Would you rather have $10 million, or the amount you’d get from doubling a penny every day for a month (so on the first day you’d have one cent, on the second two cents, the third four cents, etc.)?

If the answer isn’t obvious to you, you’re not alone. It’s a question that rests on how well you understand compound interest, the miraculous tool of finance that can lead even math whizzes astray. Small differences quickly become big ones when compounded, so estimating and rounding—tricks that normally help us with simple calculations—can throw numbers wildly off.

“Almost everyone is bad at this,”says Dan Siciliano, a Stanford law professor and a former startup CEO who gives seminars in corporate finance. “Our normal method of eyeballing in compounding really doesn’t work.”

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“The place where you’re most likely to see compounding not played out correctly is assumptions around entitlements and the overall growth of something,” Siciliano said. “A policy maker may say ‘we hope to grow the college population by x percent.’ It sounds modest if you say 3% but if you map that over a generation, you’re going to be making a big promise.”

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