The Rule of 72

10/28/2016

"Take a simple idea and take it seriously."
- Charlie Munger

The Rule of 72 is one of those crazy simple ideas that permanently changed my life for the better. And that is because twenty two years ago, I decided it was one of those core bedrock hacks! The Rule of 72 is a very quick (and surprisingly precise) method of figuring out how long it takes to double your money at various rates of return. I'll let the eloquent Professor Peter Rodriguez explain:

https://www.youtube.com/watch?v=12FsjiVzTMA

It does pay off (bigtime!) to know the Rule of 72. It is one of the most important tenets for us diehard compounders . Warren Buffett had probably mastered this rule before his 10th birthday. He knew he was going to be the richest person on the planet decades before he got there. He knew his rate of compounding, knew his life expectancy - and didn't need to know anything else.

"Compounding is the 8th wonder of the world."
- Einstein

We, the compounders, agree with Einstein. It is all about the doubles. How long does it take to get a double and how many doubles can I get in a lifetime. And the Rule of 72 lets you do all the doubling math in seconds in your head.

18 Comments

Michael Sawick

10/30/2016 04:13:16 am

Great day Mr. Pabrai. Any opportunity to consume your thoughts, ideas, and teachings is done so with eagerness. I was introduced to your work through Guy Spier's book "The Education of a Value Investor", immediaty read Dhandha investing, and then listened to Phil Town discuss how much he respected you. I'm so excited to have found your blog. Many thanks!

Mohnish Pabrai

10/30/2016 12:26:50 pm

Thanks for the nice note Michael

Cisco

10/30/2016 06:05:41 am

Ryan Chudyk link

10/30/2016 06:46:18 am

I love the name of the blog, and I'm excited to see where you take us. Thanks for starting this, I'll be sharing for sure.

10/30/2016 12:27:32 pm

Thanks Ryan. This is fun!

Tony Caruso

10/30/2016 02:40:42 pm

Hello mr pabrai, I'm so happy you decided to write a blog and join twitter. I have followed you for sometime and also discovered guy spier through you.. thanks I
And look froward to see your tweets and blog post direct from you.
Kindest regards
Tony caruso
Twitter @canunu

10/30/2016 06:55:19 pm

Thanks for the nice note Caruso

Corpraider

10/31/2016 04:14:35 pm

I very much look forward to reading your blog. Thanks for taking the time to create it!

Mayur Dvivedi

11/1/2016 01:55:11 am

Dear Mr Pabrai.

Thanks for this forum to get into the workings of a great mind. All the best & warm regards.

Varun link

11/3/2016 12:10:07 am

Really enjoyed reading Dhandho Investor and instantly took to the concept of cloning. Your story has been an inspiration and this is year 7 into my journey and so far my sign reads COMLB14 :)

Looking forward to reading your thoughts about investing and life in general.

Best
Varun

11/4/2016 12:55:21 pm

Thanks for the nice note Varun. All the best

Alok

11/20/2016 06:42:51 am

Loved reading the Annual Report of Dakshana foundation. What an amazing success. Am sure you will write about this journey of yours on your blog.

Sumit kumar

2/19/2017 09:53:54 pm

Hi mohnish pobrai, thanks all your knowledge you provide to us, I enjoyed reading dhandho investor, Very good book
And I always watch your video.

Thanks

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The Rule of 72

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