The Story of the Wise Man Sissa Will Help You To Understand the Magic of Compound Interest
The Story of the Wise Man Sissa Will Help You To Understand the Magic of Compound Interest
Master this magic or accept to be mastered.
The story takes place in India in 3000 BC. At the time, it is King Belkib who is at the head of the country. Like many kings, Belkib is bored. His power is total, and he has no more wars to fight. Eager to find sources of distraction, Belkib promises a reward to whoever finds a way to distract him.
After some time, the wise man Sissa shows up at King Belkib's palace. He brings with him a strange wooden tray. Intrigued by this invention, Belkib immediately wants to learn more.
Sissa manages to distract King Belkib, who asks that he be covered with gold ...
Sissa explains to Belkib that it is a game he has created especially to entertain him. This game is the ancestor of the game of chess. Sissa explains the rules of his game to Belkib. Then the two play a game. At the end of the game, King Belkib declares that Sissa's game is the best game he has ever played in his life.
So happy to have found a new source of entertainment, Belkib asks that Sissa be covered in gold as a reward.
Anyone would have jumped at such an opportunity to become rich in gold. But Sissa is not like everyone else. Sissa is much smarter than the others. He tells King Belkib that he doesn't want gold, only rice.
Sissa only wants rice, but he has a special demand for the rice that he asks King Belkib for. Sissa asks King Belkib to place one grain of rice on the first square of the chessboard, then two on the second square, then four on the third square, and so on to fill the chessboard by doubling the amount of grain on each square.
... But Sissa wants rice with a very special requirement
Glad to be able to preserve his gold, King Belkib accepts Sissa's request by telling his advisors:
“These wise men are really naive and stupid! Here he is asking me for rice when he could become as rich as a prince. His false modesty will lose him.”
While King Belkib mocks Sissa, his advisors calculate how many grains of rice they will have to give to Sissa.
The calculation is as follows:
1st square: 1 grain.
2nd square: 2 grains.
3rd square: 4 grains.
4th square: 8 grains.
…
64th square: 2^63 grains.
The total number of grains of rice to be placed on the chessboard for King Belkib to keep his promise to Sissa is 2^64 - 1.
This represents the following number:
18,446,744,744,073,709,551,615 grains or about 18.45×10^18
You have read well. King Belkib was to give Sissa more than 18 quintillion grains of rice.
The apparently stupid request of the wise man Sissa put the kingdom of Belkib in ruins
In a total panic, King Belkib's advisors come to tell him that the kingdom is ruined:
“My king, the whole kingdom does not have enough grains of rice to pay off our debt to Sissa. The kingdom is ruined!”
To give you an idea of the reason for the panic of the Belkib advisors, you should know that the world rice production in 2020 was about 509 million tons. The average weight of a grain of rice would be around 0.04 grams. The 18 quintillion grains of rice that Belkib owed to Sissa, therefore, represented more than 720,000 million tons!
It took more than 1000 years of world rice production for King Belkib to be able to repay his debt to the wise man Sissa.
Mastering the power of compound interest is paramount
The moral of this story is finally quite simple and can be found perfectly in this quotation from Albert Einstein:
“Compound interest is the 8th wonder of the world. He who understands it earns it; he who doesn't pay it.”
The wise man Sissa had already understood the power of compound interest thousands of years ago. King Belkib did not master this universal law. So he had to pay for Sissa.
In life, whatever the field, you will have to use the magic of compound interest to your advantage. To do this, patience and perseverance will be your best assets. At the very beginning, you will tend to get discouraged, because the results will take time to arrive.
At this point, you will have to remember that after ten squares on Sissa's chessboard, there were only a few dozen grains of rice. On the other hand, on the last ten squares of the chessboard, there were quintillions of grains of rice.
Final Thoughts
When it comes to investing in the stock market, many people think they don't have enough money. However, if you follow the principle of compound interest, you realize that $100 invested every month over a long period of time will make you a millionaire sooner or later. It's all about patience and perseverance.
Similarly, from a more personal point of view, you must realize that when Warren Buffett says that you should aim to improve by 1% every day, it is on the power of compound interest that he bets. Over time, this good habit will make a big difference in your life. You will reduce your ignorance in a whole bunch of areas, so you won't lose money.
If you doubt the power of compound interest, or if you don't understand it, I think the story of Sissa and King Belkib will stay with you forever. Then you will be able to join the camp of those who understand it and enjoy it. That was the whole point of this story.
Some reading:
The Five Things That Bruce Lee Taught Me To Take Full Advantage of Bitcoin: Bruce Lee had the mindset of a Bitcoiner.
The Greatest Reward You Can Ever Get as a Bitcoiner Hint: It’s not getting rich.
Become Smarter By Following The Warren Buffett’s Formula: Apply the magic of compound interest to your life.