The first problem is that, given that average inflation rates have exceeded 2% per year, any investment at 2% annually is going to be a terrible investment in the future—you’re actually LOSING money every year on average rather than gaining it, in terms of actual value.
However, let us assume that for whatever reason you were actually getting 2% growth on top of inflation per year (an unlikely scenario for an unguided account, but bear with me a moment). The second problem is that the result is, obviously, irrational. There are not even a googol particles in the Universe; how could you have a googol dollars and have that be a reasonable result? There isn’t anything to purchase with a googol dollars. Ergo, we must assume our assumption is flawed.
The flaw in this assumption is, of course, the lack of understanding of exponential growth; all exponential growth is self-limiting in nature. In reality you run into real constraints to how much growth you can have, how much of the economy can be in your fund, ect. As someone else pointed out, you can’t assume that you will have indefinite growth; it is confined by the size of the economy (which will never reach a googol dollars in current day money), by the likelihood of you actually getting said returns (which is 0), whether anyone would recognize a currency when too much of the world economy was bound up into it, ect.
The truth is it is just a terrible argument to begin with. Anyone who promises you 2% growth for even a thousand years is a dirty liar. The rate seems reasonable but in actuality it is anything but. Do you think that the world economy is going to increase by 2% a year for the next 1000 years? I don’t, at least not in real, inflation-adjusted dollars. The total amount of energy we can possibly use on the planet alone would constrain such economic growth.
The first problem is that, given that average inflation rates have exceeded 2% per year, any investment at 2% annually is going to be a terrible investment in the future—you’re actually LOSING money every year on average rather than gaining it, in terms of actual value.
However, let us assume that for whatever reason you were actually getting 2% growth on top of inflation per year (an unlikely scenario for an unguided account, but bear with me a moment). The second problem is that the result is, obviously, irrational. There are not even a googol particles in the Universe; how could you have a googol dollars and have that be a reasonable result? There isn’t anything to purchase with a googol dollars. Ergo, we must assume our assumption is flawed.
The flaw in this assumption is, of course, the lack of understanding of exponential growth; all exponential growth is self-limiting in nature. In reality you run into real constraints to how much growth you can have, how much of the economy can be in your fund, ect. As someone else pointed out, you can’t assume that you will have indefinite growth; it is confined by the size of the economy (which will never reach a googol dollars in current day money), by the likelihood of you actually getting said returns (which is 0), whether anyone would recognize a currency when too much of the world economy was bound up into it, ect.
The truth is it is just a terrible argument to begin with. Anyone who promises you 2% growth for even a thousand years is a dirty liar. The rate seems reasonable but in actuality it is anything but. Do you think that the world economy is going to increase by 2% a year for the next 1000 years? I don’t, at least not in real, inflation-adjusted dollars. The total amount of energy we can possibly use on the planet alone would constrain such economic growth.