Follow the Rice Grain Principle to Change the Way You Invest
If someone asked you to choose $ 1 million today, or one penny that doubles every day for a month, which would you prefer? If you are unsure, consider the principle of the grain of rice to learn how to think about investment.
As personal finance blog The College Investor points out, we tend to get hung up on seed money. $ 10 doesn’t really matter today. It’s only ten bucks, right? However, the power of a small amount to increase over time is stronger than the amount itself. The site explains this with a story about an Indian raja and a farmer who saved some of their rice:
“Your Highness,” Rani said, “I don’t deserve any reward at all. But if you want, you can give me a grain of rice. ” “Just one grain of rice?” exclaimed the Raja. “Of course, you will allow me to reward you more generously, as befits a Raj.”
… On the thirtieth and last day, two hundred and fifty-six elephants crossed the province, carrying the contents of the last four royal vaults – 536,870,912 grains of rice. In total, Rani received over one billion grains of rice. The rajah had no more rice.
As the story goes, the Rajah did not realize that the value of a single grain of rice doubled over time, and it cost him all of his storage. As a parable, this may sound silly, but we do this kind of trade all the time. $ 5 today could be $ 500 or $ 5,000 in the future, depending on how we invest it. If you’re not used to thinking about money in the long run, consider the value of one grain of rice to start changing your mindset.
Would you rather get a penny that doubles every day for a month, or $ 1 million? | College Investor through Rockstar Finance