There is a popular statement on the Internet by a Nobel laureate about the importance of understanding compound interest: “He who understands it earns it, he who does not understand it pays it.” We checked to see if he said anything similar.
The quote attributed to the physicist can be found in numerous articles on the websites banks, credit institutions And resources about investments. Social media users share it (“VKontakte", Facebook, X, Instagram, Threads) and blogging platforms (“VKontakte», "Yandex Q", Medium, Reddit). The statement about the magic of compound interest is also found in the profile literature about finance and investment.
Compound interest is way accrual of income (or credit), in which interest accrued for the previous period is added to the principal amount and then interest is accrued on this new amount in the next period. For example, if a person deposits 1000 rubles, then for the first year at an interest rate of 10% the deposit will increase for 100 rub. Moreover, in the second year, if he does not withdraw money or replenish the account, the investor will receive 10% not from 1000, but from 1100 rubles, that is, 110 rubles. The same applies to loans: if the loan rate is 1000 rubles. is 10%, then in the first year a person will owe 100 rubles. additionally, and for the second, again if the loan is not partially repaid, already 110 rubles. on top of the previously accumulated debt. So compound interest multiplies savings (or debts) at an accelerated rate. So, in essence, the statement is true: by understanding the principle of compound interest, you can earn money, and without understanding it, you can drive yourself into a hole of debt.
As for the authorship of the statement about the eighth wonder of the world, everything is somewhat more complicated. Since death Albert Einstein in 1955, all of his works were carefully studied, and many of them were digitized. “Verified” could not find the quote in question in the largest archive of Einstein’s works collected Hebrew University in Jerusalem, where, according to the physicist’s will, all his manuscripts and documents were transferred. There is nothing similar in the databases compiled Princeton And California Tech universities in the USA.
In 2011, researchers at Princeton University published a collection of statements by the scientist The Ultimate Quotable Einstein. There is a section with quotes that are baselessly attributed to Einstein, and it is in it that you can find the phrase “Compound interest is the eighth wonder of the world.” The compilers of the collection provide several more versions of the statement (less popular on the Russian-language Internet), which are also attributed to Einstein: for example, “Compound interest is the greatest mathematical discovery of all time” or “The most powerful force in the Universe is compound interest.”
The Quote Investigator (QI) portal, which specializes in verifying the authenticity of popular quotes on the Internet, found outthat the comparison of compound interest with the eighth wonder of the world appeared during Einstein’s lifetime. The first mention found by researchers was an advertisement for the credit organization The Equity Savings & Loan Company, published in the American newspaper Cleveland Plain Dealer in 1925. However, the Nobel laureate was not mentioned as an author. According to QI, the phrase was first attributed to Einstein no later than 1988. Then the president of Lipper Analytical Securities Corp. spoke about compound interest as the eighth wonder of the world in a commentary for the Courier-Post. Michael Lipper, and the journalist noted that he allegedly quoted the famous physicist. By the way, QI sorted it out and another formulation of this phrase, also often attributed to Einstein: “Compound interest is the greatest invention of mankind.” As in the case of the quote about the wonder of the world, the scientist first began to appear as its author only decades after his death.
Thus, there is no evidence that Einstein ever spoke about compound interest in such a complimentary manner. The phrase could not be found in any major database of the scientist’s works. Moreover, although the quote appeared in the media during the physicist’s lifetime, they began to attribute its authorship to the Nobel laureate only more than 30 years after his death, which usually indicates an erroneous attribution.
Cover photo: See page for author, Public domain, via Wikimedia Commons
- Quote Investigator. Quote Origin: The Eighth Wonder of the World Is Compound Interest
- Quote Investigator. Quote Origin: Compound Interest Is Man's Greatest Invention
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- Is it true that Albert Einstein did poorly at school?
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