Compounding is the 8th Wonder of the World
Have you ever done something with repetition and consistency over time? After a while, did you notice that not only was it getting easier to do, but you started seeing increased results?
If you answered yes, then you have practiced compounding.
Compounding is doing small things on a consistent basis and turning them into big, powerful, lasting things. Most of us are very familiar with the concept and the results it provides, even if we aren’t too familiar with the actual mechanics of how it works.
Einstein said, “ Compound interest is the eighth wonder of the world,” but I’ve found it extends beyond the realm of finance. Compounding can be implemented in many areas of our lives. When applied with clear systems in place and adopting discipline with consistency, we can achieve our goals in less time than we think.
One day I was working out with my personal trainer when I broke through a physical and limiting belief that I couldn’t do a specific exercise. My trainer looked at me and said great job! With a look of determination, I responded, “it’s just like compounding… the more I keep showing up, the better I get.” That’s when I had my ah-ha moment.
I came to the realization of applying compounding interest to other areas of life when I made the full-time commitment to become a Coach to help high-performers achieve freedom and fulfillment in their lives. As a high-performer myself, I am always looking to adopt systems and practices that make achieving my goals simpler and sustainable.
I love to cross-pollinate ideas from different industries, practices, and philosophies to everyday life. I enjoy obsessing over content and knowledge, and digesting information into common sense to help as many people as possible achieve their goals. This is actually a great example of compounding as well! I think cross-pollination very much has a compounding effect on skills and results.
Cross Pollination Visualized. Illustration by Visualize ValueAs a coach, I naturally asked myself, what would happen if we applied the model of compounding to every area of our lives?
Believe it or not, you are inadvertently applying the framework of compounding in your life whether you are conscious or not about it.
Don’t believe me?
Compounding is any activity that you do small or large on a daily basis that is either adding or detracting from your goals. An important piece of compounding is that each incremental investment earns you MORE than the previous one. It works great for skill development, but for most people that workout consistently, it’s maintenance not compounding. If you are learning new skills, and those skills get added to previous ones to bring your worldview to a new perspective, that’s compounding. It works great when you are continually learning, less so when you are just getting better at executing the same thing.
For example, if you are working out 4-5 times a week, you are practicing compounding on your health and strength. It’s important to note that compounding in health requires having a specific goal in mind. For example, when you train to run a marathon this requires you to increase the intensity and distances of your runs over time in order to build up the stamina that is required to run all 26.2 miles. On the other hand, going to the gym for 20-30 minutes a day doing the same workout every day with no actual goal to improve can feel like compounding but it’s actually maintenance.
Compounding Visualized. Illustration by Visualize ValueOn the flip side, compounding also works towards the negative. if you are constantly sitting around without exercise, you are compounding atrophy in your life. Are you eating junk food that makes you feel like shit? You are compounding disease.
A few examples of where the 8th wonder of the world can be applied to different areas of life:
Sleeping
Reading
Training with a goal
Friendships
Habits
Skills and Hobbies
Finances
Cleaning up the environment
A few examples of where the 8th wonder of the world can
In order to become the most useful version of myself, I began to implement compounding across many areas of my life. When we are the most useful is when we are actually enjoying what we do: growing as a person. We are hard-wired to create progress in our lives. Have you noticed that every time you make progress on something, you end up being happier and more fulfilled? That’s by design.
Compounding rewards us for consistency. The more consistent we are at working towards any given skill or habit, the more value we create. This allows us to contribute to society with our talents, resources, and gifts, in bigger and bigger ways over time.
No one likes to be a liability. In actuality, many of us strive to be an asset to ourselves and others. Compounding health helps you avoid becoming sick, which results in not incurring unnecessary medical bills that you and your family don’t have the ability to pay. In work, when you compound your skills as a professional you become more valuable to your organization and are less likely to get let go– you become indispensable.
In being indispensable, you’re likely tying together years of skills across different domains, different tasks, and the aggregate experience of your successes and mistakes; and thus, each subsequent project or decision becomes smoother to execute, and the challenges you take on become both grander and more attainable.
For example, when you compound your skills at work, you create more value for the company. As your output increases your probability to ask for and receive a raise improves significantly. Believe it or not, by increasing your income you are now able to save more, invest in your health, experiences, your friendships, and yourself.
On this point, compounding boils down to how effective you are at making decisions. The better and more consistent your decisions are the better your outcomes. Sizhao Yang has a great twitter thread on intellectual compounding where he writes, “Intellectual capital compounds at a hidden rate and most people use tangible badges and net worth as measures.”
He goes to state that most of what is predictive in life, is how you make decisions. “Being effective and investing your time in the right area at the right time is a skill, not purely luck.”
When you compound your skills, your ability to recognize opportunities that will generate the most value increases. Intuition is simply an accumulation of experiences and ideas compounded over time.
It’s Okay to Suck, It’s Not Okay to Skip
Before something can compound, it must be sustained. Compounding can’t be created directly, but it can be cultivated. You can create the right conditions for it to emerge. Compounding requires us to make a decision on what we want to compound, create a goal, and follow through with commitment.
Compounding doesn’t work if you are just interested — and not committed — to achieving your goal. This can be accomplished by adopting a disciplined mindset. As Jim Rohn said, “Discipline is the bridge between goals and accomplishment.” Your commitment will require discipline to obtain it, there is no doubt about it. Discipline is doing the desired activity as prescribed, especially when it is difficult.
The best way to create discipline in your life is to create systems that set you up for success. In creating systems that work for you, you are creating an insurance policy against the days you don’t feel motivated to show up. We don’t rise to the level of our goals, we fall to the level of our systems. Once you have these systems in place, you will notice how automatic compounding becomes part of your life. As we said earlier, the critical element for compounding is consistency. Without consistency, all of your progress will be lost.
Consistency maintains momentum, but if you lose that momentum, you might discover a painful truth: regaining momentum is more painful and costly than maintaining it. A week of neglect can cost you a couple of weeks of repair; a year of neglect may cost you several to repair.
Systems Visualized. Illustration by Visualize ValueTo illustrate the power of building systems, here are two examples. My system for hitting the gym involves waking up at 5 am every day of the week. When I think of it as a non-negotiable system, there is no decision process where I question whether I have the motivation to get to my routine started. I just execute the motions, end up there, and feel great after — even on the mornings that started miserably! But as soon as my motivation and determination become what brings me to the gym instead of the system, the hard days turn into skipped days, and the momentum breaks. Willpower NEVER lasts, it’s not enough to achieve consistency. There’s a limit to it. What’s unlimited is when I create a system that I can rely on no matter how I feel.
An even better removal of decisions in a system is how I build savings. Each paycheck, my checking account automatically withdraws a portion into my savings account. I don’t have to think about it, or make a call whether I want that extra nice dinner this month vs savings. Over time the account has increased, and with a larger balance each month, the interest gained is incrementally larger each month as well.
Your systems make your compounding efforts sustainable. And in the long run, the sustainable way is the fast way. It doesn’t get easier, you just get better. The Navy seals have a great mantra I love to apply to most areas in my life, especially compounding: “Slow is smooth and smooth is fast.”
The beauty of compounding is in the long game. By playing longer and consistently, your 2nd and 3rd order of magnitude are affected in a positive way. You end up playing a completely different game than most people because you have exponential growth working for you. Do not be discouraged by slow progress, it pays off!
If any of this resonates with you and you are ready to make the epic and powerful decision to move forward, to focus on your future, and to create the life you desire I am here to support you.
A special thanks to Jack Butcher for creating Visualizing Value, Sizhao Yang for helping me justify my idea through his tweet, and Greg Nance for the reminder to always show up, even when I suck.
