Do You Know the Rule of 72? Project Future Returns in Your Head.

I haven’t posted a lot about personal finance lately, and I’ve been meeting to get back on the horse soon.  In the meantime, this is a fun one for those of you who may not have heard it before.

When investing for a long term goal, like college or retirement, it’s often very useful to be able to quickly determine how long it will take to double your money.

Enter the Rule of 72.

Now, the Rule of 72 is shorthand, and not completely accurate.  But it’s accurate enough to be immensely useful.

The Rule of 72 says that if you divide 72 by the rate of return on an investment, you’ll get the number of years required for that investment to double.

So, if you find an investment that returns 8%, 72 / 8 = 9, so the investment will take 9 years to double.

I learned this rule about 15 years ago from my grandmother, and I’ve been using it for quick shorthand ever since.

For example, let’s say I want to know how much a $50K 401K might be worth over time.  Assuming an 8% rate of return, I can quickly determine that it will double in 9 years, quadruple in 18 years, octuple in 27 years, and be worth $800K in 36 years.

This also works, unfortunately, for loans, but in reverse.  If you take a student loan out at 7.2% for 10 years, well, you can expect to end up paying double what you borrowed in total.

I’ve also used this rule in business environments, especially when you are looking at compounding growth rates for business metrics like sales, revenue and costs.

Once again, the rule is really a shorthand, and not completely accurate.  Obviously, a 72% return doesn’t double in 1 year.   And a 1% return doesn’t double in 72 years.  However, it’s surprisingly accurate in the middle ranges, which apply to most situations.

This article in Get Rich Slowly has some variants that are fun. But for me, the basic Rule of 72 lets me quickly an easily assess what a return will really mean to an investment, in those rare moments when I’m away from Excel.

So enjoy this tidbit, and I’ll get to some meatier topics this week.

Blizzard Demos Starcraft 2 in Korea

When you play video games, you always remember the ones that absorbed huge blocks of time from your life. Starcraft was one of those games for me.

Well, it looks like the next great game from the company that brought us World of Warcraft will not be another Warcraft title or massively multiplayer game. Instead, they have taken the wraps off of a Starcraft sequel. The Starcraft 2 website is live!

For those of you who don’t play these types of games, Starcraft is a strategy game where you control armies of one of three species: Human, Zerg, or Protoss, and it’s a basic “mine, build & fight” kind of game. This one, however, was so well executed that it became the basis for professional competition in Korea, and a world-wide phenomenon.

The Blizzard games have inspired hundreds of copycat titles, but it’s an extremely hard problem to balance the design of the different races, units, resources, economics, technology and gameplay. In fact, it’s almost an impossible problem. Blizzard, however, does it better than anyone.

Here is a good write-up on the debut and press conference Q&A on GameSpot. Here is another one on Inside Mac Games.

Better yet… here is the CGI announcement trailer for the game, as debuted in Korea, on YouTube:

Here is a great video of the actual gameplay… notice again. Three key races (Terran, Zerg, Protoss) and a much better model of air/ground interaction.

Going back over 15 years, Blizzard has repeatedly demonstrated their ability to develop games that are outstanding in design and execution. What Pixar is to computer-animated film, Blizzard is to modern video games. As another hallmark of an exemplary shop, they deliver their titles for launch on both the Mac & PC simultaneously. You don’t see them complaining about time to market or cost. They know that a game of sufficient quality will pay for itself many times over, and with Blizzard’s track record, they always do.

I’m very excited to play this game, although I realize that in the modern era, I will be hopelessly outclassed by other players before I even get the DVD home and installed 🙂

Update (5/22/2007): Nate has a post on this as well, and he found more great YouTube videos of the gameplay presentation.  I felt like I was getting a 20 minute tutorial on Protoss unit deployment.  Colossus!

LinkedIn: In the Black Party

In case you were wondering where I was last night, I had the chance to go up to San Francisco for the LinkedIn “In the Black” party, to help celebrate LinkedIn’s first year of profitability. The Web Strategist blog has some great coverage and photos.

What are the chances of a web startup making it? 5%? 2%? not very good for most? We should take a lesson from business networking tool LinkedIn.

LinkedIn celebrates over 14 months of profitability, which is an amazing feat for the thousands of web companies in Silicon Valley that sprout.

Check out the full post here.

For me, it was a chance to actually wear a suit and take Carolyn up the city – not something that happens every day with two little ones at home. There was a very warm feeling at the event – something about the LinkedIn culture is incredibly open, friendly and very human.

As a bonus we discovered several friends also at the event. The funniest introduction at the party was pre-school related – apparently being the father of Jacob Nash has its privileges. They were the parents of one of Jacob’s pre-school classmates, and I believe the direct quote was, “Jacob Nash is a really big deal in our household.” It’s possible that this is Jacob’s world, and I’m just living in it. 🙂

The food & wine was excellent, but my personal favorite of the evening was the chocolate. A wonderful table of extremely rich chocolates with exotic infusions like tea and grapefruit. Even a small exit gift of gorgeous truffles.

It was wonderful to be included, and a great night out. I can’t wait to get started next week.

Congratulations to the entire LinkedIn team.

Update (5/21/2007):  Two great posts on the event on the LinkedIn blog, and on Mario Sundar’s blog.  Check them out.

Nintendo Video Game History: For Sale on eBay This Week!

Yes, I am shamelessly plugging my own listings. Deal with it.

I actually have 13 new listings up this week, and I thought it would be fun to highlight them because most of them are ghosts of video game consoles past like the mythic dungeons in world of warcraft! If you don’t know what I’m talking about then you can’t miss visiting this and revive the old memories. Most were dug up by my father recently, who keeps discovering new things to sell in his endless supply of storage sheds.

This week, I have the following starting on Sunday at 5pm:

  • Nintendo 64, with Mario 64 & Rumble Pack
  • Lot of 10 Nintendo 64 Games
  • Super Nintendo, with two controllers (but no AC or Video Cable)
  • Original Nintendo, with Super Mario Bros.
  • … and other assorted goodies

Feel free to check out my new listings. And happy bidding! 🙂