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Did Einstein Invent The Rule of 72?

6/28/2017

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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.
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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
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1495 portrait of Luca Pacioli, traditionally attributed to Jacopo de' Barbari
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Holding The Sun King Accountable

6/21/2017

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The historic results in this week's French elections, which upended the political establishment, got me thinking about accounting’s place in the creation of that republic.

King Louis XIV was known for his extravagance. The palace at Versailles is Exhibit One revealing his belief that cost was no object.

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Louis XIV of France ruled for 72 years and 110 days. The longest reign of any European monarch.
Luckily for Louis and his fellow Frenchmen, The Sun King showed great wisdom in selecting an accountant to help him keep the books balanced.

Jean-Baptiste Colbert began his political rise at a very early age and became Councillor of State before turning 30, just six years into Louis' 72-year reign. 

Through a series of political appointments, including Controller-General of Finances, Colbert instituted a wide range of tax reform and accountability measures which eventually got the state's finances in order.

His stringent and direct attacks on a number of royals and wealthy commoners earned him a large number of enemies. By the time of Colbert's death in 1683, even the king had grown tired of being held accountable by this meddlesome accountant.

And so it was that, by the end of Louis XIV's reign 32 years later, France's finances were back in disarray, eventually setting the stage for the French Revolution.

The moral of the story? Spendthrift behavior is unsustainable at any level; personal, royal or national.

Oh and, it's no accident that "accountant" and "accountable" are such similar words!
 
Best regards, Peter

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One cannot help but wonder what is the nature of the paper held by Colbert in this portrait.
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Something New Under The Sun?

6/14/2017

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It goes without saying that color is of great interest to us at Color Accounting International.   
 
So it gave us a thrill to see that Dr. Mas Subramanian’s team at Oregon State University has invented a new color. They’re calling it YInMn Blue, because it uses the chemical elements Ytrium, Indium and Manganese.

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The human eye can perceive approximately 7,000,000 different colors
The effectiveness of the Color Accounting system for teaching business acumen is in part due to our minds making better sense of color-coded accounting information, than traditional black-and-white, left-right information.
 
And while the application of color to accounting is a relatively new concept, the powerful impact of color on the human consciousness has been understood for centuries.
 
YInMn Blue may be something new under the sun, but purple has caught our eyes for quite a long time indeed.

In the 16th Century it was high treason to wear purple, which was King Henry VIII’s exclusive color.

And 1,000 years before that only Japanese officials of the highest rank were allowed to wear purple. It was the rarest of colors before today’s synthetic hues. 

In our seminars, purple is reserved for that wonderful thing, Profit!
 
Best regards, Peter

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Queen Elizabeth II sporting her Royal Purple while out for a drive with Prince Philip
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Numbers Never Lie, But People Sometimes Do

6/7/2017

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It's an interesting paradox that, when we read a declarative statement or quote from an "unnamed source," we are likely to question its veracity.

But we often take numerical statements at face value - even though economists and others may have decided to "torture the data until it confesses" the truth they wish revealed.

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Enron was able to falsely create a huge market value simply because no one questioned their numbers
Earlier in my career I did a course on editing and marking up copy for print. One sentence said “...the 7,640 feet high Golden Gate bridge in Washington state is one of the most beautiful in the world.”
 
Twenty out of twenty students corrected the text to relocate the bridge to its rightful place in California. Only one refused to accept that the bridge was over a mile tall. Perhaps the fact that I was an accountant caused me to take that number - and all numbers I read - with a grain of salt.

And that’s what we want for our learners: an appropriate dose of skepticism, and no undue reverence for stated figures. You’ve heard of alternative facts. Well there are also plenty of "alternative numbers." 
 
I read this week that toxic bosses cost the U.S. economy $21B a year in lost productivity. Who on earth came up with the number? And how would they know? After all, 24.53% of statistics are made up on the spot.

With my best wishes for a healthily skeptical week. 
 
Peter

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Even numbers which are factually correct can be twisted to support misleading conclusions
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Surrounded by The Magic of Learning

6/1/2017

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There’s something special about being surrounded by over 10,000 people, all gathered in the cause of learning.

That’s how it was for members of our global team last week in Atlanta, Georgia at the Association for Talent Development's International Conference, ATD 2017.
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Twin NASA Astronauts Mark and Scott Kelly were the keynote speakers at ATD 2017
Astronauts Mark and Scott Kelly gave the opening keynote address. Their down-to-earth tips for success contrasted with their soaring tales of the International Space Station.

Tips like:
  • Make very, very small corrections all the time
  • Set yourself goals
  • Focus on what you can control
Learners and teachers on all sides, even lessons from above!

When I got home I signed up for an alert from NASA that tells me each time the space station passes overhead within view of my house.

It reminds me daily that there’s learning and wonder all around us.

Peter
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The International Space Station is big enough, and low enough, to be seen with the naked eye
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