Investing
But Einstein said it was the most powerful force in the universe, and I take all my investment advice from flippant remarks by theoretical physicists making small talk at parties.
But Einstein said it was the most powerful force in the universe, and I take all my investment advice from flippant remarks by theoretical physicists making small talk at parties.
Compound interest is a type of interest in which the interest earned is added to the total amount, so that the interest itself then begins to gain interest in an exponential fashion. This contrasts to simple interest, where the amount used to calculate the interest will always stay at a fixed value. In economics classes, many teachers like to demonstrate extreme examples of compound interest, typically turning a thousand dollars into tens of thousands thanks to unrealistically high interest rates over several decades. But here, Ponytail discovers that a more realistic example is less than overwhelming. Instead of simple interest of 2% earning $200 in ten years, with compounding $219 is produced, hardly any better on a $1000 investment.
There is an urban legend that Einstein said that compounding interest is the most powerful force. Snopes has its doubts about it.
The idea in the title text that people take advice from physicists making small talk is also referenced in 799: Stephen Hawking and 1206: Einstein.