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This is from Morgan Housel’s blog.

What causes ice ages? it is not what you think.

“It begins when a summer never gets warm enough to melt the previous winter’s snow. The leftover ice base makes it easier for snow to accumulate the following winter, which increases the odds of snow sticking around in the following summer, which attracts even more accumulation the following winter. Perpetual snow reflects more of the sun’s rays, which exacerbates cooling, which brings more snowfall, and on and on.

You start with a thin layer of snow left over from a cool summer that no one pays much attention to, and after a few tens of thousands of years the entire earth is covered in miles-thick ice.”

You may ask what does this have to do with investing.

It has to do with the power of compounding.

“More than 2,000 books are dedicated to how Warren Buffett built his fortune. Many of them are wonderful.But few pay enough attention to the simplest fact: Buffett’s fortune isn’t due to just being a good investor, but being a good investor since he was literally a child.”

Warren became a serious investor at age 10. His net worth is 81 billion. If he had the same skills and talents, but became a serious investor at age 22, he would be worth 1.9 billion.

The lesson is to get your kids to start to invest at an early an age as possible.

What is interesting is that this law of small numbers shows up all over life. Like the number Pie.
It shows up in the growth of product sales, the use of anti biotics, and on the negative side, in the increase in smoking, with finally began to reverse in the 1960s.

If you are interested in learning about how this applies to anti biotics, product sales, and smoking, see the link, where the ideas for this article came from.
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