Key To Success: The Miracle of Compounding

Compounding is a powerful phenomenon that we are all familiar with as a result of the pandemic. Let’s say that each day, any given person with a new virus would infect around 1.5 others. That means the new virus has a daily compounding growth rate of 150%. At first, one then two then four people are infected. In ten days, only 56 people would have it. But, a short 30 days later a whopping 191,751 would be infected by this new disease! Day 35 would see over a million people infected. 1,456,109 to be exact.

How many days, do you think, would it take to infect the entire world?

Clearly this growth goes against common expectation. Here is a chart of what compounding looks like:

DayNumber Of Infections
30 (One Month)191,751
60 (Two months)36,768,468,716 (more than entire population)
Note the difference between day 1-5 and day 35-40. Both have a difference of 5 days!

The entire world would be infected on day 57. Wild!

Life Is Full Of Compounding

From viruses to finances, compounding takes place in almost every aspect of life. It is as varied as investing, running, blog readership, weight lifting, losing weight, gaining weight, rumors, trends, wellbeing, number of friends, texts sent, etc.

American multi-billionare Warren Buffett discovered this powerful effect at the age of 10. If he invested $1,000 at the age of 10 and didn’t touch it, it would have grown up to a nice $2,500 by the age of 20. But, by age 91 (his current age), his $1000 investment would be a staggering $2,253,240. All from a decision made at age 10, at 10% annual growth (around the average for the stock market).

Now, I don’t know if he had a thousand dollars at age 10. But he did very well understand that time was on his side when it comes to compounding. Time is also on your side as well.

My wealth has come from a combination of living in America, some lucky genes, and compound interest

– Warren Buffett

Many Things In Life Do NOT Happen Immediately

If you suddenly decided to go work out, went to the gym, and lifted the heaviest weights you could find, nothing really would happen (you might get pretty sore though).

If you suddenly decided to invest every dollar you had in the stock market, wisely choosing an S&P 500 index fund, and woke up early at 6:30 AM PST in order to start trading right at market open, you would be disappointed as you wouldn’t have any noticeable gain or loss by the end of the day. There would be some difference, but you will be just about right where you started.

If you suddenly decide to get healthy, quit using your phone, delete TikTok, quit vaping, etc etc etc. One day is probably not going to make a huge difference. You’ll likely revert back to your old habits in no time. And due to withdrawals it may actually be a pretty rough day, especially if you try to do all of these at once.

You may even feel disappointed as you are unable to achieve your (impossible) goals. Bummer!

But, many things in life do not happen instantly. Athletes are not made overnight. Nobody can go from this to this in a day.

9PM the same day.

It took Arnold (who was genetically predisposed to this build) years and years of training to look like that. Whether he knew it or not, compounding played a huge role in his life, as well as the lives of many other high-achieving athletes.

Utilizing Compounding To Change Your Life

While making meaningful changes to our lives may seem impossible, it is actually possible to make significant and meaningful changes. It’s not even that difficult. The difficulty comes from setting poor goals or having problems being consistent. Those goals you have are achievable! Just not right away.

By using the power of compounding, you will be able to achieve and easily surpass your goals. It just takes some time.

Setting Plans To Take Advantage of Compounding

In order to take advantage of compounding, you need to change the way you look at change. It’s not about goals themselves, but by going through this section carefully you will begin to understand what compounding looks like and how to generate it.

1) Begin Very Slow

I have made many large changes to my life and have been pursuing my goals much more effectively by starting out slow and steady. You need to set goals that you can meet every day (or every other day) without too much effort. It has to be a slight change to your life, not something huge.

For example, when I started regularly going to the gym I made it a goal to just go to the gym after work. I didn’t set any goals for lifting weights, running on the treadmill, or stretching. I just set a simple goal that I knew I could achieve almost every day.

When I got to the gym, I ended up working out a little bit. On my off-days at the beginning when I wasn’t feeling it, I would walk on the treadmill for 6 short minutes and then leave. Hardly a workout, but going to the gym became natural. I began to go to the gym without thinking about it, which is exactly the key you should be looking for when trying to set a goal.

2) Consistency

Whether setting the phone out of the bedroom or eating less, consistency is the key for compounding to have an effect. Goals that can be met every single day will lead to the most change, not goals that are very difficult. Have a plan for when things go wrong as well in order to weather the variability of life.

When I was 13, I started programming by doing a few simple lessons in python. I didn’t set any difficult goals, but I knew to be consistent. 8 years later, I am finishing up my computer science degree from UC Berkeley and have worked internships at Google and Amazon. This is entirely 100% due to compounding, but it took some time. It wasn’t terribly difficult either, there were just a few exams in college that had me stressed. Consistency has gotten me to where I am today.

3) Patience

The day you plant the seed is not the day you eat the fruit. Be patient and stay the course.

– Fabienne Fredrickson

Rome wasn’t built in a day, and landing on the moon wasn’t done overnight. Patience is so critical, Ben Franklin said “He that can have patience can have what he will“. Aristotle (or Jean Jaques Rousseau) said “Patience is bitter, but its fruit is sweet

If you are looking for an instantaneous change, don’t count on it. Slow and steady wins the race, after all.

Realizing that these changes happen slowly is critical to your success. You will likely not feel better right away. You will likely not notice any immediate changes. For example, my article Life Without Social Media was written a few months after I had been going through a social media free existence. I knew that I would see the benefits of deleting my social media accounts, just not immediately. You will benefit as well by knowing that the decisions you make today will impact you, but maybe not immediately. Patience is critical, especially if you are planning on giving up a goal.

Conclusion: Compounding Is A Tool You Can Use!

Patience, being consistent, and starting off on a good foot are critical things to keep in mind when making changes. It works, it’s effective, but it may be counterintuitive.

I have been writing in a daily journal, recommended somewhere in here, for the past month and a half. Setting daily goals has helped me keep track of how I am doing, consistency wise. I also take time at the end of the day to reflect on the goals, determining what my risk is of breaking consistency.

It took awhile to get to this point, but by setting a daily goal to simply open an empty notebook at 9PM each night, you will soon be consistently writing away.

At some point, compounding will taper off. For example, with running it’s recommended to increase weekly distance by 10% per week, maximum. But, starting out at 3 miles per day, within a year you would find yourself running an impressive (but impossible) 426 miles per day. So yes, these gains do slow down and stop eventually, but at the beginning it compounds quite nicely. At some point, 5-7 mile runs can become a refreshing and energizing daily activity that you don’t think much of! But it all starts off with a consistent and patient step out the door, each day.

An Artie™ Approved Article

Cat pictures as requested by you readers 🙂 Meet my writing partner, Artie! He was so small at first, but Artie himself compounded and he rapidly grew to full size.

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