What I mean to say is, we know that:
$$\lim_{x\to\infty} \biggl(1+\frac{1}{x}\biggr)^x = e$$
But,
$$\lim_{x\to\infty} \biggl(\frac{1}{x}\biggr) = 0$$
Thus,
$$\lim_{x\to\infty} (1+0)^x = e$$
Finally, $1^{\infty} = e$.
Why is this incorrect? Can anyone explain where the math is wrong?
It's a common mistake to do a limit inside a limit like that. Yes, $\lim_{x \to \infty}\frac{1}{x} = 0$, but that tells you nothing about $\lim_{x \to \infty}(1 + \frac{1}{x})^x$ - for example, $\lim_{x\to\infty}x\cdot\frac{1}{x} = \lim_{x\to\infty}\frac{x}{x} = \lim_{x\to\infty}1 = 1$, even though it looks like you can say $\lim_{x\to\infty}x\cdot\frac{1}{x} = \lim_{x\to\infty}x\cdot 0 = \lim_{x\to\infty}0 = 0$. The key thing is that saying something like "$\lim_{x \to \infty}\frac{1}{x} = 0$" isn't saying "$\frac{1}{x}$ eventually becomes zero", it's saying "$\frac{1}{x}$ eventually gets as close as you like to zero". So, for large enough $x$, $1 + \frac{1}{x}$ is very close to $1$. But when $x$ is enormous, taking a number very close to $1$ and raising it to the $x$th power takes that "closeness" and pulls it wide open - $1.0001^{100000000}$ is so large Google refuses to calculate it. It so happens that the "smallness" of $\frac{1}{x}$ and the "bigness" of raising something to the $x$th power balance out in just the right way so that $\lim_{x \to \infty}(1 + \frac{1}{x})^x = e$. But change anything and you upset the balance - $\lim_{x \to \infty}(1 + \frac{1}{2x})^x = \sqrt{e}$, while $\lim_{x \to \infty}(1 + \frac{1}{x})^{2x} = e^2$.
The point is, you can never just replace something inside a limit with its limit, unless you're deleting the limit. That's an extremely dangerous operation which will only yield the right answer if you got obscenely lucky - because when you do that, you erase all of the information about how fast the expression approaches its limit, so you sacrifice the opportunity to balance things out.