Rule of 72: A 600-year mathematical calculation can help you become rich (and save money)

Well, this figure was spent by an anonymous buyer who acquired Summa de Arithmetica, from the Italian Renaissance monk, Luca Pacioli.

Specifically, the work of Venetian Pacioli was sold at a price of 1.2 million US dollars through the Christies auction house in New York in June.

Volume, published in 1494, is considered the first accounting book in history and, to date, its double-entry accounting system is still used, although it was not invented by him.

Its real origin must come from the Islamic or Indian world, two schools also studied by Pacioli.

But perhaps the amount paid seems ridiculous when you know how the precious and astonishing rule works.

This is the so-called number rule 72, which contains a perfect and reliable calculation of investments and activities.

The procedure is simple: taking 72 as a dividend as a reference, it is possible to predict the evolution of macroeconomic data such as inflation, debt or economic growth.

In practice

To better explain it, put the numbers on the table and check for the curious accuracy with which this rule works.

If we divide 72 by the rate of economic growth, the interest rate, the savings or the investment, the result will give the time during which the initial investment will double.

For example, with an interest rate of 9% per annum, we divide 72 by 9 and the result is 8 years.

If, on the contrary, inflation is a matter of concern, 72 would be divided by its rate of growth. Let's say that's 6%. Simple: 72 out of 6 equals 12. That would be the number of years during which the money would be worth half.

For example, Mexican inflation is posting annual growth of 3.78% up to now in 2019, according to the latest data from the Bank of Mexico. If we round to 4 and take that value as a divisor of 72, the formula would give 18. In 18 years, about 100 Mexican pesos today would have a buying power of 50.

But in reality, 72 is not the most appropriate number. Economists recommend using 70 or 69.

However, this Pacioli chose 72 is another of his trick. This number can be divided between 2, 4, 6, 8 and 12, and most arithmetic operations are easier to perform with 72 than with 69.

"The last man of the Renaissance"

Luca Pacioli not only wrote the book that gave birth to modern commerce, but also recovered mathematical texts already forgotten.

In addition, he ventured into the fields of art and architecture, which led him to meet and befriend Leonardo da Vinci.

Pacioli even collaborated in the construction of "The Last Supper", Da Vinci's masterpiece.

For Margaret Ford, of Christie's Books and Manuscripts section, Pacioli is "the last man of the Renaissance".

"Summa de Artithmetica is a very modern book (…) deliberately chose to write in vernacular languages ​​instead of Latin, so his voice has gone beyond the confines of the school."

BBC