How Many Dominoes Does It Take to Knock Over the Empire State Building?
Posted: Brandon Arns
“Start investing early because of compounding interest.”
Almost everyone has heard some variation of this generic advice. It’s personal finance 101. You probably first heard about compounding interest when you were a kid. Even Einstein (supposedly) said it’s the “Eighth Wonder of the World.” Although you’re probably familiar with compounding, it’s nearly impossible to appreciate how powerful the effect really is.
If you started with a basic domino, and grew the next one by 50%, and the next one by 50% of that, continuously (as shown below), how many dominoes would you need to have one the size of the Empire State Building?
There is a story about a mathematician in India, who invented the game of chess about 1000 years ago. The Indian ruler, impressed by the game, offers the man all the gold and silver that he wanted. He humbly declines, and instead asks for much more modest prize, or so it seems. He asks that a single grain of rice be put on the chess board, and doubled on the next square, as shown below. All he wants is the rice on the last square. How did he do?
How much of Warren Buffett’s wealth has been earned in the last decade, versus all of his previous years combined (he is currently 88)? Here’s a hint:
Finally, and most importantly, what does this mean for you? How can you double your money and how long will it take? How has the stock market compounded throughout its history?
All of these questions are answered in the following CNBC video. It features Josh Brown, a renowned blogger, twitter personality and CEO of Ritholtz Wealth Management, and his message is simple: Start investing early.