Compounding is the Most Powerful Force in the Universe

Posted on December 8, 2008  Comments (3)

A talking head with some valuable info. I remember my father (a statistics professor) getting me to understand this as a small child (about 6 years old). The concept of growth and mathematical compounding is an important idea to understand as you think and learn about the world. It also is helpful so you understand that statistics don’t lie but ignorant people can draw false conclusions from limited data.

It is unclear if Einstein really said this but he is often quoted as saying “compounding is the most powerful force in the universe.” Whether he did or not, understanding this simple concept is a critical component of numeracy (literacy with numbers). Also quoted at times as: “Compound interest is the eighth wonder of the world.” My guess is that people just find the concept of compounding amazing and then attribute quotes about it to Einstein.

I strongly encourage you to watch at least the first 2 segments (a total of 15 minutes). And then take some time and think. Take some time to think about compounding in ways to help you internalize the concepts. You can also read his book: The Essential Exponential For the Future of Our Planet by Albert Bartlett.

Related: Playing Dice and Children’s NumeracySaving for Retirement (compound interest)Bigger Impact: 15 to 18 mpg or 50 to 100 mpg?Sexy MathThe Economic Benefits of Math

3 Responses to “Compounding is the Most Powerful Force in the Universe”

  1. Patrick
    December 12th, 2008 @ 7:29 am

    Very interesting series. I watched the first two videos. I know that our current rate of inflation will not be sustainable in the long run, or if it is, the dollar will become essentially worthless. I traveled to Turkey when I was in the military and their money was practically worthless – it was over 1,000,000 Turkish Lira to the dollar. I brought home 100,000 Lira notes home as souvenirs. While I don’t think that will hit the US anytime soon, running the numbers on exponential inflation for regular consumer goods projects some very ugly numbers by the time I reach retirement age. Hopefully my retirement accounts won’t be worthless!

    Regarding population growth… I have no idea what to say there. You can let your mind run for days over that issue.

  2. Don
    February 6th, 2009 @ 5:56 am

    I agree with you about the power of compounding. In investment, it gives us a strong reason of why we should start early.

  3. Numeracy: The Educational Gift That Keeps on Giving » Curious Cat Science and Engineering Blog
    February 19th, 2012 @ 8:24 am

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