A recent article in the Wall Street Journal got me thinking about the importance of accounting to both history and popular culture.
Popular belief holds that Albert Einstein once said "There is no force in the universe more powerful than compound interest," and that he in fact invented the famous Rule of 72.
The Rule of 72, as you may recall, tells us how many years are required for an investment to double, by dividing the interest rate into 72.
For example, an investment paying 8% will double in approximately 9 years, because 72 divided by 8 equals 9.
This simple arithmetic computation is not exact, but it is close enough to the exact results of a logarithmic equation to make it extremely useful.
As for Einstein? No proof can be found that he ever even mentioned the Rule of 72, much less invented it.
In fact, it was first cited nearly 400 years before Einstein's birth, by Italian friar Luca Pacioli, in his 1494 book “Summa de arithmetica geometria, proporzioni et proporzionalita,” a guide to arithmetic, algebra, geometry, accounting and weights and measures.
In many ways The Rule of 72 is much like Color Accounting: they both dramatically simplify a previously impenetrable problem, allowing just about anyone to find the answer they are looking for.
Best regards, Peter
1495 portrait of Luca Pacioli, traditionally attributed to Jacopo de' Barbari
