"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.