Apparently you can not fold a piece of paper more than 12 times. But let’s imagine that you could. How many times would you have to fold a piece of paper for it to be as thick as the distance from Earth to the moon (384,400 km)?
The answer: about 43 times. I was mind-blown when I first heard about this.
Let’s dig a little deeper. A piece of paper is 0.005 cm thick, according to a quick Google search. Each time you fold the piece of paper, it doubles in thickness. So when you fold a page once, it becomes two pages thick (0.01 cm). After the second fold, it is now 4 pages thick (0.02 cm), then 8 pages thick (0.04 cm) after the third fold , then 16 pages thick (0.08 cm) after the fourth, etc. These are still small numbers, but the thickness starts to increase very quickly. After 15 folds, your paper is around the same height as an average woman in the US. After 24 folds, your paper is taller than the Burj Khalifa, which is the tallest building in the world. After 28 folds the stack surpasses the height of Mount Everest. After 42 folds, you are over half way to the moon, so that means that 43 foldings is all it takes for your paper to be thicker than the distance from Earth to the moon!
Thickness of paper after a certain number of folds
It takes 42 folds to get over half way to the moon, and only 1 additional fold to get past the moon. The exponential growth is pretty incredible, isn’t it?
This is an example of a Power Law, which Peter Thiel talks about in his book “Zero to One.” Thiel uses technology companies as an example. A small number of companies outperform all others – the 12 biggest tech companies were worth a combined $2 trillion at the time the book was written, which is more than all other tech companies put together.
How does this idea relate to building wealth? Compound interest.
Pareto’s law states that 80% of the outputs come from 20% of the inputs. It might not be exactly 80/20, but the majority of our wealth will come from the last few years of compounding once a significant nest egg is built up. Consider this stat about Warren Buffett: 99% of Buffett’s wealth came after his 50th birthday ($62.7 billion of $63.3 billion), and nearly 95% after his 60th birthday.
Let’s use of an example of someone who is not worth billions of dollars. Assume Rob saves $10,000 per year and averages 8% on his returns.
It takes 28 years for Rob to surpass the million dollar mark in this case. But it only takes 8 more years to get to $2 million. Then 5 more years to get to $3 million. Building wealth is not linear, it is exponential. This is crazy to think about. We work so hard to build up a significant nest egg, but the majority of our wealth will come from compounding once we have reached a critical mass of savings.
For someone just starting out, like myself, it is both discouraging and exciting. It’s discouraging because it is difficult to get started and stay motivated to a long term quest of building wealth. But by working hard to save money now, we will be rewarded with our money working harder than we do later in life. And that thought is exciting!