It cracks me up that compound interest gets raised every time someone makes an argument about just how much money billionaires have. As if the only reason we’re not billionaires is because we were too dumb to invest the $5,000 we’ve been making every day since Columbus sailed the ocean blue.
Today “compound interest” usually relates to reinvested dividends and amortized growth/appreciation of investments (e.g., stocks, bonds) simply because non-predatory loans are designed for payoff within some fixed term. So if the term “compound interest” applies, something unexpected is happening (e.g., default) and the loan will be bundled and sold at a discount to collections.
Not far enough back to make a difference I’d wager
I’ll take that wager! 5k daily, ignoring inflation and leap-years, compounding annually (not quarterly) at 10% annualized ROI, gives us the standard annuity formula
1.1 * 5000 * 365 (1.1n-1) / 0.1
where n is the number of years, which
… in 100 years becomes ~278 billion (e11)
… in 200 years becomes ~3.8 million billion (e15)
… in 300 years becomes ~53 billion billion (e19)
… in 400 years becomes ~721 thousand billion billion (e23)
… in 533 years becomes ~231 billion billion billion (e29)
If that sounds incredible to you, you’re not alone. It’s the result of a hyperbolic growth curve that starts slow but keeps accelerating indefinitely, and 533 years is a very long time in market terms, so you easily reach the silly-numbers range.
Edit: the numbers before were napkin computation. I edited this to use the standard annuity formula which should be more accurate. Point should be the same though. Exponential growth is crazy.
Lol you’re right! It looks like the final number I gave was only for 400 years. I didn’t actually reach 533.
Also I was rounding numbers midway through like a pen and paper physics computation. Since that error scales exponentially, even if I had gotten to 533 the final number was guaranteed to be off.
No it isn’t because it’s an imagery used to show how absurd that amount of money is. 5000 a day is easy to grasp and a few hundred years is easy to grasp.
I feel like compound interest would be important here
It cracks me up that compound interest gets raised every time someone makes an argument about just how much money billionaires have. As if the only reason we’re not billionaires is because we were too dumb to invest the $5,000 we’ve been making every day since Columbus sailed the ocean blue.
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That’s real nice and all but curiously, nobody ever says that.
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When did compound interest even get invented?
Not far enough back to make a difference I’d wager
Edit: Compound interest when charged by lenders was once regarded as the worst kind of usury and was severely condemned by Roman law and the common laws of many other countries.
Well…shit…
Today “compound interest” usually relates to reinvested dividends and amortized growth/appreciation of investments (e.g., stocks, bonds) simply because non-predatory loans are designed for payoff within some fixed term. So if the term “compound interest” applies, something unexpected is happening (e.g., default) and the loan will be bundled and sold at a discount to collections.
I’ll take that wager! 5k daily, ignoring inflation and leap-years, compounding annually (not quarterly) at 10% annualized ROI, gives us the standard annuity formula
1.1 * 5000 * 365 (1.1n-1) / 0.1
where n is the number of years, which
… in 100 years becomes ~278 billion (e11)
… in 200 years becomes ~3.8 million billion (e15)
… in 300 years becomes ~53 billion billion (e19)
… in 400 years becomes ~721 thousand billion billion (e23)
… in 533 years becomes ~231 billion billion billion (e29)
If that sounds incredible to you, you’re not alone. It’s the result of a hyperbolic growth curve that starts slow but keeps accelerating indefinitely, and 533 years is a very long time in market terms, so you easily reach the silly-numbers range.
Edit: the numbers before were napkin computation. I edited this to use the standard annuity formula which should be more accurate. Point should be the same though. Exponential growth is crazy.
100% agree with the point you’re making and 100% disagree with the math that you did to get there.
Lol you’re right! It looks like the final number I gave was only for 400 years. I didn’t actually reach 533.
Also I was rounding numbers midway through like a pen and paper physics computation. Since that error scales exponentially, even if I had gotten to 533 the final number was guaranteed to be off.
Update: fixed it
DAMN YOU AND YOUR MONSTER MATHS!
even $1 at 1% compound interest gets ridiculous after a hundred years
$2.70
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No it isn’t because it’s an imagery used to show how absurd that amount of money is. 5000 a day is easy to grasp and a few hundred years is easy to grasp.
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