Fold a piece of paper 8 times to understand investing

Hint: It’s all about exponential doubling

Exponential doubling is like folding paper.
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As Mythbusters once demonstrated, exponential doubling makes it impossible to fold an 8½ by 11-inch sheet of looseleaf in half more than 8 times. Using a steamroller, a forklift, and a sheet of paper the size of a football field, you can just barely get to 11 folds. 

All of this is a demonstration of the power of exponential doubling. The first time you fold the paper, it becomes twice as thick as a single sheet. The second time, it becomes four times as thick, then 8x, then 16x, and so on. By ten folds, the wad of paper is more than 1000 sheets thick; at 20 folds, you’re at a million layers. 

What does this have to do with investing? When you invest, the interest on your money earns interest. With the right interest rates and timespans, that leads to exponential growth. If you get 5% interest on $100, you’ll have $200 in 14 years. And in another 14 years, you’ll have $400. 

Exponential doubling is how investing gets astonishing.

As with the folding paper, it’s when you double the third, fourth, and fifth times that things get really interesting. Not many investors get the rates or the time to make that happen, but knowing that it’s possible — and that you don’t even need a forklift to do it — should make everyone an investor.