The Power of Compounding on Your Life

The Power of Compounding on Your Life

I’ve written ad nauseam about the power of compounding on your investments. It truly is the 8th wonder of the world, as they say. You invest a smaller amount of money and watch it compound into a surprisingly enormous amount of money, given enough time. That’s it. That simple. Time and compounding are the winning formula for a superior investment experience.

End of blog, you win in investments!

If you choose to keep reading, however, let me use this very simple formula to explain the power of compounding not just on your investments, but on your entire life as well. Time plus compounding equals superior returns (T+C=SR, if I were a scientist writing for Nature Magazine). That is what it boils down to succeeding at a task, and let’s be honest, life is the most beautiful task there is.

Examples

Let me explain my very scientific formula with an example or two.

Example 1: You and I start working at the same company, at the same age, with the same experience. I come in 2 hours early and leave 2 hours late every single day. You come in 15 minutes early and generally leave about 5 minutes late every single day. Who do you think climbs the corporate ladder faster?

Example 2: Same circumstances as above, except it’s a sales job, fully an objective meritocracy of who advances within the organization. I come in 2 hours earlier than you and make 100 extra lead calls in the morning and 100 extra lead calls in the evening. Same question, slightly different circumstances, who gets ahead more?

I think we’d all agree the person who puts in more time gets ahead. You see it at work all the time, and you see it in life all the time. In my job, it’s clear to me which people will succeed at the highest level, and here’s the hint: it generally isn’t the smartest individuals, but rather the ones who understand life compounding at the highest level. These individuals outgrit their peers and competition, leading them to outsized success.

Look no further than the late great Kobe Bryant, who was notorious for outworking everyone. Sure, he was incredibly gifted, but what he really was at the core was someone who understood the compounding effects on his biggest asset: time.

A Personal Example

I had a great teaching moment with my own daughter last year. She’s a pretty good volleyball player and loves playing club ball. Last year she didn’t get the playing time she was hoping for in her position, despite being every bit as good as her teammate. I sat her down as she was getting upset and told her, “Sweetheart, your only option is to outwork that other girl. If you do, you’ll notice, your coaches will notice, and your game will notice.” A few months later, after putting in tons of extra work, which made this papa proud, you know what happened? You guessed it, she became the starter and never looked back.

I see this personally and professionally all the time. It’s important to remember, though, that time is finite, and although this formula is as foolproof as I can think of, it can only be deployed on so many things at once. You can’t work an extra 4 hours, coach all 3 of your children’s sports teams, be the perfect friend and spouse, and be a scratch golfer. 24 hours a day is all we get. How you use it is totally up to you. Where you prioritize spending more time, you will almost certainly see outsized gains. It really is that simple. The hard part is prioritization, and sticking to your regimen.

So I ask, what do you want to compound on? Have you given it any thought? As always, stay wealthy, healthy, and happy.