Demystifying the Natural Logarithm (ln)

Given how the natural log is described in math books, there’s little “natural” about
it: it’s defined as the inverse of ex, a strange enough exponent already.

But there’s a fresh, intuitive explanation: The natural log gives you the time
needed to reach a certain level of growth.

Suppose you have an investment in gummy bears (who doesn’t?) with an interest
rate of 100% per year, growing continuously. If you want 10x growth, assuming
continuous compounding, you’d wait only ln(10) or 2.302 years. Don’t see why it
only takes a few years to get 10x growth? Don’t see why the pattern is not 1, 2, 4,
8?

e and the Natural Log are twins:

 ex is the amount we have after starting at 1.0 and growing continuously for
x units of time
 ln(x) (Natural Logarithm) is the time to reach amount x, assuming we grew
continuously from 1.0

Not too bad, right? While the mathematicians scramble to give you the long,
technical explanation, let’s dive into the intuitive one.

E is About Growth

The number e is about continuous growth. As we saw last time, ex lets us merge
rate and time: 3 years at 100% growth is the same as 1 year at 300% growth, when
continuously compounded.
We can take any combination of rate and time (50% for 4 years) and convert the
rate to 100% for convenience (giving us 100% for 2 years). By converting to a rate
of 100%, we only have to think about the time component:
Intuitively, ex means:

 How much growth do I get after after x units of time (and 100% continuous
growth)
 For example: after 3 time periods I have e3e3 = 20.08 times the amount of
“stuff”.

ex is a scaling factor, showing us how much growth we’d get after xx units of time.

Natural Log is About Time

The natural log is the inverse of e, a fancy term for opposite. Speaking of fancy, the
Latin name is logarithmus naturali, giving the abbreviation ln.
Now what does this inverse or opposite stuff mean?

 ex lets us plug in time and get growth.

 ln(x)lets us plug in growth and get the time it would take.

For example:

 e3 is 20.08. After 3 units of time, we end up with 20.08 times what we started
with.
 ln(20.08) is about 3. If we want growth of 20.08, we’d wait 3 units of time
(again, assuming a 100% continuous growth rate).

With me? The natural log gives us the time needed to hit our desired growth.

Logarithmic Arithmetic Is Not Normal

You’ve studied logs before, and they were strange beasts. How’d they turn
multiplication into addition? Division into subtraction? Let’s see.

What is ln(1)? Intuitively, the question is: How long do I wait to get 1x my current
amount?
Zero. Zip. Nada. You’re already at 1x your current amount! It doesn’t take any time
to grow from 1 to 1.
  ln(1)=0

Ok, how about a fractional value? How long to get 1/2 my current amount?
Assuming you are growing continuously at 100%, we know that ln(2) is the amount
of time to double. If we reverse it (i.e., take the negative time) we’d have half of
our current value.

 ln(.5)=–ln(2)=−.693

Makes sense, right? If we go backwards .693 units (negative seconds, let's say) we’d
have half our current amount. In general, you can flip the fraction and take the
negative: ln(1/3)= –ln(3)=−1.09. This means if we go back 1.09 units of time, we’d
have a third of what we have now.
Ok, how about the natural log of a negative number? How much time does it take
to “grow” your bacteria colony from 1 to -3?

It’s impossible! You can’t have a “negative” amount of bacteria, can you? At most
(er… least) you can have zero, but there’s no way to have a negative amount of the
little critters. Negative bacteria just doesn’t make sense.

 ln(negative number)=undefined

Undefined just means “there is no amount of time you can wait” to get a negative
amount.