The Crash Course - Chris Martenson [19]
And that right there illustrates one of the key features of compound growth and one of the principal things that I want you take away from this chapter. With exponential growth in a fixed container, events progress much more rapidly toward the end than they do at the beginning. We sat in our seats for 45 minutes and nothing much seemed to be happening. But then, over the course of five minutes—whoosh!—the whole place was full of water. Forty-five minutes to fill 3 percent; only five more minutes to fill the remaining 97 percent. It took every year of human history from the dawn of time until 1960 to reach a world population of 3 billion people, and only 40 additional years to add the next 3 billion people.
With this understanding, you will begin to understand the urgency I feel—there’s simply not a lot of maneuvering room once you hop on the vertical portion of a compound graph. Time gets short.
Surrounded by Exponentials
Dr. Albert Bartlett once said that “. . . the greatest shortcoming of the human race is the inability to understand the exponential function.”6 He is absolutely right. We are literally surrounded by examples of exponential growth that we have created for ourselves, yet very few people recognize this or understand the implications. You now know one implication: speeding up.
Figure 5.6 shows total global energy consumption over the past 200 years. It is plainly obvious that energy use has been growing nonlinearly; the line on the chart looks like one of our hockey sticks. Can energy consumption grow exponentially forever, or is there some sort of a limit, a defined capacity to the energy stadium, that would cause us to fix the left axis on this chart?
Figure 5.6 Total Energy Consumption
This chart includes energy from all sources: hydrocarbons, nuclear, biomass, and hydroelectric.
Source: Vaclav Smil, Energy Transitions.
On the following page is another exponential chart—the U.S. money supply, which has been compounding at incredible rates ranging between 5 and 18 percent per year (Figure 5.7).
Figure 5.7 Total Money Stock (M3)
This was the widest measure of money before its reporting was discontinued by the Federal Reserve. M3 money included cash, checking and savings accounts, time deposits, and Eurodollars.
Source: Federal Reserve.
These are just a few examples. We could review hundreds of separate charts of things as diverse as the length of paved roads in the world, species loss, water use, retail outlets, miles traveled, or widgets sold, and we’d see the same sorts of charts with lines that curve sharply up from left to right.
The point here is that you are literally surrounded by examples of exponential growth found in the realms of the economy, energy, and the environment. Far from being a rare exception, they are the norm, and because they dominate your experience and will shape the future, you need to pay attention to them.
The Rule of 70
As I said before, anything that is growing by some percentage is growing exponentially. Another handy way to think about this is to be able to quickly calculate how long it will take for something to double in size. For example, if you are earning 5 percent on an investment, the question would be, How long will it be before a $1,000 investment has doubled in size to $2,000? The answer is surprisingly easy to determine using something called the “Rule of 70.”1
To calculate how long it will be before something doubles, all we need to do is divide the percentage rate of growth into the number 70. So if our investment were growing at 5 percent per year, then it would double in 14 years (70 divided by 5 equals 14). Similarly if something is growing by 5 percent per month, then it will double in 14 months.
How long before something growing at 10 percent per year will double? Easy; 70 divided by 10 is 7, so the answer is 7 years.
Here’s a trick question: Suppose something has been growing at 10 percent per year for 28 years. How much has it grown? Some people intuitively guess eight times larger