Someone was recently asking me about the Rule of 72 – a simple method in Finance for estimating an investment’s doubling time. Divide 72 by the rate of return, and the answer is an estimate of the number of years it will take you to double your investment (assuming compounding interest, of course). Anyone who works in the finance field should know the Rule of 72 – yet I have come across many high level finance executives (and CEOs) who did not know the Rule of 72 (it comes in handy in late night meetings where folks don’t have calculators!). Perhaps they didn’t care about doubling value –but I digress. The real point that this question got me thinking about is how the Rule of 72 equates to the Power of 13!
@Team13System, in our Coaching and Training segment, we emphasize the “Stretch 13” concept as a way to maximize your personal Net Present Value. It starts with the basic task of mapping out 100 long-term goals. Everyone should always have a list of 100 goals to accomplish, which is continually updated on a monthly basis. This goal-setting process is the foundation for achieving long-term Happiness in life. And remember, Happiness leads to Success – not vice versa. [Author note: we will talk about the H=R÷E formula in a future Blog]. The “Stretch 13” simply adds 13 extra stretch goals to this base list of 100. These are goals that some would call outlandish – goals that on paper you would have zero chance of achieving. Of course, @Team13System we know that anything is possible. We thrive on accomplishing in reality what everyone says is impossible on paper. That’s what “Stretch 13” is all about.
And now, the connection of “Stretch 13” to Finance. Solving for the rule of 72, we now know that we can double our value every 5 to 6 years (72/13 = 5.5) through the compounding power of that extra 13. That’s not too bad! Most folks don’t understand this way of thinking – they don’t set goals – they don’t stretch. Do they get a nice, smooth, slow and steady personal development and growth? Sure. But as Warren Buffett might say, we will always take a lumpy 13% over a smooth 5%! Don’t be afraid to stretch and don’t be afraid of 13 – the effort associated with that extra 13 has a huge long-term payoff!
This blog is dedicated to a student I once taught, who, upon listening to me explain an extra credit assignment requiring the writing of 100 personal goals, raised her hand and said “I will not do this as it has nothing to do with my MBA.” Remember — mind, body and spirit are always related, just as the Rule of 72 relates to the Power of 13 and to each individual’s Net Present Value!
Edward C. Harding III http://www.linkedin.com/in/edwardcharding3rd/