Halliday & Matthiessen (2014: 624):
… it seems quite likely that reference first evolved as a means of linking ‘outwards’ to some entity in the environment. So, for example, the concept of ‘he’ probably originated as ‘that man over there’ – a reference to a person in the field of perception shared by speaker and listener. In other words we may postulate an imaginary stage in the evolution of language when the basic referential category of PERSON was deictic in the strict sense, ‘to be interpreted by reference to the situation here and now’. Thus I was ‘the one speaking’: you, ‘the one(s) spoken to’; he, she, it, they were the third party, ‘the other(s) in the situation’. The first and second persons I and you naturally retain this deictic sense; their meaning is defined in the act of speaking. The third person forms he, she, it, they can also be used in this way; … But more often than not, in all languages as we know them, such items point not ‘outwards’ to the environment but ‘backwards’ to the preceding text … – or, in effect, [to] the instantial system of meanings that is built up by speaker and listener as the text unfolds.