Compounding In Life: A Simple Recipe For Success
Compounding, a concept originating from the world of finance, is the secret sauce behind the success of many high achievers. It’s the process where small, consistent improvements accumulate, leading to extraordinary results. Warren Buffett, one of the greatest investors of all time, attributes his success to compound interest, and he made most of his fortune well into his 60s.
But compounding isn’t just for finance — it’s a powerful tool for personal development and learning. Imagine committing to improve your language skills by just 1% every day. Starting with a basic understanding, you practice and learn new words, phrases, and grammar rules daily. After a year of 1% daily improvements, your language skills will be approximately 38 times (1.01 ^ 365 = 37.78) better than when you started! That’s the magic of compounding.
Let’s explore how compounding has shaped the lives of some extraordinary individuals:
- Michael Phelps: throughout his swimming career, Michael Phelps focused on incremental improvements in his technique, strength, and endurance. He trained for hours every day, and maintained a strict diet and exercise regimen. By consistently working on small improvements, Phelps was able to compound his skills and achieve remarkable results. For example, he developed an underwater dolphin kick that allowed him to gain a significant advantage over his competitors. This consistent dedication to improvement led to his record-breaking 28 Olympic medals, including 23 golds.
- J.K. Rowling: before achieving worldwide fame with the Harry Potter series, she faced numerous challenges and setbacks. Rowling began writing the first Harry Potter book while struggling with financial difficulties and raising her daughter as a single mother. She spent years working on the manuscript, often writing in cafes while her daughter slept beside her. When Rowling finally completed the manuscript, she faced multiple rejections from publishers. However, she persisted in her efforts to get the book published, and the compounding effects of her dedication and perseverance began to show. Rowling spent years developing the intricate world of Harry Potter, creating detailed character backgrounds, plotlines, and magical elements. She also honed her writing skills by continuously writing and revising her work. By compounding her efforts, Rowling was able to create a captivating and immersive story that resonated with readers of all ages. This dedication to her craft led to the Harry Potter series becoming one of the best-selling book series in history, with over 500 million copies sold worldwide.
- Jeff Bezos: In the early days of Amazon, Jeff Bezos faced skepticism and challenges as he sought to build an online bookstore. Bezos started Amazon in 1994, operating out of a small garage in Seattle. The company’s initial growth was slow, and many industry experts doubted the viability of an online bookstore. However, Bezos believed in his vision and continued to invest in the company, expanding its product offerings and improving its technology. As Amazon grew, the compounding effects of Bezos’ efforts began to show. The company went public in 1997, and its stock price soared, providing the capital needed to fuel further expansion. However, during the dot-com bubble, Amazon faced significant challenges and almost went bankrupt. Bezos had to adapt and pivot the company’s focus multiple times to ensure its survival. Over time, Amazon diversified into various product categories, introduced the Kindle e-reader, and entered the cloud computing market with Amazon Web Services. Today, Amazon is one of the largest and most valuable companies in the world. Bezos’ early persistence, vision, and adaptability have been key factors in its success.
As demonstrated by the above stories, compounding relies on three essential components:
- Focus: the only way to let compounding work for you is to stay focused on a goal. If you divert your attention, the power of compounding is lost, and your effort will be dissipated across many fronts.
- Discipline: to achieve a stretch goal you need to put in the effort consistently, both when you feel like doing it and especially when you don’t. If you let motivation dictate your actions, inertia conspires to keep you in place. If you want to exercise, do it every day; if you want to learn, set time aside every day; if you want to save money, save every month; if you want to lose weight, plan every meal. By not letting the conditions influence your actions you will achieve the consistency that you need to achieve your goals. As David Goggins, a former navy seal and ultra distance athlete, wrote in his book “Can’t Hurt Me”: The reason it’s important to push hardest when you want to quit the most is because it helps you callous your mind. It’s the same reason why you have to do your best work when you are the least motivated.
- Time: be patient; you will not be able to see a 1% difference, so you need to continue pushing even if it doesn’t feel like you are progressing. If you stay focused and disciplined, it is a matter of time that compounding starts showing its effect. It takes a leap of faith to continue pushing even when you don’t see any change, and that is one of the key challenges of compounding.
In conclusion, the power of compounding is a simple yet effective recipe for success in various aspects of life. Embracing the power of compounding can help anyone reach their long-term goals and unlock their full potential. So, take a leap of faith, stay focused, maintain discipline, and give yourself the time to let compounding work its magic.
