Hugh Barker

it is meaningless to describe any of these goods as having value in themselves without referring to who is valuing them and what they might exchange for them

The only way you should value an asset is by considering its current value and comparing this to your other options: most of what has happened in the past is irrelevant. The trajectory of its past value may, of course, give us some information about the future trajectory, though as the adverts always say, ‘past performance is no guarantee’. While the aim should always be to sell an asset for more than you paid for it, refusing to sell at a loss can be more damaging than accepting the loss and moving on

The rule is to divide 72 by the rate of growth (or the interest rate, for savings and investments): the result gives you the number of periods it will take for the initial investment to be doubled. For instance, for an interest rate of 9% a year, we divide 72 by 9 and get 8 years. The actual time it would take money to double at 9% is 8.043 years (see Figure 5), so this is reasonably accurate

If you really want to get geeky about it you can use the more precise 69.3 as the numerator and use what is known as the Eckhart–McHale second order rule, which is this equation:

If you really want to get geeky about it you can use the more precise 69.3 as the numerator and use what is known as the Eckhart–McHale second order rule, which is this equation:

where t is the number of periods taken to double your money and r is the rate of growth. The second part of this equation helps to improve the accuracy of the estimate for high rates of growth, for which it is otherwise increasingly inaccurate

Chapter 1 Summary
1. Money can be treated as a variable in a comparative value equation.
2. Use the Rule of 72 for a rough estimate of how rapidly your money will grow.
3. Exponential growth should be part of your ideal business model.
4. Unless you can find some magic beans, you will need to learn how to manage risk and uncertainty, and how to make reasonable predictions of future value.

This leads to errors such as the sunk costs fallacy (in which people find it hard to give up on a lossmaking project because of the money that has already been spent on it).

you really want to get geeky about it you can use the more precise 69.3 as the numerator and use what is known as the Eckhart–McHale second order rule, which is this equation:

live in a material world, in which money can help to create opportunities in life. We all know that money can’t buy you love or happiness. But the lack of money can certainly lead to deprivation and frustration

worth’. This is defined as the amount of money you would end up with if you sold all your assets and paid off all your debts at current values.