You Can Master Your Exponential Growth With These Four Simple Examples
Your Exponential Growth is Just a Piece of Paper
Do you remember the old science puzzle of folding a piece of paper in half as many times as possible? If you do, you must observe that folding a paper gets incredibly hard with time.
And about 6th time it get so hard that we’d almost quit.
However instead of getting bored if you continue the experiment in your imagination then math will provide you with an alluring insight.
Let’s Imagin doing this with me! Shall we?
Example 1
The thickness of an average paper is 0.55 mm We now have our facts straight. Let’s do the math. The thickness of the paper is doubled every time it is folded, so
If you could keep folding an average piece of paper, it would reach the moon after only 42 folds( 219,902,325,555.2 mm = 219,902.326 km.) The Average distance of the Moon from the earth is 238,855 Km )
But How? Well the Word you are looking for is “ EXPONENTIAL “
with each folding, the height of the paper doubles — and if you keep doubling anything, it simply gets huge. This is the potential of exponential growth my friend which most of us can hardly comprehend.
And to explain( Literally, poetically) this entire process in one line I would say
“Your consistent effort when compound can even take you the moon “
Example 2
Suppose a genie appeared and I ask you to choose between a penny today that doubles every day or $ 1 million Today?
The fact is most of us would choose $1 million as it’s a pretty decent amount compared to a penny which will take weeks to even reach $1.Sounds Obvious Right!
But amazingly with the penny, you’d wind up with ten times more, more than $10 million.
I know it’s paradoxical and you are nothing is wrong with your choice. Although this is where compounding comes into play. A penny will take weeks to reach $ but in the final few doublings, you will start getting $ 1 million.
In an exponential environment, the last few stages play a crucial role. The tables start turning from there only.
“You can see the power of compounding with patience only”
Example 3
I know you know what is compounding and the second scenario brings us closer to compounding and the power of compounding.
But how does it works?
For instance, there are two people, You and Your Friend. You begin saving Rs 750 per month at the age of 28 and plan to continue investing for the next 15 years. After 15 years, you decide to stop investing and decide to keep some for your retirement and some to spend on, let’s say an annual family trip.
Your friend, on the other hand, begins investing Rs 5,000 every year when he is 40 years old and continues to do so until he is 50. Suppose you both obtain a 15% post-tax return on your assets, the wealth of both of you as an investor would be like this:-
Your monthly investment Of Rs 750 made between the ages of 28 and 53 would total roughly Rs 27.7 lakh by the age of 60, whereas Your Friend’s yearly savings Of Rs 5000 began at the age of 40 and will total around Rs 25 lakh when he is 60 years old.
This is a clear example of the power of compounding and based on that it will be much smarter to invest early and let your money work for you and keep adding to it.
Even hypothetically But a 28-year-old who quit investing after 15 years will outperform a 35-year-old who continues to invest until retirement.
“ Smart People work for Money but the smarter ones make their money work for them “.
Example 4
There is an old Story that when Albert Einstein was asked what human’s greatest discovery was, he replied, “Compound interest.” Einstein called compound interest the “Eighth Wonder of the World.”
While there is some debate over whether Einstein said any of this, there is no denying that compounding interest is a wonderful idea.
Let’s elaborate on this with another Great example (The last one )
Benjamin Franklin left $1,000 to Boston and Philadelphia before he died in 1790. He instructed them to invest the money and not touch it for the next 100 years. Following that, they were required to withdraw 75 percent and spend it on public service. Philadelphia had amassed $70,000 in 100 years, whereas Boston had nearly $328,000.
Later On, Philadelphia build a Museum, the Franklin Institute, while Boston established a school, the Franklin Institute of Technology from the additional donation from Andrew Carnegie
Also, Benjamin once said “Money makes money. And the money that money creates makes more money.” This is by far the most basic explanation of compound interest you will ever hear.
“ Compound Interest is the 8th wonder of the World, he who understands it earns it, and he who doesn’t pay it” — Albert Eienstine
What do you want to be? the one who earns it or the one who pays it?
Compounding causes exponential Growth, never overlook the power of compounding. It may be tough to comprehend but easy to apply. Just keep investing and you can create a lot of wealth sooner than you might imagine.
Love
Avinash “ Who understands the power of compounding “ Rajput
