You see, the correct biblical reference is from Timothy 6:9-11 and, it actually says:
For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.
The “love of money”, not money itself … and, that to me, sounds a whole lot like what Jonathan Swift was trying to say …
While we all know that straight lines are passe, even compounding – the panacea to the masses offered by the financial services industry – does far less for us than cursory examination would at first seem to indicate, so let’s finish this series by taking a close look at an amazing effect … it’s called:
The J Curve
I am, perhaps, guilty – along with Michael Masterson whom I quoted in this post – of providing the impression that, in order to make your Number, you simply need to ramp up the compounding effect … that is, a larger compounded ‘interest rate’ provides a larger / quicker outcome … all in a nice, neat geometric progression.
Sometimes I think the assumptions of 50%+ compounded growth rates over long extended periods of time is a little excessive. I own 2 fairly successful small businesses and have seen roughly 75%+ growth in my net worth over the past 5 years if I want to count “conservative” business equity and if that continues, then I’ll blow past my number ($12.5 Million in 5 Years from now will be more like $30 Million in 5 Years!). I just feel that at some point the growth rate is not “as” easily sustainable (although I’d LOVE to be wrong!!! )
But, Michael Masterson’s assumed 50+% compound growth rate for successful business startups is only true when planning your Making Money 201 strategies to reach your Number [AJC: assuming – as it will be for most of my readers, at least – that MM101 won’t be enough to get you there by then], however …
2. You ACHIEVE your Number/Date through a series of unpredictable – and, often climatic – events.
The simplest way to explain this is to look at a recent phenomena with this very blog:
I write my blog daily and promote it enough (by leaving comments on other blogs; submitting to the occasional personal finance carnival; and so on) to have hundreds of daily readers; but, every so often, one of my articles is picked up elsewhere and … boom … readership skyrockets!
Now, I could not have engineered this result, yet I instigated it by ‘cold contacting’ Kimberly some months ago and contributing this ‘guest post’ … it’s almost like I positioned myself for success, but then it actually came of its own accord!
You can see on the graph the J-curve effect – not once, but twice – as the article was first published in US News … then syndicated by Yahoo! Finance.
And, this is the way Making Money 201 seems to work (yes, the most powerful growth strategy – as always – belongs to MM201): a series of dramatic spikes interspersed by plateaus and sudden drops …
… it’s not a smooth ride to the top, but a hairy roller-coaster ride to (we hope) ultimate success. This is why most people aren’t rich: they can’t stomach the dramatic up’s and down’s 🙁
Looking back on my own career, I realized that my financial and business success could be traced back to three ‘explosive events’ (hence the ‘elbow’ or the ‘J’ in the curve):
– I had been trundling along with my business barely breaking even when I finally ‘hooked’ the big one; a large corporate whose client base matched the demographic of my prospect list, and whose products complemented mine (actually, mine complemented their product set); I picked up two other major clients at the same time: my sales quadrupled in just 6 months.
– Later, I signed a $20 million, 5 year contract that saw me open my business (as the 51% majority stakeholder in a Joint Venture) in the USA; this quadrupled my business again.
– Later still, I signed a series of transactions (so, I guess this was really a series of slightly smaller ‘explosions’) to sell my businesses at excellent, pre-crash, valuations.
Each J-Curve Event produced a 400+% growth spurt, generally followed by a long flat (or even slightly declining, as customers dropped off) period, leading up to the next J-Curve Event, and so on …
… the combined effect over the entire period of owning the business would have approximated a 50+% annual compound growth rate, but I never ran the actual calc’s (since I started with $0 capital, my actual $$$ return is technically infinite, anyway).
So, you need to position yourself to take advantage of all of these different types of curves if you have a Large Number by a Soon Date …
Most people that I talk to seem to misunderstand inflation and how to apply it to thinking about your retirement …
… the easiest way to deal with this is to think of inflation in TWO pieces:
1. Leading up to retirement (a.k.a. “life after work”)
2. After you have stopped working
It should be easy to see why:
In the former you are working with a stream of income (e.g. your salary) trying to build up to something big (i.e. your ‘nest egg’) …. whereas, in the latter you are working with a FIXED amount of money (i.e. your nest egg) and are trying to create an annuity stream (i.e. a pseudo-salary).
Can you see how one is almost the exact reverse of the other, yet inflation plays a HUGE – but different in effect – part in both?!
Today, we’ll deal with leading up to retirement:
Dealing with inflation in the planning towards your Number (i.e. your nest egg) is dealt with quite elegantly (for the mathematically-minded) in this post by Pinyo:
Step 1: How much do I need today?
I need $40,000 per year
Step 2: Adjust for inflation.
Now we have to adjust that $40,000 for inflation. For this example, we assume inflation rate is 3.5% per year. We accomplish this with the following formula:
Inflation Adjusted $ = Today’s $ * ((1 + inflation rate)^ Number of years to retirement)
Inflation Adjusted $ = $40,000 * (1.035 ^ 30)
Inflation Adjusted $ = $113,000 (rounded up)
I need $113,000 per year after inflation
Step 3: Multiply by 25
The formula:
Retirement Needs = Inflation Adjusted Income * 25
Retirement Needs = $2,825,000
I need to save $2.8 million to begin retirement
I can’t get the math to work, but you need to visit Pinyo’s post for the full explanations and try it for yourself …
We have some slightly different rules:
For example, I presume that inflation will be at least 4% for the next X years (economists were predicting 5+%, but who knows now, given the current economic situation?!) and I have been assuming a ‘safe retirement withdrawal rate’ of 5% (i.e. Rule of 20). Together, these come to a slightly lower ‘number’ than Pinyo, but not by much: $2.4 million. That’s why, for planning purposes, I don’t get too hung up on what numbers you decide to choose …
That’s also why I find that for us non-mathematically-minded-people [AJC: yes, I have 2nd year college math and I still can’t add in my head … let me see 1 + 3 = $7 million … good enough for me! 😉 ] that the following table is ‘good enough’ to estimate for inflation; if you earn $40,000 per year (or whatever you currently earn, or want to earn when you retire), then to estimate how much income you need to replace:
• 5 years out, add 25% to the current amount.
• 10 years out, add 50% to the current amount.
• 20 years out, double the current amount.
30 years out, we would simply multiply by 2.5 (which ‘only’ gets us to $100k, rather than Pinyo’s $113k). Again, for planning purposes, I actually think that this is close enough … but, if you are good with a calculator (or, better yet a spreadsheet), go for it!
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In the next and final part of this two-part series, we will look at how to deal with inflation after you stop work / retire …
I don’t invest in mutual funds, but I know that many of my poor, deluded readers do 😛 For you, The Dough Roller provides some tips … and, for the rest of us, he mentions this blog. Thanks, Dough Roller!
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After all, this is basically the subject of almost all of the 2,500+ personal finance blogs in the blogosphere … how to save your way to wealth. We know that it can’t be done, but that doesn’t stop all of those poor blighters from trying … and, worse, writing about it 😉
But, it is an important part of making money, which is why we devote a whole subject to it …
[AJC: Which gives me the fleeting idea for yet another reader poll: which is the most important Making Money stage of them all: MM101, MM201, or MM301? But, you would all too quickly see right through the question: making lots of money (MM201) is useless if you (a) spend it before you get it (MM101) and/or (b) let it slip right out of your fingers once you have it (MM301) … ergo, they are clearly ALL important!]
Now, I thought that I would be pretty smart and ask questions that would lead you away from the ‘hidden gem’, and I could then glide in on my blogging-white-charger and whisk you right off your financial feet with a princely nugget of wisdom, just as you were nodding in agreement with the poor misguided fools who submitted non-optimum answers …
… but, ‘ask the audience’ came bloody close to winning the 7 million dollar question!
Although the majority response was split nearly 50/50 between the ‘common wisdom’ answer and the one that I thought (hoped!) would slide right under the radar, nobody said it better than Ryan:
Without delayed gratification, why would we save money at all? We’d just live paycheck to paycheck and hope we never…didn’t get a paycheck!
And, what pees me off even more is that the general comments, covering all of these choices and more, were so on-the-mark that I could stop writing this blog … but, will instead just have to shift into higher gear [AJC: hang on tight!].
So, yes …
…. this was another almost-trick question in that they are ALL clearly important, but, this is an experiential blog, in that my financial advice is largely shaped by my own experience (much more so than somebody else’s ‘theory’) and, when I looked back it was delayed gratification more than anything else that seemed to keep me out of the poor house … then and now.
Why delayed gratification?
Because it is a habit for a lifetime; it will keep you from spending all of your money:
– when you don’t yet have enough of it
– while you are still struggling to get more of it
– when you have what should already be enough of it
… and, for those whom ‘delayed gratification’ has not yet become habit, we broke new ground by inventing 7million7year’s Patented Delayed Gratifier [AJC: no, it’s not something most commonly found in an Adult Store 😉 ] a.k.a. The Power of 10-1-1-1-1
There you have it: delayed gratification, what I – and, you – believe to be the most important Making Money 101 tool of them all 🙂
Want to make money in real-estate? Then you need to know where the ‘hot’ cities to buy in are … this US News article from Luke Mullins should tell you just that!
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I classify ‘windfalls’ with all other Found Money: save 50%+ and spend up to 50%
I’m not going to tell you to spend half, but you can and should – at least – spend a significant portion: at least enough to fully celebrate your good fortune (even more so if it was a result of hard work rather than luck).
Interestingly enough, by chance, I came across this quote from Ramit Sethi (I Will Teach You To Be Rich):
I don’t recommend you sock away 100% of unexpected earnings. In fact, I force myself to spend 25%-50% of any unexpected money within a month, a technique I developed to keep motivating myself to earn unexpected income.
Of course, blindly following blanket rules won’t make you rich … you have to qualify them and assess against your own situation, which is why this blog (or others) cannot be misconstrued as personal financial advice … for example:
– If you find $20 on the street, buy yourself a latte and a magazine and then put the other $10 in your end-of-month savings ‘cookie jar’
– If you sell your business for $2 Million don’t spend $1 million
– If you get a $200 a week pay increase:
… do spend $100 immediately (enjoy!)
… don’t spend $100 extra a week (unless you HAVE to)
No rules, but some guidelines:
– If the ‘found money’ is life-changing (for me, that means getting you to your Number, or a Big Step closer) then spend a chunk … perhaps as much as the top tier on your version of the 10-1-1-1-1 chart (provided it isn’t more than 5% – 10% of the total ‘found money’). Do me a favor: spend it on something you’ll remember (for me, it was the Maserati and the Villa-in-Tuscany vacation) 🙂
– For the money that you do want to spend – one-off, but not life-changing – still apply 10-1-1-1-1, but kick it all up a notch (e.g. you only need to think about spending $100 for 10 minutes) … but, ONLY until that allocated money is spent
– If it is an ongoing – and fairly reliable – stream of ‘found money’ (e.g. a pay increase), calculate how much of the increase you NEED to spend (i.e. add to your budget because you have been going without, or are behind, or have critical debt repayment, etc., etc.) then gradually wind your spending back to that number and save the rest.
An example may help to illustrate the last point:
You currently earn $500 a week, and are behind a little. You calculate that another $40 a week will be enough to ‘break even’ on your spending (you know: put food on the table; clothe the kids; pay down the remaining balance on the credit cards that you tore up, etc. etc.).
Now, you receive a pay-rise (I guess you got lucky and switched jobs, or decided to take on a second job) of $200 a week (after tax, of course):
1. You are committed to saving at least $100 of that, so $100 a week additional goes straight into the investment account
2. You are committed to spending $40 a week (see above)
3. So that leaves $60 a week undecided:
Week 1: spend $60 … enjoy!
Week 2: spend $40 …. enjoy!
Week 3: Spend $20 … enjoy!
Week 4: By now, you’re actually saving $160 a week extra … what do you expect? Every week to be Christmas?!
You know by now that I am a “look if these ‘losers‘ can do it, surely so can you and I” junkie 😉
So, here’s a question for you: how tall do you have to be to play basketball … particularly to be a world-class dunker?
7 foot? 6 foot 5? Less? More?
Watch the first 45 seconds of this video (unless you’re also a “I love watching repetitive basketball dunking videos” junkie, in which case watch the whole thing and tell me if I’ve missed anything good!) and guess how tall the guy is …
…. OK, so you’ve read this then watched the video, so I’ll tell you: he’s just 5′ 8″, and he’s from my home town (Melbourne, Australia).
Chicago Bulls, watch out! So, what’s holding you back?
Phil Town (author of Rule # 1 Investing) talks about his approach to Value Investing as a way to achieve a minimum (presumably, long-term) 15%+ compounded return in the stock market.
On his blog he recently fielded a question from a reader who asked:
I am 30 years old no debt and have a net worth of $52,000 cash. My goal is to be retired by 35 years old. To reach that goal is now the time to go all in?
Even though the reader doesn’t tell us how much ‘retired’ is, I think it’s worth revisiting Phil’s response:
The time frame is too short to stockpile stocks and be sure to retire in 5. We need more like 20 to make that work. So you’re going to trade using Rule #1 strategy and tools.
1. You’ll live to 95, so retirement is 60 years.
2. You’ll need at least $50,000 a year in 2009 dollars.
3. Assume you’re trading and making 30% adjusted for inflation (so 34% or so before inflation).
4. Assume you’re adding $10,000 a year for next 5 years.
5. In 5 years you’ll have $283,000 in 09 dollars.
6. You’ll have to make 18% after inflation to get $50,000 a year in 09 dollars.
7. Conclusion: Doable, but you are not retired clipping bond coupons on some beach in the South Pacific. You’re still investing. Better if you had more in the nest egg in 5.
So, Phil’s basically demonstrated that it’s not doable … at least not with stocks; it MAY be doable with a very high risk (read: great deal of luck) aggressively trading options and / or business startup strategy.
Here’s Phil’s suggested solution:
Q: How to get more when you have less? A: Leverage. Other people’s money.
Q: How do you get other people’s money? A: Four ways:
Trade on margin: 50% loan. You’ll more than double your return to $558,000.
Trade derivative (options) so your dollar represents only a small portion of the underlying security
LP: Raise $600,000, 34% ROI is $2.4 million in 5 years. You keep $500,000. Plus you got $40,000 a year to manage it. This is more or less what Buffett did in the 50’s and 60’s
Put half the money in a startup and help make it go big.
… I guess Phil agrees: 5 years from $52k to any number that’s likely to yield a reasonable retirement requires a super-high annual compound growth rate, and that only comes from the strategies that I mentioned earlier; and, of these, business is clearly a better path than trading stocks and options on margin … there’s simply too much luck involved in trying to aggressively mix it with the stock-market pro’s.
I must admit, the only reason why I’m writing this post is because I happened to read Bill Shrink’s post with 16 Depression Era Money Saving Tips and saw this photo (under the tip: “buy in bulk”) …
… and, the only thing exciting about that is that I have an empty cup of that incredibly spicy ‘instant soup’ (the one in the photo with the Chinese character that looks like a black lantern on a pole) sitting on my desk in front of me, and my mouth is still burning! Yum …
While the tips themselves are sound, I was getting ready to give him a metaphorical pasting, when I saw that he actually did include an increasing-income tip, as well:
Develop Multiple Income Streams: it wasn’t called the Great Depression for nothing, but the gloom and doom we associate with it overshadows the fact that not everyone was hurting. Amidst all the mass suffering and despair, a small minority of people actually managed to thrive by diversifying and developing multiple income streams. You can do the same! Whether it’s investing (Warren Buffet says to be greedy when everyone else is fearful), starting a business, or picking up a second job, anything you can do to spread your risk across more than one thing will make you safer and more secure.
Of course, the aim is to get rich(er) quick(er) – so, that we can reach our Number – which leaves me to wonder, how do people actually get rich during a depression? Well, according to this forum – where this exact question was posted – you can get rich by:
– If you have money buy up assets at depressed values. The key is to have money during the depression. If you don’t then you are in a very tough position as jobs and business opportunities are scarce,
– Save all the money you can in good times, spend it in bad times
– Wait a few days, see if there are further losses and then put in a buy order
– Become a Beer distributor
– Make bras or get into entertainment
– My grandfather worked for a factory that made thread and other home sewing supplies and rode out the depression that way. I guess today it would still be cheaper to buy your threads at WalMart, but there must be other recession-proof businesses.
– In a recession people and companies repair what they have in Capital Equipment
– I knew a family that benefited from an ancestor who wisely saved his cash…and when the Great Depression hit, he bought land…and lots of it and at cheap prices.
– Funeral homes, toilet paper and trailer parks
… and, there are plenty more.
Look, when you buy into a rising market, the chances are that you are already too late … but, the same applies in a ‘depression’: by the time you read about it, it’s too late to panic, you’ve ALREADY been caught. So, it’s simply time to buck the trend and invest.
The opportunities to get rich for the ‘little guy’ are actually MUCH more prevalent in a down-market than in an upmarket: so, buy up assets (land, stocks) at depressed prices and hold for the long-term and/or buy into businesses that are always needed (i.e. the ‘boring ones’) … that’s pretty much all it takes 🙂
Nobody wants their finances to grow in a straight line (too slow, and inflation really hurts), so let’s continue this series with a look at a faster way to grow your money … one that is well covered in mainstream personal finance blogs:
The Compound Curve
When we do one simple thing [AJC: again, ignoring the effects of inflation], the whole picture changes dramatically:
If, instead of withdrawing/spending the interest earned on the CD, we ask the bank to reinvest the interest then we create an effect known as compounding. Where both the principle (i.e. the lump sum that you originally deposited) and the interest (then the interest on the interest and so on …) earn interest. The effect, as you can see, can be quite powerful … slow, but powerful.
In fact, ‘urban legend’ has Albert Einstein calling compounding “the most powerful force in the Universe” … urban legend because Einstein would never have called such a relatively [pun intended] slow geometric progression ‘powerful’ when he had nuclear reactivity to play with (a far quicker and more dramatic form of compounding).
Be that as it may, compounding is something well understood, but always remember that it is only powerful to the extent that it may keep you out of the ‘poor house’ – but, not by much – hence, compounding is really only a basic (but necessary!) Making Money 101 saving strategy:
– without it, you don’t get to first base, financially-speaking, but
– with it, that’s about all you do.
You can – and probably already do, to a greater or lesser degree – apply the power of compounding to your job/profession (be it as paid employee or paid consultant) when you reinvest some of your earnings into investments such as mutual funds (e.g. via your 401k), direct stocks, and real-estate … and, of course, reinvest (instead of withdraw and spend) the dividends (a.ka.a ‘profits’) from those investments.
Warning: This is a High Risk Post … it’s only for those poor misguided souls who INSIST on speculating (be it: stocks, real-estate, FOREX, commodities, etc., etc.) … don’t do it! But, if you MUST try to gamble your way to a fortune (admittedly, it has – albeit RARELY – been done), at least read on ….
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I have a confession to make: I love playing poker.
I had never played a hand – nor gambled at all (I hate any game where the casino odds are even 1% or 2% against me … why throw money away?!) – but, then I arrived in the USA and turned on the television just as Chris Moneymaker was bluffing Sammy Farha on his way to making history at the 2003 World Series of Poker …
… it was like meeting the eyes of a woman across a crowded room; it was (I am ashamed to admit) ‘love’ at first sight 🙂
Which brings me to the Universe’s Cruel Joke, and it goes something like this:
I exclusively play No-Limit Texas Hold’em but met a friend who is one of the world’s top Pot Limit Omaha pro’s … in fact, I now take tennis lessons with him. This (not him!) convinced me to give the game a try, so I throw $40 (being sensible, no need to throw ‘real money’ away) into an online table while I’m chatting to a friend over the ‘phone and what do you know, I’ve made $200 about 3 minutes later!
This is a game I could grow to love, so I proceeded to lose $4k over the next few weeks, playing my usual limits …
… oh, I know this is just ‘variance’, because I’m in with the best hand almost every single time 😉
Josh is one of our 7 Millionaires … In Training! and he intends to make his money trading according to a system that he has been developing for trading pharmaceutical stocks. I have high hopes for Josh, and he will probably end up with his own hedge fund, if he survives his good luck.
You see, Josh has just hit it big – and sudden – as, he explains:
[I put] the whole 401(k) and personal brokerage account into a penny pharmaceutical stock, (avg price was around .0475 cents.) Today it closed at .82 cents. The stock is TTNP, Titan Pharmaceuticals.
Adrian, when are we starting MM-201, I’m jumping out of my skin here?
As I said to Josh:
If you MM201′ed any harder, you’d burst
You see, it’s easy to make money when you find a stock that climbs straight up like Jeff’s Hornet on full after-burners, it’s MUCH harder to:
a) Repeat until rich, and
b) Keep it, once you’ve made it.
What has this to do with poker? More importantly, what does poker have to do with investing?
Well, if you are a trader/speculator … everything!
You see, poker is a high ‘variance’ activity – that means that there is both a skill and luck component – but, you may know this as high risk / high reward. And, the best friend of the professional poker player is not skill … or even having luck on their side … it’s bankroll management.
At its simplest, ‘bankroll management’ means not allocating too much of your bankroll (i.e. capital) to any one session, and walking away when you lose that … at its most complex, it can involve a whole set of rules, such as Chris Ferguson’s poker bankroll management system …
… Chris is a top poker professional who – as his own ‘grand experiment’ – set out to make $10,000 starting with just one penny. Even though he had great skill – far greater than any of his opponents at the levels that he was playing at – he knew that he needed to protect himself from that devil known as ‘variance’ (i.e. sheer bad luck):
Here’s how he did it:
Starting with nothing but a Full Tilt Poker account, Chris played in Freerolls until he earned enough to graduate to games with real-money buy-ins. From that point on, he adhered to a strict set of guidelines to build up his bankroll:
He never bought into a cash game or a Sit & Go for more than 5 percent of his total bankroll; the only exception was at the lowest limits: he was allowed to buy into any game with a buy-in of $2.50 or less
He didn’t buy into any multi-table tournaments for more than 2 percent of his total bankroll; the only exception was $1 MTTs
If at any time during a No-Limit or Pot-Limit cash-game session the money on the table represented more than 10 percent of his total bankroll, he had to leave the game when the blinds reached him
Getting started wasn’t easy. In fact, it took more than seven months of steady play until he got his bankroll to stabilize at about $6.50. Undaunted, Chris maintained his discipline and dedication and continued with his challenge. Then, on November 26th, 2006, Chris made a major breakthrough. He turned a $1 tournament buy-in into $104 in prize money when he finished second in a 683-player tournament. Even with that huge bankroll boost, it still took Chris nine more months of hard work to reach $10K. But because he strictly adhered to the bankroll management strategy that he’d set for himself, Chris achieved his goal the following September.
Besides the sheer similarity in Josh’s and Chris’ graph, there are clear parallels between poker and trading … if you still can’t see them, stop and play a little $1 / $2 no-limit hold’em online … you’ll begin to see my point, pretty soon 😉
What has this to do with personal finance??!
Well, for traders and speculators,’bankroll management’ – which we call Making Money 101 – is also the most important skill that you need to learn so that you have a base to work from and a fall-back …
… if you are still not 100% convinced, I would encourage you to grab the book about Jesse Livermore – The World’s Greatest Trader. I want you to see that he became rich and broke FOUR separate times (then, blew his own head off) … I don’t want this to happen to you.
Once you really FEEL this, read on – otherwise, just bookmark this post and wait … nothing produces discipline better than the inevitable major loss …
OK, if you are now TRULY ‘on board’, I want you to break your ‘windfall’ into three easy (well, equal) pieces:
1. Trading Account: do more of what you just did, and hope to repeat (just remember NOT to put all of your position into one investment … ONLY invest into one ‘event’ what you would be happy to lose 100% of without suffering unduly)
2. Passive Investment Account: Buy a rental; or buy/hold ‘boring stocks’ that you would be happy to own forever … fight the urge to trade these stocks!
3. Savings Account: This is what you live on (assuming trading is your major source of income), keep this in cash or CD’s. I told Josh to use this as a deposit on his own condo.
When you lose 1. (almost all poker players – and traders – lose their ‘bankroll’ at least once in their lives … some MANY times a.k.a. Jesse Livermore) forget about ever ‘dipping’ into 2. or 3. to try and ‘catch up your losses’ … it won’t happen(!): you will simply have to go back and build up a new trading account from scratch … just like you did when you first started out.
Always remember this ‘3 easy pieces’ approach to windfalls and you won’t ever go [completely] broke …
Rich 1; Broke 0; Head [Intact] – not a bad scoreline
)
Most people that I talk to seem to misunderstand inflation and how to apply it to thinking about your retirement …
I classify ‘windfalls’ with all other 
In fact, ‘urban legend’ has Albert Einstein calling compounding “the most powerful force in the Universe” … urban legend because Einstein would never have called such a relatively [pun intended] slow geometric progression ‘powerful’ when he had nuclear reactivity to play with (a far quicker and more dramatic form of compounding).
