Before Cairo Wakes

The last years are bigger than all the years before

Two men have a daughter born in the same week. The first opens an account for her that day and puts in a small amount every month. The second says he will start when he earns more, and he does start, eleven years later, with much bigger amounts.

Most people expect the second man to catch up, because he puts in more. Very often he does not. Not because he was lazy, and not because the first man was clever. He is simply missing eleven years at the front, and those eleven years were going to be the ones doing the heaviest work at the very end.

The idea, and where it comes from

The arithmetic is old. Jacob Bernoulli worked on continuous growth in 1683. The Rule of 72, the shortcut most people actually use, appears in Luca Pacioli's book on arithmetic in 1494, and he already treated it as common knowledge. What is new is how badly we still misread it, which is what Morgan Housel wrote about in 2020 in "The Psychology of Money".

The formula is short.

Your money at the end equals your money at the start, multiplied by the yearly growth rate, repeated once for every year.

The important letter is n, the number of years. It sits up in the exponent. Everything else is multiplied once. Years are multiplied again and again. That single difference is the whole idea.

The Rule of 72 turns this into something you can do in your head. Divide 72 by the yearly rate and you get roughly how many years the money takes to double. At 10 percent a year, 72 divided by 10 is about 7 years to double.

Why it is true, not just what it is

Here is the part almost nobody is taught. Look at a sequence of doublings. 1, then 2, then 4, then 8, then 16. Add up everything before the last number. 1 plus 2 plus 4 plus 8 is 15. The last number alone is 16. It is bigger than every step before it combined.

That is not a coincidence and it is not about money. It is true of every doubling sequence, always, for a simple reason. Each step is exactly the sum of everything so far, plus one. So the final doubling will always be worth slightly more than the entire history that produced it.

Now put real numbers on it. Start with 10,000 pounds. Grow it at 10 percent a year for 40 years and never add another pound.

The first ten years feel like nothing is happening. That feeling is correct and it is also the trap. Boredom in the early years is not a sign that the plan is failing. It is the shape of the plan working.

The part that contradicts normal advice

Everyone knows Warren Buffett as the greatest investor alive. Almost nobody knows the real reason. He has been investing since he was a teenager, for about eighty years. According to figures from Creative Planning reported by CNBC, roughly 98 percent of his wealth arrived after his 65th birthday. His net worth was about 3 billion dollars at 65. Almost everything else came later, from the same money doing the same thing for longer.

So the usual advice, find a better return, is aimed at the wrong letter. A better rate helps. More years helps far more, and more years is the part you can control today and can never buy back.

Now the honest limit, and for a man living in Cairo it is a serious one. Compounding only means something in real terms, which means after inflation. Egypt's deposit rate is 19 percent. Urban inflation in July was 14.9 percent. Divide 1.19 by 1.149 and you get about 3.6 percent. That is your real growth rate.

Run the Rule of 72 on both numbers and see the gap. In pounds, at 19 percent, your money doubles in under 4 years. In what your money can actually buy, at 3.6 percent, doubling takes about 20 years. Five times longer.

So the imported version of this advice, just save and let it compound, is much weaker here than it sounds in an American book. The idea still holds. The engine is just running slowly, which means the years matter even more, not less.

Where it shows up

Debt. The same formula runs backwards. A card or a buy now pay later balance compounds against you, and it compounds faster than any savings account will ever compound for you. Paying down a 30 percent debt is a guaranteed 30 percent return, and there is no safer return available anywhere.

Your body. Damage compounds quietly. Blood pressure, blood sugar and weight do nothing visible for years and then present the whole bill at once, exactly like the chart above. Which is also why a screening today is worth more than a screening in ten years, and why almost nobody does it.

Your name. Trust follows the same curve. Small kept promises earn nothing for years, then suddenly open a door that no meeting could have opened. And it is fragile in a way money is not. One serious breach resets the count to zero.

Three things to try

1. Work out your own real rate today. Take what your savings actually earn, divide by 1.149 for inflation, and see the true number. Decide with that number, not the one on the bank poster.
2. Pay the most expensive debt first, before saving anything beyond emergency cash. It is the highest certain return you will ever be offered.
3. Start the smallest version now rather than the right version later. The amount is the part you can fix next year. The starting date is not.