic

Also in the area of psychology, you need to keep track on a regular basis of your assets and liabilities, since keeping those in mind is essential for remaining optimistic. When people focus on isolated elements and forget about the whole picture, they tend to lose track of their assets and liabilities, and drive their emotions to extremes. In the same way as merchants calculate their profits, losses, assets, and liabilities, well-balanced individuals need to keep an overview of their strengths and weaknesses, short- and long-term goals.

Even in the darkest situations, when everything seems to be falling apart, well-balanced individuals can still keep the big picture in mind. Merchants know that, from time to time, they are going to incur some losses, but that those do not represent the end of the world. Part of their inventory may be lost in a shipwreck, or maybe has to be written off because it has gone out of fashion. That's too bad, but it's no reason to despair. Overall, the accounts can still be satisfactorily balanced.

Such disruptions in the conduct of business must be regarded as normal, in the sense that, they can be expected to happen from time to time. Such problems won't make an experienced merchant panic because he knows that, as long as he keeps the overview, he can still repair his balance sheet.

Never lose your nerve in difficult situations

In the same way, well-balanced individuals do not despair when they are going through difficult periods in their health, relationships, of personal finances. Their ability to see that there is still plenty of light in the darkness entails a form of psychological accounting. As long as they are able to keep the big picture in mind, they are highly unlikely to lose their nerve.

Undoubtedly, Pacioli was a pioneer in his attempt to seek balance and proportion in all human activities. He did not write about psychology, since this was not yet an established area of knowledge in the Renaissance, but he recommended using double-entry bookkeeping for all kinds of transactions.

Thus every product sale must have an impact on the inventory, which is decreased, and the income, which is increased; and every investment must have an impact on the assets, on the one hand, and the debts or capital, on the other.

Similarly, in the area of human emotions, people should strive to look for balance and proportion, so that they never lose track of their assets and liabilities, problems and opportunities, misfortunes and lucky streaks.

Choose a consistent perspective

Pacioli defended the view that the universe has a propensity towards balance and proportionality. A harmonious painting must offer a consistent perspective and a well-composed structure. This is why Leonardo's work “The Last Supper” is so impressive, since all figures are perfectly proportioned. This is the type of proportion that we should be seeking in our careers, relationships, health, and emotions.

The ability to search for balance and proportion is essential for maintaining a good emotional balance, especially in critical situations. The lessons to be learned from Pacioli are not only financial, but also philosophical and psychological. The search for a balanced perspective should be taught in schools and universities. It is a piece of knowledge that explains why so many people become extremely emotional, make terrible decisions, and engage in counter-productive actions.

It is only by maintaining an overview of our assets and liabilities that we can ensure our emotional stability. Those who can preserve the ability to look at the big picture can be assured that, even in the darkest moments, they are always going to be able to see plenty of light.

 For more information about rational living and personal development, I refer you to my book The 10 Principles of Rational Living

[Text: copyright John Vespasian, 2014]

[Image by dbking under Creative Commons Attribution License. See the license terms under]

The 10 Principles of Rational Living