Compound Interest Is Man’s Greatest Invention

Albert Einstein? Advertising copywriter? Apocryphal?

Dear Quote Investigator: Some people think that Albert Einstein’s name is magical. If they want to convince you of something or sell you something they invoke his revered name to prove that a genius agrees with whatever proposition they are peddling. Here is a collection of statements that the brilliant physicist supposedly said:

Compound interest is man’s greatest invention.

Compound interest is the greatest mathematical discovery of all time.

Compound interest is the eighth wonder of the world.

Compound interest is the most powerful force in the universe.

Compound interest is more complicated than relativity theory.

Did Einstein make any of these ridiculous remarks? Sometimes the wording of the quotations is different. For example, some sayings replace “compound interest” with “compounding interest”, “compounded interest”, or “compounding”. Are they all bogus?

Quote Investigator: Since this is a large topic involving multiple quotations this post will concentrate only on remarks claiming that compound interest is the greatest invention. QI has not located any significant evidence that Einstein made this comment.

The earliest instance QI has located in which compound interest was called “the greatest invention the world has ever produced” was dated 1916. The words appeared in an advertisement for the “Security Investment Co.” The speaker was a fictional character created by an advertising copywriter [GICI]:

The Greatest Invention

Three friends were having a discussion as to what was the greatest invention. One claimed the steam engine, another the telegraph.

The third friend sharpened his pencil and started to figure on a large piece of paper.

Finally he said: “Gentlemen, if the man who invented compound interest had of secured a patent on his idea he would have had without any doubt the greatest invention the world has ever produced.”

If Columbus had of placed one single dollar out at 6% interest compounded annually with instructions to pay the proceeds to you today, you would have over Ten Billion Dollars coming to you.

In 1976 the Wall Street Journal published an opinion article that ascribed to Einstein the belief that “compound interest” was “man’s greatest invention”. Einstein died in 1955, and this is the earliest instance located by QI of an attribution of this sentiment to him though the phrasing used in the newspaper is tentative [HKAE]:

All I can do is remind them of the truth of Albert Einstein’s alleged response when he was asked, “What do you, Mr. Einstein, consider to be man’s greatest invention?” He didn’t reply the wheel or the lever. He is reported to have said, “Compound interest.”

Here are additional selected citations in chronological order.

In 1906 the prominent literary figure Jack London published an essay titled “What Life Means to Me” in which he referred to “compound interest” as a “remarkable invention of man”. This example shows that at least one famed individual used superlatives when describing compound interest [JLCM]:

But it is not particularly easy for one to climb up out of the working class—especially if he is handicapped by the possession of ideals and illusions. I lived on a ranch in California, and I was hard put to find the ladder whereby to climb. I early inquired the rate of interest on invested money, and worried my child’s brain into an understanding of the virtues and excellencies of that remarkable invention of man, compound interest.

In 1916 a character in an advertisement in a California newspaper called “compound interest” the “greatest invention the world has ever produced”. The details were mentioned above [GICI].

In 1924 a short article in a Vermont newspaper titled “The Marvels of Interest” was printed. The same illustration of Christopher Columbus investing money to obtain a massive sum that was featured in the 1916 advertisement was used again. The article resorted to a stereotype when labeling “interest” the “greatest invention in the world” [CCSA]:

A banker getting up a thrift speech got busy figuring out the earning power of one dollar with interest compounded semi-annually. …

Had Columbus put away his dollar in 1492 on the same basis it would have grown to represent the tidy sum of $1,842,679,000. Getting down to earth, the banker pointed out that $100 compounded semi-annually at four per cent doubles itself every 17 1-2 years, grows eight fold in 52 1-2 years, and so on to amazing dimensions. No wonder the Jew said that interest was the greatest invention in the world.

In 1935 an autobiography by Roger W. Babson, founder of the business school Babson College, was published. A review in the New York Times contained an excerpt that presented the advice the book author received from his father [RBGI]:

… the elder Babson gave him the pithy advice to  go into banking, insurance or public-utility operation, stressing the fact that “the world’s greatest invention was 6 per cent compound interest, which goes  on twenty-four  hours a day, seven days a week and fifty-two weeks a year.”

In 1938 an article in the Boston Globe with a humorous tone expected readers to appreciate that some people considered “compound interest” to be the “greatest invention in the world” [GACI]:

Right here and now, we shall toss a brick through the plate glass window of convention by stating that we think that trial marriages are absolutely all right. Yes, sir, they are the greatest invention in the world since somebody discovered compound interest.

In 1970 an odd assertion about Einstein appeared in a syndicated newspaper column [AEGZ]:

… it was the claim of Dr. Albert Einstein, the humorist, that the zipper was man’s greatest invention.

QI has located no evidence that Einstein identified the zipper as man’s greatest invention with humorous intent or serious intent. Yet this statement reflects a general pattern: People are eager to hear about and repeat claims concerning Einstein’s views on inventions.

In 1972 another prominent individual was drafted into the group that supposedly praised the concept of compound interest [JKCI]:

According to John Maynard Keynes, “compound interest is the second greatest invention of mankind”.

Apparently the economist Keynes was not quite as enamored as others because he only ranked compound interest second in the pantheon of inventions. QI has not yet located any support for this claim about Keynes.

In January 1976 an advertisement for a Savings and Loan in Florida referred to compound interest as “the world’s greatest invention,” but the attribution was anonymous [BRGI]:

We can do it with what has been called the world’s greatest invention: “Compound Interest.”

In August 1976 an article in the Wall Street Journal contained a subsection titled “Albert Einstein’s ‘Discovery’” that included a version of the claim (as mentioned earlier in this article). The author, Hastings Keith, mentioned the difficulty that some people have in understanding how quickly a pension can grow in size because of compounding. This is the first cite found by QI with a linkage to Einstein [HKAE]:

All I can do is remind them of the truth of Albert Einstein’s alleged response when he was asked, “What do you, Mr. Einstein, consider to be man’s greatest invention?” He didn’t reply the wheel or the lever. He is reported to have said, “Compound interest.”

In October 1976 the claim about Einstein was printed in Barron’s weekly newspaper. The periodical referred to Keith who wrote the piece in the Wall Street Journal two months before [HKBF]:

As Rep. Keith liked to remind his former colleagues, when someone asked Einstein what he considered man’s greatest invention, the great mathematician replied not the wheel or the lever; instead, he is reported to have said, “compound interest.”

In 1977 a scientist named Stephen Rosen wrote about his appearances on television and the strategy he used to keep viewers entertained and interested [TVSR]:

One question I was asked at practically every stop was, “What’s the greatest invention of all time?”  I finally worked up an acceptable answer to this one, one I hoped would preserve my goal of presenting positive, optimistic views of science.

Greatest invention? “Albert Einstein said it was compound interest. Alfred North Whitehead said it was the invention of the method of invention. Mel Brooks said it was Saran-Wrap.”

This is the kind of amiable, idle chatter viewers have come to expect from talk shows.

References continued to proliferate, but QI will stop the presentation here because the citations above provide a reasonable sample.

QI hypothesizes that an anonymous advertising copywriter initiated the idea that compound interest was the world’s greatest invention or man’s greatest invention. However, 1916 is not necessarily the origin of this hyperbolic statement, and future researchers may locate earlier citations. QI was unable to find any support for the attachment to Einstein, and QI believes that it is very unlikely that Einstein made this remark.

Sometimes a comment is attributed to a famous individual to increase the prestige and believability of the comment. Also, a quotation from a famous person is often considered more interesting and entertaining. Inaccurate attributions are readily propagated.

(Many thanks to Jason Zweig whose initial query led to the construction of this question and the pursuit of this exploration.)

[GICI] 1916 June 28, Riverside Daily Press, Advertisement titled “The Greatest Invention” for “Security Investment Co.”, Page 5, Column 3, Riverside, California. (GenealogyBank)

[HKAE] 1976 August 25, Wall Street Journal, Letter From a Pensioner by Hastings Keith, Page 12, New York. (ProQuest)

[JLCM] 1906 March, Cosmopolitan Magazine, What Life Means to Me by Jack London, Page 526, Volume 40, Number 5, International Magazine Company, New York. (Google Books full view) link

[CCSA] 1924 October 23, St. Albans Daily Messenger, The Marvels of Interest, Page 4, Column 2, St. Albans, Vermont. (Genealogybank)

[RBGI] 1936 March 1, New York Times, Roger Babson’s Life by Rose C. Feld, [Book review of Actions and Reactions: An Autobiography by Roger W. Babson], Page BR20, New York. (ProQuest)

[GACI] 1938 December 18, Boston Globe, Go Into Marriage on an “Every Sale Final” Basis: Boy Advises Girl by George Antheil, Page C51, Boston, Massachusetts. (ProQuest)

[AEGZ] 1970 February 26, Omaha World Herald, Checking Up: 95 Mosquitoes Needed for Job by L. M. Boyd, Page 30, Column 1, Omaha, Nebraska. (GenealogyBank)

[JKCI] 1972 October, Urban Land: News and Trends in Land Development, Satellite Communities by Bernard Weissbourd, Start Page 3, Quote Page 9, Urban Land Institute, Washington, D.C. (Verified on paper)

[BRGI] 1976 January 8, Boca Raton News, Rocky road to success: Advertisement for First Federal of Broward, Page 6A, Boca Raton, Florida. (Google News Archive)

[HKBF] 1976 October 4, Barron’s National Business and Financial Weekly, EDITORIAL COMMENTARY Kicking the “Kicker”: Congress Has Finally Done the Right Thing by Richard Karp, Page 7, Dow Jones & Company Inc., Boston, Massachusetts. (ABI/Inform)

One thought on “Compound Interest Is Man’s Greatest Invention

  1. It’s an interesting coincidence, though, that compound interest and nuclear chain reactions are both examples of the same type of function in calculus, exponential growth. Exponential growth means that the rate of growth in any particular moment is proportional to the quantity in that moment.
    So in the case of nuclear decay, any positive rate of growth, no matter how slow at first, leads to a nuclear explosion. If compound interest is positive, the account holder must eventually get rich (assuming he/she lives long enough, and assuming the interest rate of growth exceeds the inflation rate of shrinkage, inflation being an example of a negative exponential growth function).
    Whether Einstein said anything to that effect, I have no idea, but the similarity between the two is not often mentioned, so I wonder if any search for quotes with the keyword “exponential” rather than “compound” might turn up anything.

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