Rule of 72

Posted on Leave a commentPosted in Economics, Investment

Only objective of Investment is to get a good return. However, we forget the rule of compounding. Even, if we remember, we certainly do not know, how to compute realistically the return, we will get by applying principles of Compounding. The basic benchmark is to know, how long will it take to double the money. The simple way to calculate is by applying ‘Rule of 72′

DEFINITION OF ‘RULE OF 72′

A rule stating that in order to find the number of years required to double your money at a given interest rate, you divide the compound return into 72. The result is the approximate number of years that it will take for your investment to double.

The rule of 72 is a famous shortcut for calculating how long it will take for an investment to double if its growth compounds on itself. According to the rule of 72, you divide your expected annual rate of return into 72, and that tells you how many years it takes you to double your money.

Considering that large, blue-chip stocks have returned roughly 10% over the last 100 years and investment grade bonds have returned roughly 6%, a portfolio that is divided evenly between the two should return about 8%. Dividing that expected return (8%) into 72 gives a portfolio that should double every nine years. That’s not too shabby when you consider that it will quadruple after 18 years.

Be a rosh gadol

Posted on Leave a commentPosted in Leadereship, Learning

In Israel, soldiers who are rosh gadol (big head) are distinguished from those who are rosh katan (little head). Rosh katan behaviour is shunned because it means interpreting orders as narrowly as possible and to avoid taking on responsibility or extra work.

Rosh gadol thinking means following orders but using judgement. It emphasises execution discipline with improvisation. Rosh gadol connotes a responsible can-do attitude. With a similar spirit, one of my Tata colleagues, Ravi Arora, ends his e-mails with the words, “If it’s a good idea, go ahead and do it. It is much easier to ask forgiveness than it is to get permission.”

Bitzua, chutzpah and such expressions come alive in an eminently readable and inspiring book called Start-Up Nation: the Story of Israel’s Economic Miracle (Dan Senor and Saul Singer, Twelve Hachette Group, 2009). ¬†Bitzua translates into ‘getting things done’. This spirit of ‘try it, just do it’ is all-pervasive in Israel and has led to the country becoming a top destination for R&D. According to Jewish scholar Leo Rosten, chutzpah is “gall, brazen nerve, effrontery, presumption plus arrogance.”

The secret lies in culture, not processes. Companies should examine how to develop more rosh gadol, chutzpah and bitzua by influencing the organisational culture rather than only their processes.

Source : innocolumn – Business Standard By R. Gopalkrishanan

This applies to Individual as well…One must decide, in taking daily decision and being opinionated, would like to be Rosh gadol or rosh katan..