It’s not easy to become great at anything. No one is born a great entrepreneur, artist, or athlete. We have to earn it. One thing I’ve noticed about high achievers is they leverage the compounding principle by designing their life around it. The compounding principle is based on incremental, constant, progress over a very long-time frame. Albert Einstein is said to have called the “compounding principle” the most powerful force in the universe. Most of us are familiar with compound interest, which is how this principle is applied in economics. Compound interest works because you earn “interest on your interest” and your money compounds over a long-time frame.
Consciously designing your life around the compounding principle will give you a similar exponential return in learning new skills, enhancing diet and exercise, or building a successful business. Watch what happens when you invest a small amount of time every day to work toward a goal that is important to you.
This principle breaks down into three building blocks.
- Long-term thinking. Identify what you want in the long term and aim for that.
- Commitment. Focus on your long-term goal and employ self-discipline to work toward it daily.
- Incremental constant progress. Get a little better every day. Consistency develops ability.
We need goals to know where we are going and daily habits to help us get there. Compounding works best when we are consistent, and that’s the hardest part.
A common mistake people make is they tend to want to carve out a larger chunk of time one, two, or three times per week. Instead, it’s better to create daily habits and invest a smaller amount of time every day. Life has a way of getting in the way. Most of us have competing interests for our time and it’s easy to get distracted or get pulled into other activities by your job, friends, and family. Habits are reinforced and work best when you do them at the same time every day.
Before I commit to any new practice, I find it useful to ask myself this question:
Can I commit to working on this new habit every day for the next 5 years?
If the commitment sounds overwhelming, then consider reducing the amount of time you dedicate daily. For example, if not for 30 minutes a day, how about 20? Or simply 5? Remember, it’s consistent, incremental progress that yields compounded results.
Here are a few examples of how I’m using the compounding principle daily:
- Exercise to improve my health, increase my energy level, and reduce stress.
- Meditation to increase the clarity of my thinking and reduce emotional reactiveness.
- Reading and listening to podcasts to expose myself to new ideas and learn.
Learning thrives on the compounding principle. Imagine the advantage you get by investing five minutes a day to learn one new idea. In one year you will add over 300 new ideas to your mental toolbox. These ideas can help de-risk business decisions, improve the clarity of your thinking, and work more effectively with people.
Now it’s your turn. What’s your goal? What daily habits can help you achieve it?
Leverage the compounding principle by designing your life around it.