Doubling Down—From 1 Cent to $1 Million in 27 Days
I confess! I’m a sucker for all kinds of trivia. Fascinating facts, history facts, math facts, you name it. When my creative juices stop flowing, I often turn to trivia as a means to recharge the old batteries. I was doing just that when I tripped across this:
If you begin with one cent (a penny) and double it each day for 27 days, you will have more than a million dollars.
“Yeah … right!” I thought to myself, quickly dismissing the notion as typical Internet BS.
Later that evening I found that I was still thinking about this improbable piece of mathematical duplicity. Could it really be true? Unable to quell my curiosity, I brought up an excel spreadsheet—intent on learning the truth of it.
Using Excel, I entered the following formula into a cell (feel free to do this at home):
That is $0.01 followed by twenty-seven 2’s and the result was $1,342,177. It has to be twenty-seven 2s. Twenty-six 2s gives you a result of $671,088, which is obviously less than the $1 million target.
I immediately conjured up visions of hitting the casino’s roulette table where I would place red and black (high-low and even-odd will provide the same odds) wagers until I had achieved “millionaire” status. OMG…I was 27 spins away from easy street! Then it dawned on me that the odds were not actually 50/50 on these bets. They were 52/48 in favor of the house! After all, the ball could drop into the zero’s slot!
Still, a 48 percent chance of becoming a millionaire, with only a penny at stake is a compelling thought to ponder. Then it occurred to me that if I began with a $5 stake rather than a $0.01 stake, I could reduce the number of spins to 18, thereby increasing my chances of achieving millionaire status!
The Psychology of it All
Slowly, I began my return to reality. First of all, if it was that easy, we’d be tripping over millionaires. Clearly we are not. Do you even know a millionaire?
Then there is the obvious problem of winning 18 consecutive spins. What are the odds of that occurring? One in 131,072 (I think). Heck … the odds of hitting black 5 times in a row are just one in forty-one!
Let’s not discount the psychological factor. If you were fortunate enough to have hit 5 times in a row on your $5.00 initial stake, you would have won $160. I suspect you would not have much of an issue with putting that on the line for another spin. Let’s say you let that $160 ride and you have another successful run over the next 5 spins. Now you have $5120. For the majority of folks, that is a fairly substantial stake to put on the line for another 8 turns of the wheel. Would you really tempt lady luck, particularly after a ten turn run? Or would you walk away with your $5120? If this ramble of mine intrigues you, read the true story of Ashley Revell.
There is a Point to This
How many of you were ready to hit the casino? Quite a few of you I imagine. Of course, by now you realize that the odds against doubling your money 18 times in a row are astronomical. Yet many of you reading this are fearful of investing in stock, bonds, mutual funds and EFTs. Yes … investing is gambling, after a fashion, but the odds are significantly better. Moreover, you have an element of control that is conspicuously absent in the world of casino gambling.
The point I am trying to run home is that almost everyone is willing to take some degree of monetary risk. Some risks are foolish, like trying to win a million dollars playing roulette. Others are calculated risks such as those you will encounter with investing.
Be honest with yourselves. Many of you tempted by the roulette scheme are timid about investing in the market. This is irrational thinking. I hope this opens at least a few minds to the concept of investment. If just one of you reading this will overcome his/her baseless fear of investing, then my time here today has been worthwhile.
What about You?
Are you afraid to invest? Will anything you are reading here minimize this fear? What is your threshold for loss? How much will you risk?