The Rule of 72
"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:
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."
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.
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!
10/30/2016 12:26:50 pm
Thanks for the nice note Michael
10/30/2016 06:05:41 am
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!
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
10/30/2016 06:55:19 pm
Thanks for the nice note Caruso
10/31/2016 04:14:35 pm
I very much look forward to reading your blog. Thanks for taking the time to create it!
11/1/2016 01:55:11 am
Dear Mr Pabrai.
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 :)
11/4/2016 12:55:21 pm
Thanks for the nice note Varun. All the best
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.
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
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Mohnish Pabrai is the founder and Managing Partner of the