Leveraging the magic of compounding to turbo-charge personal and professional growth

I learned the math behind compounding as a little kid, and I have seen it in action over and over, in multiple settings, since then, but it never ceases to amaze me with its power or applicability to a broad range of situations.

My belief is that, when you are able to see – with certainty – where and how compounding is occurring in your life, this insight can be transformative. My hope is that, after you read this blog entry, you will see compounding’s immediate applicability to your own life – and where it can make an impact.

I was reminded about the value of compounding when reading the book The Snowball, Warren Buffett’s recently published biography. According to this book, Buffett internalized the power of compounding as a little kid (in this case, as applied to money) and designed much of his investing life to capitalize on this principle. Here’s a quote from page 60 of the book:

“[Buffett] could picture the numbers compounding as vividly as the way a snowball grew when he rolled it across the lawn. Warren began to think about time in a different way. Compounding married the present to the future. If a dollar today was going to be worth ten some years from now, then in his mind the two were the same.”

Now in this blog entry, I’m not going to write about the power of compounding regarding money. Instead, I’m going to write about its equally potent applicability in other areas of life – and show how it can offer you practical help.

To start, let me remind you about the classic compounding story – the widely told fable about the man who invented chess:

The King, for whom chess was invented, was so pleased with the invention that he offered the inventor a large pile of gold. The inventor suggested an alternative reward: he would get grains of wheat, as follows: one grain of wheat on the first square of the chess board, two grains on the second square, four on the third, eight on the fourth, etc., doubling the number of grains each time. The King saw that this must be a much better deal for him than the gold pile, and accepted. Of course, when you do the math, you realize that the inventor suckered the King here because the amount of wheat on the 64th square (18,446,744,073,709,551,615 grains) is worth far more than all the gold in the kingdom.

The reason that this story is cool, I believe, is the mathematical mind-fuck it creates. It’s really hard for a normal human to comprehend how a grain of wheat, then two and then four – seemingly nothing growing at a seemingly infinitesimal pace, can magically turn into a vast fortune only a few steps later on in its evolution.

Next, let me please tell you about a personal life-experience where I learned about the power of compounding applied to a very different situation:

• I started going to therapy when I was 40 years old. When I started, I was unhappy, lonely, and feeling like a total failure.
• After two years of diligently going to therapy, I really felt no better than I felt when I started, and my career and relationships, if anything, had gotten worse. I told my therapist about how discouraged I felt at that point, and she responded by saying that I was actually making huge progress – pointing out that I had had several very important insights during those past two years.
• Another two years went by, and after that point, I started to feel a little happier every once in a while, but I was still quite unhappy and lonely most of the time. Furthermore, I remained quite discouraged about my future prospects. When the subject of my discouragement came up again, my therapist repeated her mantra about how much I had grown.
• Another two years went by, and by this time, I was happy pretty frequently, well on my way to being a multi-millionaire, and starting to feel pretty good about myself. By this point, I was no longer discouraged, but I couldn’t make sense of what was happening, and I felt sure that my progress would fall apart any day.
• Another two years went by (which brings me to the end of last year), and by that point, I was happy almost all the time, frequently blissful, financially secure for the remainder of my life, and starting to recognize that my internal changes were securely in place and dependable.

So, do you recognize the mathematical pattern here? We’re on the chessboard again. The fact is that I’ve been growing at a constant logarithmic pace for the past eight years, I just didn’t recognize the mathematical pattern ‘til recently.

And, guess what else. I’m not going to stop growing at this pace – so you (and I) can rest assured that my life will be exponentially more amazing only two more years from now.

So, how does this obscure mathematical principle apply to your life? To answer that question, please try the following exercise:

Today: Take a goal that you really want that seems unreachable to you. I don’t care what the goal is as long as you really want to achieve it. And then, put into place one very small AND SUSTAINABLE building block right now to get you a millimeter closer to your goal. I don’t care how little progress you make here; you just need to make progress and put something sustainable (and easily do-able) in place. One common error here is that, when working toward a goal, we often make changes that create apparent short-term progress, but create no lasting value. Remember, your goal is several squares down the road here.

One week from today: Acknowledge the progress you made in the first week of your project, remind yourself about the power of compounding, and put a second small building block in place toward your goal. Again, the building block needs to be sustainable and easily implemented. If you’re like I was eight years ago, you’ll be totally discouraged after this point because you still won’t see any progress. But please, don’t give up at this point.

Two weeks from today: Again acknowledge your progress and take another step. You’ll find that you can take a slightly bigger step at that point than you took the first week, but it’ll still seem like you're going nowhere. Don’t worry, the compounding will work.

And so on…

After several weeks (or maybe months or maybe years) of diligent seemingly slow progress, you will start to feel like you’re getting a bit of traction, and you might see the outlines of solid ground emerging. This is the point where you will be most at risk – not at risk of quitting, but rather, at risk of resting on your laurels. Please, don’t quit the process at this point. That’s when it gets fun, and really rewarding. Here, you need to keep building, systematically putting new building blocks into place every week that continue to solidify and further your progress.

Now, if you like this exercise and want to tell me about your journey, I’d love you to post a comment. With only two people following my blog as of today, I’m still on square 1 of my blogging journey (so I’m not yet deluged with an impossibly large following). Get your feedback in now, though, because once I have 10,000 people following my blog (which is a short journey from here after I double my number of visitors every week), it’ll be a lot harder for you to get my attention then.