Einstein, compound interest: Does not compute

July 22, 2006

Earlier, in the thread about bad quotes, bad scholarship and Ann Coulter, a person asked about another quote that has dogged speech writers and investment seminars for years:

I am trying to discern the author of the quote “compound interest is the greatest invention of the 20th century.” Since you mention neither Twain nor Einstein remarked this, do you know who did?? I would be very grateful.

Comment by fact checker 07.11.06 [emphasis added]

Twain’s words are well enough cataloged that, had he said it, one would be able to track it down. Think for a few minutes about Twain’s finance issues, however, and you realize it is highly unlikely that he would have said it. Twain invested heavily in a machine to mechanically set type, to publish the memoirs of former-President Ulysses Grant; the machine did not work, and Twain lost his fortune. He undertook a grueling lecture tour to make money back. Later financial setbacks forced another long lecture tour. It is not probable that Mark Twain (Samuel Clemens) would ever have said anything about simple compound interest. It was not his style to invest passively, or for long-term returns.

The line about compound interest being the “best invention” of mathematics, or of the 20th century, or whatever, is more often attributed to Albert Einstein. Google “compound interest” and “Einstein” and you get tens of thousands of hits.

It’s a good line, a snappy introduction to the Rule of 72 for a presentation to potential investment clients or for the introduction to the rule in a high school classroom. I have a short PowerPoint presentation on the Rule of 72 for economics classes, and I would have used the quote — had it checked out. My experience as a journalist and speechwriter urged caution.

I wrote to the Albert Einstein Institute, to the American Institute of Physics, and to other places where people might know obscure sources of Einstein’s sayings and writings, to try to verify the quote. It surely did not turn up in Bartlett’s Familiar Quotations, nor in the Oxford Dictionary of Quotations. Those specialists in Einstein data and history could not verify the quote (which is the careful way of phrasing it). One fellow I spoke with said if he had a nickel for every time he was asked to verify the compound interest quote, he would have no need for compound interest.

I can say with confidence that Albert Einstein never wrote or said anything about compound interest. While Einstein wrote about a wide variety of topics, compound interest is not among them.

Fatherflot at Daily Kos wrote about this quote in early 2005, after several advocates of privatizing Social Security had used the quote in one version or another to introduce their own remarks. A lot more people read that blog, but no one there could verify it, either. There are several variants on the quote illustrated there. I think that an alleged quote’s lack of veracity is often demonstrated by mutations. For real quotes from real people, generally someone knows the original work and starts writing about what it’s supposed to be — at many cocktail parties a line about “consistency being the hobgoblin of small minds” will be corrected (Emerson said it is “a foolish consistency,” and it is “little minds”), for one example.

Einstein didn't say what this poster claims he said, either.

Einstein didn’t say what this poster claims he said, either.

As I told fact checker, I think the line was invented 40 or 50 years ago. From my checking, I would bet it was a copywriter or speechwriter working for some investment house. We may hope to someday track down the origin of the quote, and if the originator is still alive, ask her or him why the line was attributed to Einstein.

Fillmore’s bathtub runneth over with bad quotes, hoaxes gone amok, and other errors. We just try to flush a few down the drain.

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