I have absolutely nothing.
I don't have anything.

To not have diddly squat means to have absolutely nothing - zip, zero, zilch - you get the idea. :-)

First of all, it doesn't mean "nothing." NOT to have diddly squat may mean to have nothing, but to HAVE diddly squat means to have very little.

There are two main schools of thought on the origin of the phrase.

1) From "Why You Say It" By Webb Garrison (Rutledge Hill Press, Nashville, Tenn., 1992): "Diddly-squat.Strictly American in origin, that expression sounds suspiciously like a pair of modified barnyard terms - but isn't. Carneys (carnival workers) who traveled from town to town working one county fair after another developed their own private language. They had to do so in order to attract potential gamblers who would pay for a chance at a gimcrack prize. 'Diddle-e-squat' seems to have entered the carnival talk to name money - often a nickel or a dime, since that was the going rate for a game of chance. Frequently used to hide talk about a small amount of money, it was an easy and natural transition for the carnival term to indicate very little of anything."

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Note added at 2 hrs 1 min (2004-06-05 15:25:20 GMT)
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2) Having conducted extensive research into diddly, diddle, doodle, dawdle and several similar red herrings, I have come to the conclusion that it\'s just excrement. Wait, don\'t go! I mean, literally, that\'s what diddly-squat means. The earliest (1934) form of this expression was doodly-squat. The word squat came to English in the 15th century from the Old French se quatir meaning \"to crouch\". As squatting is involved in the performance of a certain bodily function*, squat was occasionally used as a euphemistic substitute, as in: \"That boy don\'t know squat about baseball.\"

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Note added at 2 hrs 3 mins (2004-06-05 15:27:38 GMT)
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In short, it seems that \"squat\" stands for \"shit\" and is probably the origin of the carney slang as well.

diddly (also diddly-squat) (US informal) = anything eg He hasn't done diddly all day. There's no point in asking Ellen - she doesn't know diddly.