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Become a Billionaire in 5 WEEKS? Here's how.

Russ H

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Here's an exercise I learned years ago from one of my rich mentors:

THE STORY:

During the depression, an out of work man was given an apple by a kindly storekeeper to survive.

Instead of eating the apple, he sold it for 2 cents.

With that 2 cents, he walked back to the apple merchant the next day and bought 2 apples (the merchant was on a side street, and his apples were cheaper than those on the main avenues).

The man again went and sold these two apples for 2 cents each, and bought 4 apples with the proceeds the following day.

Assuming he does this every day, how long does it take the man to become a millionaire? How long until he' s worth $10,000,000? A billion?

Here goes:

Net worth at the end of:

Day 1: .02
Day 2: .04
Day 3: .08
Day 4: .16
Day 5: .32
Day 6: .64
Day 7: 1.28
Day 8: 2.56
Day 9: 5.12
Day 10: 10.24
Day 11: 20.48
Day 12: 40.96
Day 13: 81.92
Day 14: 163.84
Day 15: 327.68
Day 16: 655.36
Day 17: 1310.72
Day 18: 2621.44
Day 19: 5242.88
Day 20: 10,485.76
Day 21: 20,971.52
Day 22: 41,943.04
Day 23: 83,886.08
Day 24: 167,772.16
Day 25: 335,544.32
Day 26: 671,088.64
Day 27: $1,342,177.20

Answer: If he can double his money selling apples each day, he will be a millionaire in less than a month.

Day 27: 1,342,177.20
Day 28: 2,684,354.40
Day 29: 5,368,708.80
Day 30: $10,737,417.60

Answer: If he can double his money each day selling apples, he will be worth over $10,000,000 in 30 days.

Let's see what happens in just one more week:

(rounding up from here on out):

Day 31: 21,474,834.
Day 32: 42,949,668.
Day 33: 85,889,336.
Day 34: 171,798,672.
Day 35: 343,597,344.
Day 36: 687,194,688.
Day 37: $1,374,389,376.

A BILLIONAIRE in just 37 days!!! :tiphat:

*********

OK, so here we go:

1. What, specifically, are the flaws in this exercise?

2. How do these flaws relate to what your average Joe or Jane hears when they meet with their financial planner? Or for the average young buck planning to double their income every year?

3. How many real world examples can you find of sales doubling OVER AND OVER? It doesn't have to be each day-- For instance, try to find an industry that doubles its sales each year, for 37 years.

Feel free to add any additional observations or ideas you get while looking at the above exercise.

-Russ H.

PS I lied. The above exercise takes more than 5 weeks (2 days more). ;)
 

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AlwaysCurious

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Lets see, how many apples are there in the world? How many customers do you need for that, and what logistics?
 

CarrieW

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I heard this along time ago.

this is why I think my forex plan will work! lol
 

LightHouse

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main problem, you have to find buyers for all those apples everyday. Positive, even if you come up short you will still have put forth the effort and get there.
 

JScott

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The big flaw is that you'd need an incredible infrastructure (and a whole lot of customers) to sell 10 million apples in a day.

Not to mention that expenses would likely exceed profit.

And if you could find a market for 10 million apples with a $.01 profit margin, you'd likely find competitors popping up everywhere undercutting you, so your revenues would drop, as would your margins.

Oh, and don't forget about taxes! :)
 
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Russ H

Russ H

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JScott-

Cool idea, but let's stick within the framework of our exercise.

Pu-leeze? :tiphat:

-Russ H.
 

bflbob

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1. What, specifically, are the flaws in this exercise?


First is the assumption that he'll be able to continue buying them at $.02, no matter what the quantity.

Second is competition. He might sneak under the radar the first few days, but once he starts selling somewhere near 100 apples, someone will start trying to beat him on price.

Third is logistics. While he might be able to sell 100 apples a day, it would be impossible to sell 10,000 apples a day without help. Help eats into profits, which destroys the profit matrix. He also would not likely be able to sell them all from one location, which brings shipping and spoilage into the equation.

Fourth is the law of supply and demand. The more apples he supplies, the less the demand for them will be, making the selling price decrease. At the same time, his demand is higher because the supply (from growers) will remain steady. This higher demand will drive his costs up. This is the dreaded condition known as shrinking margins.

Fifth, this exercise assumes linear growth. In all reality, demand and opportunity seldom join forces to permit linear growth. What would happen if it rained for a week in the middle of this exercise? It could be safely assumed that revenues wouldn't double daily during that time. In fact, spoilage could occur, driving the matrix backwards.

2. How do these flaws relate to what your average Joe or Jane hears when they meet with their financial planner? Or for the average young buck planning to double their income every year?
Financial planners, especially those selling a product, tend to promote linear growth. While not many would promote 100%/year linear growth, they might push 8-15% linear growth. A few years of negative growth early in the formula period could render the financial plan worthless.

3. How many real world examples can you find of sales doubling OVER AND OVER? It doesn't have to be each day-- For instance, try to find an industry that doubles its sales each year, for 37 years.
Ya' gotta' be kidding!:bgh:
 
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BeingChewsie

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3. How many real world examples can you find of sales doubling OVER AND OVER?

The chinese automotive industry? :)
 

Jonleehacker

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3. How many real world examples can you find of sales doubling OVER AND OVER?
Google, would find those numbers awfully disappointing, and the stock would drop. :)

Seriously, only on the web do you find that type of growth potential. Think about YouTube and Facebook, who achieved multi-billion dollar evaluations in a couple years.

Their formula was to attract users according to the doubling algorithm you presented, and then look for the big payoff once they established market dominance.

Only on the web, in my understanding at least, does the system hold up to the potential pitfalls (supply problems, infrastructure etc) that have been mentioned by others.
 

CarrieW

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what about my beloved forex trading???
 

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AlwaysCurious

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what about my beloved forex trading???
No canidate for that kind of exponentially growth. At some point you would move the market with your trades. That´s the thing with all of those doubling methods, coming to a certain point, the rules will change.
 

CarrieW

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yeah at some point maybe

with forex moving over 3 trillion dollars a day even whole central banks barley have that large of an impact.
 
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Russ H

Russ H

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Rep speed fpr Bflbob! :)

Lots of great points.

Too many people get into the "if I double my money, then . . ." scenarios but never, ever consider the real obstacles to this approach.

(and yes, Carrie-- if you ever wondered why so many follow-up posts to your Forex thread were kind, but pessimistic, it was primarily for this reason, no other.)

Sustained straight-line growth is extraordinarily difficult, if not impossible.

You need:

-Progressive economies of scale (i.e., you need to make your process *cheaper* as you grow)

-An expanding market that completely consumes your product. Which means you need to start with a potential market-- at the beginning-- that would be able to consume at your highest projected level.

-The ability to scale up without losing your profit margin. Simply put, can you sell 3,000,000 of anything for the same price as selling 3?

The ability to *source* your product/service/offering for a steadily decreasing price. (since your other costs-- distribution, delivery, growing your market-- typically increase in a non-linear fashion).

The ability to continue sales without saturating the market or having buyers want to pay *less* for your product/service. This is perhaps the most influential. Ever try selling a couple hundred thousand (or several million) shares of stock? Your share price-- what others are willing to pay decreases as more and more shares are available.

Funny thing is, even after all these points, some will read this post and still think that their "system" or approach is designed to handle all of these elements.

But if you really dig down, and look at the whole process, will it really?

Part of successful investing is anticipating the setbacks and real obstacles to sustained growth. Telling yourself "I'll just deal with this when I get there" is not just unrealistic, it's a recipe for failure.

When you build your PLAN, incorporate the above market realities into the mix.

The more you plan for these things, the greater your chances of real success.

-Russ H.
 

MJ DeMarco

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Wait a second, didn't George Soros make his BILLIONS by the currency markets? I would think the currency market is the only market that could support this type of volume/exercise.
 

CarrieW

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yes mj he surely did!


eta-

No Russ I never wondered. I assumed it was because the people posting had no understanding of how the forex market works. its like asking my 7yr old dd whats wrong with my car.

and yes while some were kind some were not. pessimestic isnt the word I would chose to desribe those posts lol.
 
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Russ H

Russ H

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PhxMJ said:
I would think the currency market is the only market that could support this type of volume/exercise.
Actually, MJ, Soros did this in part through currency manipulation (since he had large quantities). Much like Buffet does when he buys whole companies.

And MJ, You of all people should know that this model can also be done on the WEB-- as Jon Lee Hacker points out, the fastest growing online businesses (like facebook) actually have growth patterns bigger than doubling.

-Russ H.
 

yveskleinsky

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OK, so here we go:

1. What, specifically, are the flaws in this exercise?

2. How do these flaws relate to what your average Joe or Jane hears when they meet with their financial planner? Or for the average young buck planning to double their income every year?

3. How many real world examples can you find of sales doubling OVER AND OVER? It doesn't have to be each day-- For instance, try to find an industry that doubles its sales each year, for 37 years.

Feel free to add any additional observations or ideas you get while looking at the above exercise.
For starters, great post Russ, ++rep.

1. Flaws in the exercise seem to be what everyone else has already mentioned- however, it seems there are different "rules" for the web. (Costs can stay low for a relatively long period of time, while growth can increase exponentially(the difference is that the money maker is a system of delivering goods or services not the goods or services themselves- obviously this is not workable in a B&M type environment as money is linked directly to time-either the owner or their employee.)

2. To have an income stream grow in a straight line and/or at an exponential rate, a person has to be "unreasonable" as this line of thinking is not main stream, and definitley not embraced by most (if not all) financial planners. Financial planners tend to focus on planning for money a person already has, and avoiding risk (diversify, etc).

3. As for examples, I would say google and ebay come to mind immediately.
 

MJ DeMarco

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Actually, MJ, Soros did this in part through currency manipulation (since he had large quantities). Much like Buffet does when he buys whole companies.

And MJ, You of all people should know that this model can also be done on the WEB-- as Jon Lee Hacker points out, the fastest growing online businesses (like facebook) actually have growth patterns bigger than doubling.

-Russ H.

Russ,

I'm speaking from within the constraints of the time limits. The Googles and the Facebooks of the world weren't created in 37 days. Outside of the time constraints, the internet poses the greatest opportunity in achieving these kinds of exponential returns; in fact, it is the greatest fastlane opportunity around -- so believe me, I'm not discounting the exponential power of the web!
 

CarrieW

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soros did have large amounts of money before he"broke the british pound" but when he did that he made about 1.1billion dollars. his total net worth is about 8.5 billion right now. he not only is an excellent forex trader he is an excellent investor period and I would imagine he could continue to double his money(or more) reguardless of the vechicle he choses.

from wiki-- In 1970 he co-founded the Quantum Fund with Jim Rogers. It returned 3,365% during the next ten years (42.6% per year for 10 years), and created the bulk of the Soros fortune. Rogers "retired" from the fund in 1980.

I believe that it is possible to double your money(or more) infinatley thru forex trading(if done correctly)

I also agree it can be done on the web. again if you know what you are doing.

eta- he made that 1.1billion in 1 day...
 
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Russ H

Russ H

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CarrieW said:
from wiki-- In 1970 Soros co-founded the Quantum Fund with Jim Rogers. It returned 3,365% during the next ten years (42.6% per year for 10 years), and created the bulk of the Soros fortune.

I believe that it is possible to double your money(or more) infinatley thru forex trading(if done correctly)
Carrie, I'm a bit confused.

If George Soros, admitedly one of the most brilliant investors on the planet, built his MASSIVE fortune with annual returns under 50% per year, why do you feel your plan can make 100% returns infinitely?

I'm not trying to be a jerk here. I just don't see the logic.

Apologies in advance for my denseness. :smx2:

-Russ H.
 

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Russ H

Russ H

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MJ-

Many thanks for the clarification. I didn't realize that you were limiting yourself to a 37 day timeframe.

In that short a time, I agree. There are very few places to double your money every day.

Even in currency trading, it would be quite difficult to see 100% returns every day for 37 days.

More likely, you could register one or two massive jumps over a spread of a few days.

And in most cases, having substantial capital to start would influence your ability to make the returns.

-Russ H.
 

CarrieW

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that return wasnt in forex. it was in hedge funds.

you dont need to get 100% returns for every trade. you just have to get 1% 100 times. its cumulative and compounding.

with good money management even if you lose more then you win you can overall get that 1%.
 

Edge

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Possible - Yes :hurray:

Probable - No :smxE:

Sure, you can take a bankroll and double it in one day with forex or any other highly leveraged investment vehicle. That isn't the question in this scenario, the question here is how many times can you be right without being wrong? With the amount of risk you have to take on to achieve the needed reward, you have to be right X amount of times, but you can only afford to be wrong once. This is essentially structuring on average a double-or-nothing trade everyday.

CarrieW - I can really appreciate your confidence and I believe you can be or are a successful forex trader and I realize this isn't the risk management you use with your "real money" account. I think a lot of the feedback you received in the past was because you didn’t show a plan for scaling back after some successful trades.

There are infinite ways of changing your risk management through position sizing, altering your risk:reward targets, and number of days you have to have a trade at risk. To say "I am going to double my balance when market conditions exhibit a certain condition" is much different than saying "I am going to double my money daily, monthly, etc." Once you find that magic risk management adjustment, let me know what it is, because it is something I think about fine-tuning daily.
 

Edge

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CarrieW - Sorry, I didn't catch your latest response before my post.
 

CarrieW

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thanks edge...

actually alot of the responses were due to the fact that I posted only the one portion of my plan(which I am still working on. when its complete I will post it for feedback. lol cant wait to see what that feedback will be.)

that first portion of the plan is very aggressive and highly leveraged. and it isnt how I am going to be trading for the duration of my career.

and honestly I am having a very hard time finding calculators to help me create my plan and profit expectations. I have been searching for days and days for one. looks like I am going to have to do it by hand. its going to take forever.
 
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Russ H

Russ H

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Edge said:
The question here is how many times can you be right without being wrong?
Exactly.

-Russ H.
 

CarrieW

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1 more thing. i just feel like i have to put this out there to clarify.

I believe it is possible.

just because something is possible doesnt mean its going to happen.

and I never did say that I was going to be the one who does it.

sure I would love to be able to but that doesnt mean its gonna happen.

even if I dont even come close to doubling my money infinatley I believe I can still do very well with it. the point is the possibility is there so why not reach for the stars!
 
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Russ H

Russ H

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Thanks for the clarification, Carrie.

Each of us is different, so how we motivate ourselves is, well, different too.

For me, getting excited (or motivated) by something that has a very small chance of success is just setting myself up for failure.

I used to do this.

Get all excited, take on the challenge, and fail miserably.

Got all pissed off and depressed.

I did this A LOT (pretty much carried my through my teens and twenties). :coco:

I finally figured out that, for me, setting smaller, easier-to-achieve goals was much more satisfying.

Kinda like climbing a mountain-- I do it one small part at a time (not by looking at the peak).

That way, each goal (or elevation) I achieve is an accomplishment-- a cause for celebration.

Instead of lots of work, frustration, and eventual exhaustion/punishment for not getting to the summit.

Changing how I looked at goals, and how moved forward (celebrating the small steps) was a HUGE change for me.

Made me a much happier guy.

But everybody's wired differently. :)

-Russ H.
 

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