🔥 The Compound Interest Trap: The King Who Couldn’t Pay His Promise

Legend has it that chess was invented in India many centuries ago. The king was so impressed with the invention that he told the creator of the game:

— Ask me for any reward you want!

The inventor, with a cunning smile, asked for something that seemed modest:

— Your Majesty, I only ask that you give me one grain of rice on the first square of the chessboard, and then double the amount of rice on each subsequent square.

The king, surprised by the simplicity of the request, immediately agreed. He ordered the rice to be placed on the board:

• Square 1: 1 grain

• Square 2: 2 grains

• Square 3: 4 grains

• Square 4: 8 grains

• …

• Square 10: 512 grains

• Square 20: 524,288 grains

• Square 30: 536,870,912 grains

As they moved along the board, the number of grains grew exponentially. By the time they reached square 64, the number of grains was so enormous that it exceeded the world’s rice harvest for several centuries:

18,446,744,073,709,551,615 grains of rice! 🌾😱

The king, horrified, realized that he had promised something he could never pay.

⸻

💡 Why is this story so important?

This tale not only speaks of the inventor’s cunning, but also teaches us the power of compound interest: the exponential growth of something that is doubled (or grows at a constant rate) over time.

In investments, compound interest means your earnings generate new earnings, and those new earnings, in turn, generate more earnings. Over time, what started small can grow to unimaginable levels.

📈 Compound interest is the eighth wonder of the world, as Albert Einstein said: “He who understands it, earns it. He who doesn’t, pays it.”