Compounding

In this post I’ll talk about the effect of compounding in work and life in general.

 

Change is a need common to all humans. We are all used to the idea of change. Better yet, a big change. Some times our behavior and habit require it. Like the moments we feel ourselves walking in circles and everything seems to be the same.

We hear about change with politicians, when they want our votes and trust, we hear about change on the TV shows, radio, songs, even in the words of the ones close to us.

For the ones who had lost their freedom change meant regaining it. For the ones who are bored, change is, well… anything that does not resemble sameness.

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Like any other things such as success, love and happiness, Hollywood tricked us one more time. We got used to the idea that to change all we need is to want to change. We all wait for the magic moment something inspiring will happen and our lives will change forever. And we uncover our destiny. Our  true purpose. That idea of change is for an adult  what a fairy tale is to a child. A mere illusion. Don’t fall for it.

The compounding effect

Slow and steady growth over a long period of time. That’s what compounding is all about. In the beginning the growth is unnoticeable and if you are the kind the needs immediate results this can be frustrating. A good example widely used to explain the power of the compounding effect is with money. Imagine a very wealthy person comes and makes two offers to you. He either gives you 1 million dollars today or a dollar that doubles its value every day for 6 months. Which one do you choose? The first? The second?

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If your caught up distracted, the 1 million dollar offer might be the most appealing. But if you pay close attention to both, you’ll notice that in two days your 1 dollar will be worth $ 4 and in three $8, in 4 $16, in 5 days $32 and by day 20 over $1.048.576. That’s the power of compounding in its purest form.

 

Skills and habits work pretty much like the dollar you receive today and grow slowly over  a period of time. Because the process can be very slow the majority of people find it hard acquire new skills. If skills where money, a skill would have the worth of, let’s say $0.000001. For you to start noticing significant changes it takes time. But if you wait long enough the results can be astonishing.

Habits are formed virtually all the time. Each new activity you take is physically influencing the wiring of your brain. In other words: your brain is being rewired all the time. We are in constant change even if we don’t notice it. As the famous value investor Warren Buffet once said:

“Habits are to light to be felt until they are too heavy to be broken”

It’s said by scientists that if you hold on to an activity for at least 3 weeks straight, the odds that this activity will become a life time habit increases dramatically.

 

The compound effect: the book

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The book “the compounding effect” written by Darren Hardy explains in great detail the compounding effect. The idea that one can develop a skill over time in an exponential manner is not new but the author puts it in a way that it changes your perspective about. It’s like being shown how to use a wheel in a different way. Definitely a really good experience.

 

It’s all about knowledge and experience 😉

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