8.13.2009

Einstein's Interest

Many of you have probably heard an excessive amount of quotes from Albert Einstein. I even included one beneath my senior yearbook picture in high school. At the time, I felt that the world would be better off if people worked hard and minded their own business a little more. Kudos to you if you know that quote. Anyway, one of the more common quotations that I thought to be surprising, coming from a physicist, was the following:

"The most powerful force in the universe is compound interest."

No disrespect to Al, but finance, really? Shouldn't he have been continuing to discover much more complicated things than compound interest? Don't waste time thinking about interest...He needs to find out that E equals M multiplied by C squared! Yes, I understand that physics involves many topics covering forces, their power and many other topics that I do not remember from Mr. Freyer's second period lectures...but I still see this as a financial topic.

Having said that, Einstein is exactly right in saying that compound interest is a powerful thing but I think he is limiting himself in his definition of the most powerful force. Compound interest is great but it is only one type of a wonderful, profitable thing called residual or passive income.

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