If you are given two possible options of taking 3 Million Dollars in cash or A penny that doubles in value every day for 31 days, what choice would you make? Without any deep thinking, almost everyone would go for the first option considering these facts:
- It seems like a whole lot of money compared to the other
- It does not require time as you’d get it almost immediately
- It is in cash.
However, if we should take a closer look at these options and make use of basic mathematics we learned in school, we will realize that a penny that doubles in value every day for the next 31 days is worth almost 11 Million USD. Surprising? This means that if you had chosen a penny per day, you would be more than 7 million USD richer than the individual who chose 3 million USD cash. The little penny over time made the difference. This is what the compounding effect is all about.
In essence, the compounding effect is the act of attaining success starting with small steps or actions. In the above example, the small step or action was to accept a stipend of a penny daily for 31 days while the success was ending up over 7 million USD richer than the first option.
The Big Idea of Compound Effect
Your decisions or choices + Your actions or behaviour + repeated actions + Time = Success.
Let’s explain each component with relevant examples.
According to Hardy, the only difference between the broke, unhealthy and depressed or the healthy, rich and undepressed is the choices they made. Our present state is a product of the decisions we have made beforehand. For example, what you have become today be it a doctor, engineer, business owner, etc., is a product of the choices you made while growing. In essence, we can say that our lives are a reflection of our choices. Take, for instance, if you decide to lose some weight now, your life will reflect that you have lost weight in the future and that’s when you’d hear people ask you questions like:
“You look slimmer; did you lose some weight.”
“I like how you look now, much slimmer.”
How do you think they would be able to detect that you decided to lose weight some time ago? Because you have become a physical representation of your choice.
There is a saying that states that success is a product of the many good decisions you have made while failure is the product of the many good decisions you failed to make. For your life to improve, there must be an improvement in your decision making, and for me, a good decision is borne out of conscious and critical thinking. I don’t know if this happens to you, but I get to remember some of the things I did as a kid, and I feel disgusted that I ever did them. Can you relate? There was a time I threw a stone a kid who annoyed me but rather than the stone hit the kid; it landed on the screen of a car. I knew there were cars around, but I wasn’t conscious enough to think of the possible outcome as I was so angry at the young lad. That one decision caused a lot of issues for me that day.
What I am trying to emphasize is that what makes a good choice is the process of taking out time to assess and analyse it. What are the advantages and disadvantages of each option? If I take this step, would it work for me? Those and many more are questions you should ask yourself. The truth is that many people are in their worst state today because they made wrong decisions impatiently without waiting to analyse the situation and possible outcome. You can take a survey, pick out some folks and ask them why they are at this stage of their life. You’d notice that a number of them would take you back through memory lane. The rich and healthy would tell you the choice they made that brought about a remarkable change in their life while the poor would tell you of the choice they did not make that brought about this pathetic life they are living. Our life is the total of all the choices we’ve made.
I have seen people that claim they don’t make choices. That’s not possible. Your decision to not make a decision is a decision itself.
After making that choice of reading a book weekly, losing some kg, hitting the gym, saving some money, etc., your choices are nothing but empty thoughts until it is brought alive by your actions. Your
With time, after your actions become repeated, it forms into a habit. For instance, when you start saving, your mind has to be very deliberate to save daily. Once you can subject yourself to save daily, you would become so used to it that it might even become an involuntary action. For the compound effect to work, you need to keep doing that thing that would bring about a change. You must be able to create routines that would be habits beneficial to achieving your goals. By routine, I mean something you do each day without a miss, such that it becomes as constant a brushing your teeth. Hence, an unconscious action. Having understood the component of Darren’s formula, let’s go back to the first example I mentioned in this piece.
If you are given two possible options of taking 3 Million Dollars in cash or A cent that doubles in value every day for 31 days, what choice would you make?
Let’s analyse it together.
Assuming you go for the penny per day payment while I go for the 3 million dollars at once payment, by the second day, you would have 2 cents while I would have less than 3 million because I would be spending from it already. By the 20th day, I would still be enjoying my 3 million dollars except if I’m a very lousy spender; meanwhile, you would have acquired 5 thousand dollars. On the 31st day, you one cent would have grown to more than 10 million dollars while I would be wallowing in the remnant of my 3 million dollars.
To get the point better, you’d see that we both made a choice (the option we chose) and we took actions. You started receiving payments daily, I received my payment once. It became a habit by getting used to receiving your one cent daily. Meanwhile, I was eating up my 3 million dollars. The compound effect of your choice was way more than what I collected in the first place. Applying this example to our lives more practically, that 3 million dollars I collected are anything that brings instant gratification or pleasure. It can be overeating sugar, sleeping all day, drinking a lot of alcohol, spending lavishly, etc., while the daily cent you received is the small smart choice like going to the gym regularly, reducing sugar intake, reading a book weekly, taking long boring courses, etc. The small smart choices would yield way more than you can imagine just like the cent yielded over 10 million dollars.
Patience in Compound Effect
Patience is the ability to wait for so long for something desirable and to achieve the results of Compound Effect; you must be very patient. The one cent-daily-guy did not get his money to transform in a day; rather, it took him a while. This implies that most of the actions you take would not effect change immediately. For instance, if you decide to lose a hundred calories daily, you won’t see the effect of the 100 calories lost. Instead, you would get to see the difference much later.
Also, you cannot decide to build your muscles today and immediately see results. It takes time to see the result of discipline. With the compound effect, Darren said in his book that the most interesting part to him is the build-up stage, that little step is the joy whether it is towards your health, finance, relationship, etc.,
In essence, there is no magical stunt you can pull to make a success. The simple answer is consistency and patience. The best part of this is that it can be applied in almost every part of your life. Also, it can work in the opposite direction too. This means that although the compounding effect works for any situation, it can also be used to achieve failure rather than success and this happens when you make the wrong choices. For instance, if you and your friend decide to lose 100 calories daily and your friend does not keep through to his words but rather stopped the next day and continued eating his junks and all while you continued to the very end. In the end, you’d have achieved success by growing slimmer while your friend would have failed by growing fatter. The same compound effect, same choices but different actions and habits.