The principle
Capital left invested at rate r for n years multiplies by (1+r)ⁿ. Spend it instead, and the wealth you gave up is the sticker times that multiple — plus every running cost, similarly compounded from the year it's paid, minus whatever resale returns at the end. At the house's deliberately modest 6% default, money doubles in about twelve years: a decade-horizon purchase costs roughly 1.8× its sticker in horizon-year wealth before running costs. That multiple, not the sticker, is the number a decision should face.
Doing it honestly
Two disciplines keep the idea honest. First, the counterfactual must be real: if the alternative to the purchase was cash at 1%, price it at 1% — the opportunity cost of money you would never have invested is small, and pretending otherwise is theatre. Second, the assumption must be visible and stressed: every house instrument shows the result at three market assumptions, because a hidden return assumption is where this principle turns from tool to trick.
The two abuses
The maximalist abuse prices every pleasure at compound interest until living itself looks irresponsible — the $5 coffee that "costs $50,000". This misuses the idea by applying a 40-year horizon to a Tuesday, ignoring that the alternative to most small spending is other small spending, not a brokerage deposit. (The latte factor note takes this apart properly.)
The minimalist abuse ignores the idea entirely for large sums because "you can't take it with you" — true, and irrelevant to whether a $85,000 purchase should be understood as a $150,000 decision. The principle scales with the sum and the horizon; it is at its most honest exactly where the abuse says to switch it off.
The house position
True Cost of a Purchase is the principle as an instrument — sticker, running costs and resale, compounded to the horizon under three assumptions, with the formula printed. The rule of 72 note gives the mental shortcut for the same arithmetic when there's no instrument to hand.