The field was in ferment. Some of the techniques, which developed subsequent to World War II or which might have been theoretical prior to World War II but had practical implications, are given in this article. And capital budgeting is perhaps the most dramatic example. We—when I say “we,” I don’t want to say exactly who, because I’m not sure. But there was developed a model for solving capital investment decisions using present value, which is diametrically different from what was in all the texts, all the accounting texts prior to World War II. But which just knocked out what it said in those texts, which said they were wrong, which they were wrong. They didn’t give you the right answer.

And that was developed here?

Well, that’s hard to say. In this article you will find some references to this. As far as I’m concerned, personally, I was involved in United Shoe Machinery Corporation case, which required United Shoe Machinery to sell machines that it formerly leased. And therefore, there had to be a selling price on these machines. And Joel Dean was the principal economist on the other side of United Shoe Machinery. And I represented the shoe manufacturers. . . .

So Joel Dean had written a book really describing this new approach, but saying in the book—which we used against him in the case—that it had little practical significance because it was too complicated.

So even though we used it against him in the case, that was my introduction to present value. And I just said I was a convert from the case. And we figured—actually, it was very complicated, because you had to deal with powers of a number to make the calculations. And that meant slide rules and stuff, which the students didn’t understand. There were no calculators, of course. And I would say that a very dramatic development was Chuck Christensen’s set of tables. . . .

To solve these problems, you really need two and only two tables. And there they are. And we worked them out, whenever it says there, early 1950s. And you need the present value of a dollar. And you need the present value of a stream of dollars through time. And with those to things you can get a good enough solution to any problem. And so, quickly, that technique was adopted by us and by everybody. . . . .

Well, zero people were doing this prior to World War II. And then, all of a sudden, everybody is doing it. Well, not everybody, but statistics taken by 1960 or so on, say 1960s, show that the big majority of companies were using present value, if they were using any approach. The approach that we knocked out was called the accounting rate of return. And it didn’t take account of the time value of money. And anybody that uses that today is just ignorant.

There are some people that don’t believe in any model for this thing. They go by gut feel, which is—I mean, that is their option. And a lot of problems you do that, because you don’t have good numbers, good enough numbers. But if you are going to use numbers, I think that every knowledgeable person would agree that this is the way to do it.

Robert N. Anthony