This Is How Finance and Banking Worked Before Computers

Tracy Alloway (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:14)

And I'm Joe Weisenthal.

Tracy Alloway (0:16)

Joe, do you remember the episode we did with Stuart Butterfield, the founder of Slack?

Joe Weisenthal (0:21)

I do. Great episode. Software, tech. I like when we have tech and software episodes that aren't about just like the markets, but like how technology actually works.

Tracy Alloway (0:31)

How it actually functions.

Joe Weisenthal (0:32)

Yes.

Tracy Alloway (0:33)

All right, well, that's a good jumping off point because there was a moment in that episode where I think it was Stuart asked a very innocent question, which is he basically said he had no idea how banking worked before the advent of computers.

Joe Weisenthal (0:47)

I'm glad he said that because I have no idea either. And when I think about money, by this point, we all sort of know like, oh, like money is, it's just a database entry, right? Well, that makes a lot of sense to me in a world of Excel, but how did databases work? How did money as a database creation work before databases?

Tracy Alloway (1:05)

Well, that's exactly it because nowadays, I think money is almost synonymous with an electronic database. Like that's basically what it is at this point. But of course, for hundreds and hundreds of years, we did not have things like Excel spreadsheets. So how did banking and finance and trade actually work in those conditions?

Joe Weisenthal (1:24)

Yeah. And like, I just don't understand how like people traded stocks or people went into a bank and said, I want to get my money or without like, how are they not just like always losing track of how much money people had? How are they always not just like forgetting, oh, you bought that stock like on pen and paper, like type? Like in my mind, they must have been losing track of stuff all the time.

Tracy Alloway (1:42)

Well, I think I said this in the Stewart episode, but there were a lot of bank failures. There were a lot of trading blowups. So maybe they, you know, maybe the lack of technology was actually bad. But we do actually have the perfect guests to discuss this topic. We are going to be speaking with Anne Murphy. She is a professor of history and executive dean over at the University of Portsmouth. She just wrote a new book. It's called Virtuous Bankers, A Day in the Life of the Eighteenth-Century Bank of England. So the perfect person to talk about precomputerized banking. We're also going to be speaking. This is a double feature. We're going to be speaking with John Handel, postdoctoral fellow at the McIntire School of Commerce at the University of Virginia. He's written a lot about trade and technology in the 1800s, early 1900s. So we're going to take a journey through the history of finance.

Joe Weisenthal (2:35)

I can't wait. I'm really excited about this. I have so many questions.

Tracy Alloway (2:38)

All right. Anne and John, thank you so much for coming on Odd Lots.

Anne Murphy (2:41)

Well, thank you for inviting me. It's lovely to be here.

John Handel (2:44)

As they say in sports talk radio, a long time listener, first time caller. So great to be here.

Tracy Alloway (2:50)

Nice.

So maybe I should start in sort of I'm going to attempt chronological order here. But why don't we start with you, Anne? I mean, you know, the clue is in the title of your book. What was it actually like? A day in the life of the Bank of England in the 1700s?

Anne Murphy (3:08)

So it was a very busy place. The time I'm writing about is the 1780s. So it's just after the War of American Independence.

And the British are having a moment of real introspection about their finances and trying to figure out whether everything is working well, which is one of the reasons that the Bank of England kind of looks inward at itself at this time and really tries to figure out what it's doing and how it's doing it and whether it's doing it well or not.

But the bank at this time, it's a 24-hour-a-day place. It opens at dawn. You've got customers kind of milling around from about nine o'clock onwards. And it's doing everything you would expect a bank to do, but without those Excel spreadsheets. You know, it's doing them all with ledgers and quill and ink. And it's my view that it does it well, and it doesn't lose its customers' money. It has a pretty good grasp of where everybody is and whether there's money to trade and how it does all this stuff.