One of the most famous quotes commonly attributed to Einstein was something that he himself never actually said: “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” While the quote is not from Einstein at all, the math behind the concept of compound interest is incredibly profound, playing a role in any system — physical, mathematical, or financial — that accumulates based on how much of a base amount is present. When the base amount increases, it isn’t just the original amount (the principal) that continues to accumulate, but the additional amount (the interest) that adds to the accumulation as well.
While investors most often use this to explain the growth of wealth in an interest-bearing account, it can be applied not just to wealth, but to the cost and price of goods and commodities that continue to increase over time as well. When wealth increases, we call it compound interest, but when prices increase, we call it inflation: not the cosmic kind, but the economic kind. The Einstein quote may be a fake, or at least grossly misattributed, but if you want to understand the current affordability crisis, the mathematics and the concept behind the quote is exactly what everyone should understand.
This image shows Albert Einstein playing his violin in 1932. While Einstein had a great many famous quotes and sayings over his life, there is no evidence he ever remarked anything about compound interest, or called it “the greatest invention” or the “eighth wonder of the world” or anything of that ilk. It appears that was an invention of a New York Times writer from 1983.
Einstein grew to fame in the early 20th century, and died in 1955. While an enormous amount of his writings, speeches, and interviews survive, nothing that he ever said or wrote relating to compound interest survives. The earliest assertion that the quote was said by Einstein can be traced back to a 1983 _New York Times_ column, which mentions the quote as a popular saying that’s attributed to him.
But it’s likely that the attribution was made up entirely, as there is no print record of the quote — or any saying linking Einstein to the concept of compound interest — prior to that. An investigation into the quote’s origins unearthed two very similar statements that may provide the ultimate inspiration for the eventual saying that became linked with Einstein’s name. In 1916, a newspaper advertisement in California described compound interest as “the greatest invention the world has ever produced.” A little bit later, in 1925, the phrase “the eighth wonder of the world is compound interest” was used by a Cleveland savings and loan company.
It is unknown what sort of intersection of: played a role in conferring an Einsteinian attribution to the actual quote itself. This height by age chart, published in 2000 by the CDC, shows a roughly linear growth in height in boys from the age of 2 until adulthood. There is no compounding in humans when it comes to increases in height; the increase comes instead in a linear fashion.
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