The Stewardship of Wealth: Successful Private Wealth Management for Investors and Their Advisors, + Website

Conclusion: Preserving Wealth Is Hard Slogging

There is a Chinese parable about the sage who, having performed an important service to the empire, was asked by the emperor what he would like as his reward.

“All I ask,” replied the sage, “is one grain of rice today, two grains tomorrow, four the next day and so on throughout the remainder of my poor lifetime.”

“Ah,” said the emperor, “surely you must ask for more than that!”

But the sage was firm in his modesty and the emperor agreed to the bargain. It was only a few months later that the emperor learned there was not enough rice in all of China to meet his obligation to the sage. Whereupon, recognizing that he had been evilly tricked, the emperor had the sage executed, bringing to a brutal but effective end this particular episode in the thrill of compound interest.

And that is precisely the point: Nothing compounds forever, or even for very long. Trees start from small seedlings but don't grow to the sky. Some species spawn thousands of offspring, threatening to overwhelm the earth, but few of these offspring live long enough to reproduce. Malthusians³⁰ have warned for more than two centuries that human population growth would quickly overwhelm the world's resources, causing the species to collapse. But it never happens: Between disease, famine, war, and economic and technological progress, the compounding never comes close to what a straight line projection would suggest.

Einstein is famously supposed to have remarked that, although ...