This post comes against the background of ESKOM (South Africa’s electricity supplier) asking for yet another 45% increase per year for the next 3 years. I listen to the radio news every morning while shaving and many times start thinking about the news – and forget to listen. Anyway, there is one concept, idea, fact that is of the utmost importance if you want to grow your money and you need to understand that.
If my car consumes 7l of petrol per 100km, it means that I can calculate the litres consumed over 1000km’s by multiplying 7 by 10. It is easy – most people can do that without a problem.
But consider this: I have a 100m2 fish pond. An alien plant lands in the pond and starts growing. On day 1 it forms 1 leave. Day 2 there are 2 leaves and so it carries on doubling every day. It takes 10 days for the leaves to cover half my pond. How long will it take to cover the rest? If it worked like the fuel consumption, it would take another 10 days. But it does NOT work like the fuel consumption. This is exponential! Therefore it will take only 1 day to cover the rest of the pond.
It is not 1 per day – that is the easy part. But it is 2x2x2x2x2x2x2x2x2! Computer ram works the same way! So we started off with 64k ram. Then 128k, then 256k, 512k, 1024k (or 1meg) and so it increases.
The point I am trying to make is: anything that multiplies like the leaves on the pond or computer ram can make you exceptionally rich, or extremely poor! And I think it is very important that we are able to recognise exponential growth and linear growth. My fuel consumption is linear. The further I drive, the more fuel I use. But it increases in a straight line. The leaves start very small and we are lulled into a false sense of security or ignore the potential – and then suddenly it gets big.
Practical example: I mentioned John Sweet the other day. He sells tips on horse racing. One of his clients wrote to him the other day explaining how he uses exponential growth to grow his money with John’s tips.
This person (let’s call him Mr B) is willing to loose R300 per day. John gives 3 “good and safe” bets each day. Mr B bets R100 on the first tip. If it wins, he adds another R100 to his winnings and bet that on the second tip. If it wins he adds another R100 on the third tip. He actually gave a breakdown of his bets over the approximately 14 days that he did this. And some days all three bets lost! Then he lost R300. But despite that, he grew his money to more than R6000. That is the money growing power of exponential growth!
Look for it, search it out and use it!
But remember, never try to use it to recoup losses. Unless you have unlimited funds and can print your own currency – like the government!
Let’s go back to the leaves on the pond.
When I see that first leave, it is only 1 and nothing compared to the size of my pond, so I ignore it. After 2 days there are only 2 leaves, so I am not too worried, probably don’t even notice it. In fact, I might not even be aware of the leaves after 6 days, because there are still only 64 leaves. But on day 7 I start to notice, because I now have 128 leaves in my pond. By day 10, 50% of the pond is covered and now I am definitely aware of the problem – there are 1024 leaves. And day 11? My pond is covered by 2048 leaves. From 1 leave to 2048 within 11 days. Just imagine you could grow your money like that! Or worse, imagine you had to double up to make up losses, and play 20 also loses!
If the leaves where R1, you would have R131072 after 17 days. And you would be a MILLIONAIRE with R1048576 on day 20! Not bad, is it?
So look for opportunities to do this, but at the same time beware of the dangers.
Tomorrow I will show you what ESKOM is doing and tell you where I am with my solar geyser!